• Wants subsidy savings spent on healthcare, education
• Says no new loan request from Nigeria
• FG Sets 23% GDP revenue target — Edun
The International Monetary Fund (IMF) is in full support of the Federal Government’s ongoing economic reforms but says a social protection scheme for the vulnerable will make the restructuring even better.
It is of the view that savings from petrol subsidy removal could be spent on healthcare and educational sectors for maximum impact on the people.
The Director, African Department at the IMF, Abebe Selassie, gave the advice yesterday during the regional economic outlook for Sub-Saharan Africa press briefing on the sidelines of the ongoing World Bank/IMF annual meetings in Washington DC., USA.
The IMF director said this is not the time for spending compression, but rather spending more on these sectors with a view to sustaining growth and improving social outcomes.
Selassie said governments would do better carrying out reforms that ensure the mobilisation of resources for schemes with greatest impact on the people.
Minister of Finance and Coordinating Minister for the Economy, Wale Edun, during a parley with investors also on the sidelines of the World Bank/IMF annual meetings, threw more light on the economic reforms in Nigeria.
He said it was only on October 2, 2024 that petrol subsidy was effectively removed through market-pricing practices.
“It is now that we will assess the gains of the subsidy removal, which will be a huge dividend to the people,” Edun said.
When asked if the federal government has approached the IMF for funding since the reforms took effect, Selassie said there has been no such request from Nigeria.
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He applauded the reforms- petrol subsidy removal and exchange rate unification, describing them as better choices.
Selassie said: “They have made choices that we think, are within the direction of better use of public resources in a way that will unlock the incredible potential that the economy has.
“The reforms will make the economy more dynamic to invest in and will facilitate growth. And we welcome those reforms, while also recognising, that it has entailed quite a lot of cost adjustment.
“A better job can be done by rolling out social protection, particularly to the most vulnerable.”
The IMF chief, however, said the reforms embarked upon by Nigeria are deeply domestic and political choices for the country’s leadership.
He said the Sub-Saharan African countries are implementing difficult and much needed reforms to restore macroeconomic stability, and while overall imbalances have started to narrow, the picture is varied.
“Policymakers face three main hurdles,” he said.
“First, regional growth, at a projected 3.6 per cent in 2024, is generally subdued and uneven, although it is expected to recover modestly next year to 4.2 per cent.
“Second, financing conditions continue to be tight.
“Third, the complex interplay of poverty, scarce opportunities, and weak governance, compounded by a higher cost of living and short-term hardships linked to macroeconomic adjustment are fueling social frustration.”
On IMF’s intensified engagement in the region, he said the involvement is at one of the highest levels in recent history, with numerous ongoing programs and financial arrangements.
His words: “Since 2020, the Fund has made available over $60 billion in financing for the region. However, declining official development assistance is challenging the effectiveness of our support.
“Much work remains to be done to reinvigorate reforms and tap into the region’s tremendous potential.”
Selassie added that within this environment, policymakers face a difficult balancing act in striving for macroeconomic stability while also working to address development needs and ensure that reforms are socially and politically acceptable.
“Protecting the most vulnerable from the costs of adjustment and realizing reforms that create sufficient jobs will be critical to mobilize public support,” he stated.
He said that inflation in Sub-Saharan Africa continues to decline, and budget deficits have begun to narrow, reverting to pre-crisis levels.
He said that debt-to-Gross Domestic Product (GDP) ratios are also stabilising albeit at a high level, which are positive signs for the region’s economic health.
However, Selassie admitted political and social challenges faced by government in implementing much needed reforms.
“The cost-of-living crisis, particularly due to higher food prices, has been more acute in our region,” he said.
“And this has intensified the strain on households who spend a larger share of household expenses on food. Governments are making fiscal adjustments by increasing revenue and compressing spending.
“But elevated interest burdens continue to strain public finances and they add to the sense that government services are not improving or even deteriorating.”
FG Sets 23% GDP revenue target
The Federal Government, according to Edun, plans to boost budget revenues with a target of reaching 23 percent of GDP, a move aimed at fostering sustained economic growth.
He said government was resolute in revamping the national economy through policies and initiatives designed to uplift millions of Nigerians.
“Our optimism for Nigeria’s future reflects the President’s dedication to implementing impactful policies,” he said.
On Nigeria’s fiscal performance, he said: “Where we began was nearly 100 percent of revenue going toward debt servicing. We have reduced this to about 60 percent, which, while still high, represents significant improvement.”
He said budget deficit has reduced from 6.5 percent of GDP to approximately 4.4 percent.
Government’s target is 4 percent by December.
The Director-General of the Budget Office of the Federation, Mr. Tanimu Yakubu, provided additional insights into Nigeria’s revenue performance. He reported that government revenue reached N12.6 trillion by August 2024, against a pro-rata budget projection of N13.1 trillion, leaving a shortfall of N500 billion.
“Our August target was N13.1 trillion, and actual performance was N12.6 trillion, resulting in a deficit of N500 billion. Missing our target by only 3.6 percent is still a positive indicator,” Yakubu stated.