*The International Monetary Fund has commended the Federal Government鈥檚 proactive management of the COVID-19 pandemic and economic impacts on Nigerians, noting the socio-economic conditions yet remain a challenge in the West African country

Alexander Davis | 绿帽献妻

The International Monetary Fund (IMF) has commended the Federal Government鈥檚 proactive management of the COVID-19 pandemic and its economic impacts.

绿帽献妻 reports the global lender鈥檚 commendation is contained in the IMF Executive Board鈥檚 conclusion of the 2021 Article IV Consultation with Nigeria, published on the organisation鈥檚 corporate Web site.

President Muhammadu Buhari,GCFR

The IMF Executive Board stated despite the management of the damaging pandemic, the outlook remains subject to significant risks, including from the pandemic trajectory, oil price uncertainty, and security challenges in the West African country.

The lender also noted that the Nigerian economy was recovering from a historic downturn benefiting from government policy support, rising oil prices, and international financial assistance.

The document further said: 鈥淎fter registering a historic deficit in 2020, the current account improved in 2021 and gross foreign exchange reserves have improved, supported by the IMF鈥檚 Special Drawing Rights (SDR) allocation and Eurobond placements in September 2021.

鈥淣otwithstanding the authorities鈥� proactive approach to contain COVID-19 infection rates and fatalities and the recent growth improvement, socio-economic conditions remain a challenge.

鈥淟evels of food insecurity have risen and the poverty rate is estimated to have risen during the pandemic.鈥�

Higher debt service and fiscal sustainability

The IMF further noted that the outlook faces balanced risks as on the downside, low vaccination rates expose Nigeria to future pandemic waves and new variants, while higher debt service to government revenues pose risks for fiscal sustainability in the country鈥檚 economy.

According to the global lender, a worsening of violence and insecurity could also derail the economic recovery programmes.

It stated: 鈥淥n the upside, the non-oil sector could be stronger, benefitting from its recent growth momentum, supportive credit policies, and higher production from the new Dangote refinery.

鈥淣igeria鈥檚 ratification of the African Continental Free Trade Agreement (AfCFTA) could also yield a positive boost to the non-oil sector while oil production could rebound, supported by the more generous terms of the Petroleum Industry Act.鈥�

The international financial institution, however, stressed the need for major reforms in the fiscal, exchange rate, trade and governance areas to lift long-term, inclusive growth.

Strengthening social safety nets

The Executive Board Directors also welcomed the removal of the official exchange rate and recommended further measures for a unified and market-clearing exchange rate in the country.

According to IMF, this measure is to help strengthen Nigeria鈥檚 external position, taking advantage of the current favourable conditions.

They also noted that exchange rate reforms should be accompanied by macroeconomic policies to contain inflation, structural reforms to improve transparency and governance, and clear communications regarding exchange rate policy.

The Directors as well highlighted the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks.

The further body said: 鈥淚n this regard, they called for significant domestic revenue mobilisation, including by further increasing the Value Added Tax (VAT) rate, improving tax compliance and rationalising tax incentives.

鈥淒irectors also urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources.

鈥淭hey stressed the importance of further strengthening social safety nets.鈥�

According to IMF, it considers it appropriate to maintain a supportive monetary policy in the near term, with continue vigilance against inflation and balance of payments risks.

It also聽 encouraged the Federal Government to stand ready to adjust the monetary stance if inflationary pressures increase in the Nigerian economy.

The lender recommended strengthening the monetary operational framework over the medium term by focusing on the primacy of price stability and scaling back the central bank鈥檚 quasi-fiscal operations.

The Fund applauded the banking sector鈥檚 resilience in the face of the pandemic, and the planned expiration of pandemic-related support measures.

Acknowledging the fact that the newly launched eNaira digital currency could help foster financial inclusion and improve the delivery of social assistance, the Fund noted that close monitoring of associated risks would be important.

鈥淚mprovement in transparency and governance are also crucial for strengthening business confidence and public trust,鈥� it further said.

The Directors, therefore, called for stronger efforts at improving transparency of COVID-19 emergency spending in Nigeria.

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