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Economy & Politics

Nigeria needs structural and monetary policy reforms to unlock potential – IMF

IMF has stated that the exchange rate and monetary policy reforms will help to unlock Nigeria’s growth potential.

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An International Monetary Fund (IMF) staff team, led by Jesmin Rahman, has disclosed that exchange rate and monetary policy reforms, increased revenue mobilization, and structural reforms will help to unlock Nigeria’s growth potential.

The team conducted a virtual mission from October 30 to November 17, 2020, in the context of the 2020 Article IV Consultation with Nigeria.

This is according to the End-of-Mission press release on the 2020 Article IV Mission to Nigeria by International Monetary Fund (IMF) staff, posted on the IMF website yesterday, 11th December 2020.

Considering that Real GDP is contracting, inflation is increasing, and external vulnerabilities remain large; the team, at the conclusion of the mission, concluded that major policy adjustments embracing broad market reforms are needed.

Issues highlighted by the team

  • The COVID-19 global pandemic is exacting a heavy toll on the Nigerian economy.
  • Low oil prices and sharp capital outflows have significantly increased balance of payments (BOP) pressures and together with the pandemic-related lockdown, have led to a large output contraction and increased unemployment.
  • Supply shortages have pushed up headline inflation to a 30-month high.
  • The outlook is challenging under current policies.
  • Inflation is projected to remain in double-digits and above the Central Bank of Nigeria’s (CBN) target range.
  • Fiscal deficits are projected to remain elevated in the medium term.

Government actions highlighted by the team

Recognizing the gravity of the situation in the country,

  • The Federal Government adopted a revised budget in July, which removed fuel subsidies and prioritized spending to make room for a support package including higher subsidies on CBN credit intervention facilities and regulatory forbearance measures to ease debt service in affected sectors.
  • The authorities have also taken courageous steps to remove costly and untargeted subsidies in the power sector, which were largely benefiting better-off households.

What they are suggesting

  • Major policy adjustments embracing broad market and exchange rate reforms are needed to address recurrent BOP pressures and raise the medium-term growth path.
  • A durable solution to Nigeria’s recurrent BOP problems requires re-calibrating exchange rate policies to reduce BOP risks, instil market confidence and facilitate private sector planning.
  • Significant revenue mobilization – including through tax policy and administration improvements is required to create space for higher social spending and reduce fiscal risks and debt vulnerabilities.
  • The mission noted this year’s reduced dependence on central bank financing of the budget and recommended its complete removal in the medium term.
  • Further steps are needed to ensure more consistent access to the Transparency Portal and publication of contract details relating to beneficiary ownership.
  • There might be a need to withdraw liquidity or raise rates if BOP and inflationary pressures intensify.
  • While the banking sector has been resilient, thanks to the ample pre-crisis buffers, the mission recommended vigilance and corrective actions to prevent an increase in financial stability risks arising inter alia from increasing non-performing loans.
  • On the structural front, the approval of the power sector recovery program financing plan, the ratification of the African Continental Free Trade Area (AfCFTA), and the completion of key road projects are positive steps. Going forward, the mission recommended decisive actions to tackle governance weaknesses and implement regulatory and trade-enabling reforms, including the lifting of trade restrictions, to unlock Nigeria’s strong growth potential.

What you should know

  • The International Monetary Fund, IMF, promotes international financial stability and monetary cooperation. It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.
  • The IMF’s primary mission is to ensure the stability of the international monetary system – the system of exchange rates and international payments that enables countries and their citizens to transact with each other.
  • The IMF End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

Adeyemi holds a PhD in Accounting Sciences. He has worked in the Educational Sector and as an Independent Consultant.

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Economy & Politics

Senate endorses ex-Service Chiefs as Non-career Ambassadors

The Senate has confirmed President Buhari’s nomination of the immediate past service chiefs as non-career ambassadors.

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The Nigerian Senate has endorsed the nomination of the past serving Military Service Chiefs as Non-career Ambassadors.

This was confirmed during Tuesday’s plenary session and announced in a social media statement by the Nigerian Senate.

Their confirmation follows the consideration of the report of the Senate Committee on Foreign Affairs, Chaired by Senator Adamu Bulkachuwa.

According to reports, the Senate Minority Leader Enyinaya Abaribe, however, questioned the nomination and confirmation of the ex-service chiefs when the Senate had on 3 different occasions called for their sack.

Senator Abaribe also raised issues on the petitions against the former service chiefs and questioned why they were dismissed without explanations.

But Senate President Ahmad Lawan dismissed Senator Abaribe’s concerns, ruling that the nomination of the former service chiefs cannot be nullified simply because the upper chamber had called for their sack, noting that this is totally a different assignment.

In his concluding statement, the Senate President, Senator Lawan added that these nominees that have just been confirmed have served this country to the best of their abilities. He appealed to the executive to make sure they use their experience as military men to the best.

“These nominees that we have just confirmed are nominees that have served this country to the best of their ability. Our appeal to the Executive is to make sure they use their experiences as military men to the best,” Lawan said.

Lawan, on behalf of the senate, wished them a very successful career in their capacity as Non-Career Ambassadors.

What you should know 

  • Recall Nairametrics reported earlier this month that President Muhammadu Buhari nominated ex-Service Chiefs for Senate approval as non-career Ambassadors-Designate.
  • Their appointment came barely a week after their retirement as service chiefs and their replacement with new ones.
  • This led to a spate of criticisms from some Nigerians who felt that the nation’s security situation got worse under their watch.
  • They were reported to have tendered their resignation from their positions amid heightened calls that they should be sacked due to the increasing rate of insecurity across the country.

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Economy & Politics

2020 budget performance: FG achieves 89% capital release in December 2020

The Minister of Finance has revealed that the FG achieved 89% release of the capital component of the 2020 budget to MDAs as of December 2020.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed, has revealed that the Federal Government achieved 89% release of the capital component of the 2020 budget to Ministries, Departments and Agencies (MDAs) as of December 2020.

She said that the 89% capital funding for MDAs was achieved with the release of N1.74 trillion.

According to a report by the News Agency of Nigeria (NAN), this disclosure was made by Ahmed at an interactive session with the leadership of the National Assembly on Monday, February 22, 2021.

She also revealed that the government had disbursed N118.37 billion for Covid-19 capital expenditure from the fund.

READ: Recession: Senate attributes recovery to it’s cordial relationship with Executive

What the Minister for Finance is saying

Ahmed said the Nigerian economy faced serious challenges in 2020, with the macroeconomic environment significantly disrupted by the Covid-19 pandemic.

She said this led to a 65% drop in projected net 2020 government revenues from the oil and gas sector, which adversely affected foreign exchange inflows into the economy.

On the delayed release of funds to implement the 2020 capital budget until March 31, the Minister said the complaint had decreased.

She said, “I think the complaint was earlier in the year when we were trying to transfer the balances. As far as I know, in the past three weeks, I haven’t heard any such complaints and we have been able to address them.

“But when we started the transfers, we couldn’t transfer to some agencies because of some limitations in the system, but we have since been able to transfer the capital component that is being utilised by the agencies budget to the system.

READ: Nigeria receives $9.68 billion capital inflows in 2020, lowest in 4 years

While pointing out that the implementation of the MDAs projects was tied to procurement processes and capacity of the MDA, Ahmed also said the extension of the 2020 capital budget implementation to March 31 had recorded 30% performance as at January.

However, Ahmed said that she expected that the extension would record 100% performance in March.

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Speaking during the interaction, the Senate’s Chief Whip, Senator Orji-Uzor Kalu, commended the Minister on the capital performance of the 2020 budget.

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READ: FG to reopen Kano and Port Harcourt airports for international flights

He said, “I want to commend the minister and her team because this is the first time in the history of Nigeria that by December 31, we are having 89% performance expenditure of the budget. It has never happened before; Last year was the very first.

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“The budget had been going 49%, 27%; this means from what the Senate President was asking, it means by March, we should be looking at implementing the budget 100%.’

Earlier, President of the Senate, Ahmad Lawan said the meeting was to get an update on the capital implementation of the 2020 budget given its extension for implementation by the national assembly to March 31.

What this means

  • The 89% capital release for the 2020 budget as of December 2020 is quite encouraging as it occurred despite the economic challenges and disruption caused by the outbreak of the coronavirus pandemic.
  • There seems to be an improved effort by the Federal Government at the budgeting process with the early passage of the 2021 budget and the implementation of the capital component of the 2020 budget.

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