- The new government inherited a difficult economic situation marked by low growth, low revenue collection, accelerating inflation, and external imbalances built up over years.
- Addressing food insecurity is the immediate priority. The recent approval of a well-targeted and effective social protection system is an important step toward addressing this and implementation will be crucial.
- The decision by the Monetary Policy Committee to further tighten monetary policy will help contain inflation and pressures on the naira.
Washington, DC: An International Monetary Fund team, led by Axel Schimmelpfennig, IMF mission chief for Nigeria, visited Lagos and Abuja February 12–23, 2024, to hold discussions for the 2024 Article IV Consultations with Nigeria. The team met with Minister of Finance Edun, Central Bank of Nigeria Governor Cardoso, senior government and central bank officials, the Ministry of Agriculture, the Ministry of the Environment, as well as representatives from sub-nationals, the private sector and civil society. At the end of the visit, Mr. Axel Schimmelpfennig, issued the following statement:
"Nigeria's economic outlook is challenging. Economic growth strengthened in the fourth quarter, with GDP growth reaching 2.8 percent in 2023. This falls slightly short of population growth dynamics. Improved oil production and an expected better harvest in the second half of the year are positive for 2024 GDP growth, which is projected to reach 3.2 percent, although high inflation, naira weakness, and policy tightening will provide headwinds.
"With about 8 percent of Nigerians deemed food insecure, addressing rising food insecurity is the immediate policy priority. In this regard, staff welcomed the authorities' approval of an effective and well-targeted social protection system. The team also welcomed the government's release of grains, seeds, and fertilizers, as well as Nigeria's introduction of dry-season farming.
"Recent improvements in revenue collection and oil production are encouraging. Nigeria's low revenue mobilization constrains the government's ability to respond to shocks and to promote long-term development. Non-oil revenue collection improved by 0.8 percent of GDP in 2023, helped by naira depreciation. Oil production reached 1.65 million barrels per day in January as the result of enhanced security. The capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to 3 percent of GDP in 2024.
"The recently approved targeted social safety net program that will provide cash transfers to vulnerable households needs to be fully implemented before the government can address costly, implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected.
"The team welcomed the Monetary Policy Committee (MPC)'s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 percent for a total tightening of 1,025 basis points since May 2022. This decision should help contain inflation, which reached 29.9 percent year-on-year in January 2024, and pressures on the naira."
