IMF urges Nigeria’s govt to plowback fuel subsidy savings to fund budget
Bamidele Famoofo
The International Monetary Fund ( IMF) has tasked fiscal authorities to throw back savings from removal of fuel subsidy into funding the 2025 annual budget, if it must safeguard key spending priorities.
The IMF during its routine consultative mission to the most populous black nation in April, noted that the economic outlook is marked by significant uncertainty, hence the need for alternative means of funding growth in the economy.
“Elevated global risk sentiment and lower oil prices impact the Nigerian economy. The reforms since 2023 have put the Nigerian economy in a better position to navigate this external environment. Looking ahead, macroeconomic policies need to further strengthen buffers and resilience, while creating enabling conditions for private sector-led growth,” IMF said .
Meanwhile, IMF affirmed that The Nigerian authorities have taken important steps to stabilize the economy, enhance resilience, and support growth. These reforms have put Nigeria in a better position to navigate the external environment.
“The Nigerian authorities have taken important steps to stabilize the economy, enhance resilience, and support growth. The financing of the fiscal deficit by the central bank has ceased, costly fuel subsidies were removed, and the functioning of the foreign exchange market has improved. Gains have yet to benefit all Nigerians as poverty and food insecurity remain high.
“Macroeconomic policies need to further strengthen buffers and resilience, reduce inflation, and support private sector-led growth,” IMF said.
IMF disclosed that a tight monetary policy stance is required to firmly guide inflation down. The Monetary Policy Committee’s data-dependent approach has served Nigeria well and will help navigate elevated macroeconomic uncertainty. Announcing a disinflation path to serve as an intermediate target can help anchor inflation expectations.”
According to the IMF: “The authorities communicated to the mission that they will implement the 2025 budget in a manner that is responsive to the decline in international oil prices. A neutral fiscal stance would support monetary policy to bring down inflation. To safeguard key spending priorities, it is imperative that fiscal savings from the fuel subsidy removal are channeled to the budget. In particular, adjustments should protect critical, growth-enhancing investment, while accelerating and broadening the delivery of cash transfers under the World Bank-supported program to provide relief to those experiencing food insecurity.
“A tight monetary policy stance is required to firmly guide inflation down. The Monetary Policy Committee’s data-dependent approach has served Nigeria well and will help navigate elevated macroeconomic uncertainty. Announcing a disinflation path to serve as an intermediate target can help anchor inflation expectations.”
The IMF team was by Axel Schimmelpfennig, IMF mission chief for Nigeria. The team met with Minister of Finance and Coordinating Minister of the Economy Wale Edun, Minister of Agriculture and Food Security Abubakar Kyari, Central Bank of Nigeria Governor Yemi Cardoso, senior government and central bank officials, the Ministry of the Environment, the private sector, academia, labor unions, and civil society.