The International Monetary Fund just concluded its Article IV consultation with Nigeria taking a broader outlook on the Nigerian economy as it grapples with the falling oil prices, dwindling fiscal revenues and projected drop in GDP growth rates. The outcome of the consultation was a press release that included several assessments and recommendations on current policies initiated by the government. We highlighted some that they agree with. Here are the top 5 we picked.
- Devaluation – they agreed to “tightening fiscal policy and allowing the exchange rate to depreciate while using some of the reserve buffer were appropriate responses to the recent fall in oil prices”.
- Non oil revenues – They also agreed that mobilizing additional non oil revenues is critical to open up fiscal space and improve public service delivery over the medium term.
- Tax administration – They welcomed ongoing initiatives to strengthen tax administration, and encouraged the authorities to also rein in exemptions, keep tax rates under review, persevere with subsidy reform, and improve the management of oil revenue.
- Revenue sharing formula – Furthermore, the directors saw merit in reviewing the current revenue sharing arrangements to help address regional disparities over the longer term and ensure that social and development needs are addressed.
- Removal of rDAS – The directors welcomed the recent unification of the foreign exchange rates, noting that greater exchange rate flexibility could help cushion external shocks. As the largest single supplier of foreign exchange, it will be important for the central bank to intermediate this supply in a transparent, efficient, and fair manner.
It is not often the IMF agrees with a country’s fiscal and monetary policy considering the hardship that is typically associated with it. But then, we hope things will turn out better for the economy.