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Tag: International Monetary Fund (IMF)

  • IMF, Nigeria discuss reforms, new development plan

    IMF, Nigeria discuss reforms, new development plan

    The International Monetary Fund (IMF) and the Federal Government have opened discussions in Abuja on the country’s ongoing economic reforms, medium-term outlook, and preparations for the 2026–2030 National Development Plan.

    The meeting, on Friday, brought together the IMF delegation led by Mr. Axel Schimmelpfennig, Assistant Director of the IMF’s African Department, and Minister of Budget and Economic Planning, Senator Abubakar Bagudu. 

    The engagement formed part of the IMF’s consultative mission to review Nigeria’s fiscal priorities, macroeconomic framework, and reform direction ahead of its next country report.

    IlSchimmelpfennig acknowledged Nigeria’s reform progress and expressed the IMF’s interest in understanding how the country’s medium-term strategy aligns with its development objectives.

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    “We would like to hear your thoughts on current developments — your outlook for the next year and the medium term,” he said. 

    “We understand that you are preparing the medium-term framework, the National Development Plan, and the 2026 budget. Having your overall vision at this stage will be extremely helpful.”

    He noted that while pre-election periods can often bring uncertainty, Nigeria’s policy coherence signals institutional maturity. “Every country manages pre-election periods differently,” Schimmelpfennig observed. “But what we see in Nigeria is a continued commitment to reform and policy consistency — a signal of growing institutional strength.”

    Responding, Bagudu said the government remains committed to aligning fiscal reforms with national planning to promote coherence, efficiency, and inclusive growth. He expressed appreciation for the IMF’s constructive engagement and technical assistance over the past two and a half years.

    “We are deeply grateful for the guidance and encouragement we have received from the IMF and World Bank. Your interrogation and feedback have played a vital role in refining our reforms and ensuring that our economic management remains evidence-based,” the minister stated.

    According to Bagudu, Nigeria’s reform efforts under President Bola Tinubu have been driven by discipline, inclusion, and transparency — principles that are beginning to yield measurable results.

    He explained that the administration’s target of building a $1 trillion economy by 2030 is anchored on disciplined reforms and coordinated national planning. The minister added that the Renewed Hope Ward-Based Development Plan seeks to harness the economic potential of Nigeria’s 8,809 wards, providing a framework for inclusive, bottom-up growth.

    Bagudu also spoke on the development of the 2026–2030 National Development Plan, which aims to integrate federal, state, and local strategies into a cohesive and data-driven roadmap for sustainable growth.

    “We are working to make the plan a reflection of Nigeria’s collective ambition — one that incorporates fiscal discipline, subnational collaboration, and the reforms necessary to sustain long-term growth,” he said.

    The Minister further noted the importance of ongoing collaboration with the IMF in macroeconomic modelling, fiscal planning, and comparative data analysis to strengthen policy outcomes.

    “We are not lamenting; we are learning and refining,” Bagudu added. 

    “Our partnership with the IMF is about innovation, not dependency, and will continue to guide Nigeria’s reform-driven path towards sustainable growth.”

  • IMF: CBN’s reforms triggered inflation rate dip, stable exchange rate

    IMF: CBN’s reforms triggered inflation rate dip, stable exchange rate

    The International Monetary Fund (IMF) has acknowledged the positive impact of the Central Bank of Nigeria (CBN)-led economic reforms in Nigeria. The declining inflation rate, naira stability, rising foreign reserves, economic buffers and other supportive domestic factors are listed as significant benefits from the exchange rate reforms and foreign investor-friendly policies. These, the CBN Governor, Olayemi Cardoso said, ensured that higher tariffs impact on the economy remained subdued and supported IMF’s two-year upward growth revision for the Nigeria economy, reports Assistant Editor, Collins Nweze

    For the International Monetary Fund (IMF) that Nigeria’s economy has weathered global headwinds from trade tariffs, oil prices decline, prolonged financial markets uncertainty. It hinged the success of the economy turning the corner to economic reforms instituted by the Central Bank of Nigeria (CBN).

    CBN Governor, Olayemi Cardoso, explained how the turnaround came. He said there were strategic efforts taken by both monetary and fiscal authorities that provided strong buffers for the economy and triggered IMF growth revisions for the country.

    Speaking during the Intergovernmental Group of Twenty-Four (G-24) press briefing at the 2025 IMF/World Bank Annual Meetings in Washington DC, US, the CBN said that Nigeria’s economy has been fully restructured and resilient, with huge buffers against global risks.

    Cardoso, who is the leader of the Nigeria delegation at the meetings, said the naira, has equally emerged as a competitive currency, with the economy witnessing positive trade balances and large businesses moving from imports to export of locally produced goods and commodities.

    On the impact of the trade tariffs on the domestic economy, he said the tariffs are less of problems for the country.

    “And I think we were very fortunate, because a lot of the things that were needed to have been done, we did them much earlier, and as a result of that, we’re able to create resilience and buffers against potential shocks,” he stated.

    “And for us again, oil is basically the only commodity that was so exposed to the tariffs, and the impact of that was relatively modest. We now have a more competitive currency with the results that, for once, we have a situation where we have a positive balance of trade surplus, and we expect it to be six per cent in GDP for some time,” he said.

    “So basically, what is happening is a complete restructuring of the economy, where we are encouraging people to go into domestic production, and, of course, discouraging imports,” he added.

    Cardoso explained that oil was the oil commodity that was exposed to the trade tariffs, but the impact was equally modest.

    “So, and of course, in terms of anchoring expectations, we found that those who followed the Nigerian economy were fairly comfortable. And for us, again, oil is basically the only commodity that was so exposed, and the impact of that was relatively modest,” he said.

    In his remarks, G-24 Chairman, Pablo Quirno noted that recent adverse shocks in global economy have left growth below pre-pandemic levels, with rising policy uncertainties creating substantial medium-term headwinds.

    “Emerging market and developing economies have faced deteriorating terms of trade, reduced export volumes, and declining foreign currency earnings. Many of these countries have implemented domestic policies to mitigate uncertainty, but constrained policy space underscores the urgent need for collective solutions supported by multilateral institutions,” he said.

    Nigeria’s revised growth for 2025, 2026

    The IMF also gave a positive growth forecast of 3.9 per cent to Nigeria in 2025, and 4.1 per cent in 2026.

    In its World Economic Outlook (WEO) report for October 2025 , the IMF Economic Counsellor Pierre-Olivier Gourinchas, said the Fund based its outlook for Nigeria on several improving macroeconomic indicators and supportive domestic factors.

    He said factor responsible for the higher growth revision include improved oil production, rising investor confidence, a supportive fiscal stance, and given its limited exposure to higher US tariffs.According to him, the Fund also listed the stability in the exchange rate, rising foreign reserves and rebasing of the Gross Domestic Product (GDP) as significant factors expected to propel the Nigeria economy forward in 2026.

    Aside Nigeria, many other economies see significant downward revisions because of the changing international trade and official aid landscape.

    “Whereas growth in Nigeria is revised upward on account of supportive domestic factors, including higher oil production, improved investor confidence, a supportive fiscal stance in 2026, and given its limited exposure to higher US tariffs, many other economies see significant downward revisions because of the changing international trade and official aid landscape,” he said.

    He said that the 10 to 12 per cent weakening of the dollar has helped financial conditions in many emerging market economies, especially countries that have dollar denominated debt. He added that local currency recovery and dip in inflation figures have also been supported by weakening dollar.

    “The depreciation of the dollar also helps a number of these countries on inflation front, because a lot of goods are invoiced in those dollars, and so the pricing dollar remains constant, but the dollar itself is weaker. This helps to reduce input prices, and lead to drop in inflation,” he said.

    IMF Deputy Director in the Research Department, Petya Koeva Brooks, said that many low-income countries in sub-Saharan Africa benefited from preferential access to the US market under the African Growth and Opportunity Act, which expired in September.

    She explained that in sub-Saharan Africa, growth is expected to remain subdued, unchanged in 2025 from 4.1 percent in 2024, before picking up to 4.4 percent in 2026.

    “This is an upward revision relative to the April 2025 WEO forecast by a cumulative 0.5 percentage point, but a downward revision of 0.1 percentage point compared with the October 2024 WEO,” she said.

    According to the WEO report, the global economy is adjusting to a landscape reshaped by new policy measures.

    It projected global economy growth to slow from 3.3 per cent in 2024 to 3.2 percent in 2025 and 3.1 percent in 2026, with advanced economies growing around 1.5 percent and emerging market and developing economies just above 4 percent.

    It said that some extremes of higher tariffs were tempered, due to subsequent deals and resets.

    “But the overall environment remains volatile, and temporary factors that supported activity in the first half of 2025—such as front-loading—are fading. As a result, global growth projections in the latest World Economic Outlook (WEO) are revised upward relative to the April 2025 WEO but continue to mark a downward revision relative to the pre-policy-shift forecasts,” the report said.

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    Likewise, inflation is projected to continue to decline globally, though with variation across countries: above target in the United States—with risks tilted to the upside—and subdued elsewhere.

    “Trade diplomacy should be paired with macroeconomic adjustment. Fiscal buffers should be rebuilt. Central bank independence should be preserved. Efforts on structural reforms should be redoubled.”

    “The tactics that keep activity seemingly resilient in the short term, such as trade diversion and rerouting, are costly. Suboptimal reallocation of productive resources, technological decoupling, and limitations on knowledge diffusion are bound to restrain growth over the longer term,” it said.

    The Fund said the global economy has shown resilience to the trade policy shocks, including because these shocks materialised on a smaller scale than expected at their onset, but the drag from shifting policies is becoming visible in more recent data. There have been several common drivers of growth patterns across countries but also some important idiosyncratic factors.

    How it started

    Speaking at the Lagos Business School leadership programme in Lagos, Cardoso, explained that  when he assumed office as governor in 2023, Nigeria’s economy faced formidable headwinds.

    “Inflation was spiraling, external reserves were strained, investor confidence was shaken, and nearly every macroeconomic indicator was under pressure. It was a moment that demanded not just technical skill, but leadership rooted in courage, credibility, and accountability. We had to act decisively,” he said.

    To rein in inflation, the apex bank tightened policy aggressively, raising rates by more than 800 basis points and strengthening liquidity management.

    “We restored orthodoxy by halting central bank financing of government beyond statutory limits and re-anchoring monetary policy on its core mandate,” he said.

    “On foreign exchange, we introduced a willing-buyer, willing-seller framework, unified exchange rate windows, and cleared the backlog of verifiable FX commitments, restoring market confidence. We strengthened reserves, now standing above US$42 billion, and created new channels for diaspora remittances and investments, including the Non-Resident BVN platform, which allows Nigerians abroad to open accounts seamlessly from anywhere in the world,” he stated.

    For Nigeria, Real GDP expanded by 4.2 per cent in the second quarter of 2025, signaling the re-emergence of growth momentum.

    “Capital flows are rebounding, sovereign credit ratings have improved, as seen in the Credit Default Swap curve, and the naira is beginning to stabilise. Together, these shifts suggest more than a cyclical adjustment: they mark the outlines of a developmental inflection point, where investor confidence is gradually restored and Nigeria positions itself, two years on, at the threshold of structural renewal and long- term transformation,” Cardoso said.

    “But this is only the beginning. The real task is to ensure that these hard-won gains translate into durable prosperity, especially for the next generation. And this is where leadership becomes critical,” he added.

    Over the past two years, the CBN has undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency.

    This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets.

    In the foreign exchange market, the apex bank faced a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime characterized by multiple forex rates, which had encouraged arbitrage opportunities. This regime stifled much needed foreign investment, and led to the depletion of our external reserves which fell to $33.22bn in December 2023.

    It must also be understood that the cost of the FX subsidy regime is estimated to far exceed that of fuel subsidies. In 2022 alone, the potential revenue lost due to a less flexible FX regime was approximately N6.2 trillion, compared to N4.5 trillion from fuel subsidies. These funds could have significantly contributed to critical investments in education, healthcare, and infrastructure development.

    While the Central Bank will continue to lay the foundation for price stability and foster a conducive policy environment, the role of our banks in this journey is crucial.

    An FX market defined solely by when and how the Central Bank buys or sells dollars is inadequate for the needs of a dynamic economy like Nigeria’s. Now is the time for banks to step up to their intermediation and market-making responsibilities, providing customers with the right solutions to run their businesses and manage risks effectively.

  • Nigeria must act now on climate or risk deeper debt – IMF

    Nigeria must act now on climate or risk deeper debt – IMF

    …calls for urgent climate adaptation, fiscal reforms

    The International Monetary Fund (IMF) has raised the alarm that climate-related shocks could worsen Nigeria’s already fragile economic stability and deepen its debt crisis if not urgently addressed.

    In its 2025 Article IV Consultation Report, published on its official website, the Fund warned that extreme weather events pose a direct threat to the country’s growth, fiscal sustainability, and financial sector.

    The report stated that rising sea levels, especially in Lagos, Nigeria’s commercial and financial hub, could cause significant damage to critical infrastructure, disrupt agricultural activities, and overstretch government finances.

    “Climate events significantly impact Nigeria’s growth outlook, fiscal sustainability, balance of payments, and financial sector, potentially undermining macroeconomic stability,” the IMF said.

    It further noted that the increasing frequency of extreme weather events is already taking a toll on economic growth and revenue, while raising the cost of public expenditure on disaster relief, infrastructure repairs, and climate adaptation.

    Although Nigeria’s financial sector remains relatively small, the IMF warned that its heavy presence in Lagos exposes it to direct physical and operational risks from flooding and sea-level rise. Such events, it said, could impair asset quality and pose broader risks to financial stability.

    According to the report, these climate shocks could combine with sluggish growth and declining tax revenues to put additional pressure on Nigeria’s fiscal position.

    The IMF warned that these trends may further widen the country’s fiscal and external financing gaps.

    The Fund observed that Nigeria’s public debt rose sharply to 52.3 per cent of Gross Domestic Product (GDP) in 2024, up from 41.5 per cent in 2023. It attributed the rise to increased borrowing needs and a weakening naira.

    Similarly, the country spent 4.1 per cent of its GDP on debt servicing in 2024, up from 3.7 per cent in 2023, according to the African Development Bank. The uptick, the AfDB noted, was due to higher interest payments on government securities and fresh borrowings to plug budget deficits.

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    “Fiscal policy will have to address lower tax revenues from lower growth and higher demands for spending on disaster relief, infrastructure repair, and investments in climate adaptation and mitigation,” the IMF stated.

    The report warned that without far-reaching reforms, Nigeria’s debt-to-GDP ratio is expected to continue rising, posing serious risks to the country’s long-term economic prospects.

    The Fund called on the Nigerian government to step up its efforts on climate adaptation and ramp up revenue mobilisation through reforms.

    It also urged a deliberate push toward economic diversification to reduce dependence on oil revenues, which remain vulnerable to global price shocks.

    While recognising recent fiscal reforms, the IMF maintained that they are not enough to safeguard the economy against the looming impacts of climate change.

    “The expected rise in sea level would pose a significant economic cost for Nigeria, damaging infrastructure in coastal areas such as Lagos. Without a clear strategy to tackle both fiscal instability and climate change, Nigeria risks undermining its long-term economic future,” the report cautioned.

    The IMF stressed that integrating climate adaptation into national economic planning would be a vital step, but insisted that only comprehensive reforms in public finance and structural transformation could position the country on a path of resilient growth.

  • Assessing IMF’s spotlight on Nigeria’s financial sector reforms, stability

    Assessing IMF’s spotlight on Nigeria’s financial sector reforms, stability

    The Article IV Consultations on Nigeria, released last week by the International Monetary Fund (IMF), acknowledged the Central Bank of Nigeria’s (CBN) significant efforts to strengthen the banking system and raise capital across the sector. The IMF praised initiatives to boost financial inclusion and deepen capital market development, while calling for a robust, risk-based supervisory framework—especially in mortgage, consumer lending, fintech, and cryptocurrency. It highlighted improved reserves, renewed investor confidence and naira stability as key outcomes of the CBN’s strategic reforms. These achievements, the Fund noted, signal progress in stabilising prices and the exchange rate, reports Assistant Editor COLLINS NWEZE

    The International Monetary Fund (IMF) has commended the progress Nigeria has made in reforming its financial sector over the past two years. This acknowledgment followed the IMF’s recent Article IV Consultation, which focused primarily on the Central Bank of Nigeria’s (CBN) market reforms and their impact on forex inflows and macroeconomic stability. A major highlight of the report was the overhaul of the foreign exchange (FX) market and the sustained stabilisation of the naira.

    According to the IMF, these reforms have enhanced price discovery, improved dollar liquidity, and contributed significantly to restoring investor confidence. The Fund noted that Nigerian authorities had implemented major policy shifts that improved macroeconomic fundamentals and economic resilience. The IMF Directors expressed support for the CBN’s tight monetary policy stance under Governor Olayemi Cardoso, recommending that it continue until disinflation becomes more firmly anchored. They welcomed the end of deficit monetisation and efforts to strengthen central bank governance as foundational steps toward inflation targeting.

    The IMF emphasised the importance of a robust FX intervention framework focused on limiting excessive volatility. Directors urged Nigerian authorities to phase out existing capital flow management measures in a sequenced and timely manner, stressing that a flexible exchange rate remains a key buffer against external shocks. On the fiscal side, the IMF advised a neutral fiscal stance to preserve macroeconomic stability, prioritising growth-enhancing investments. It also called for accelerated delivery of cash transfers to support vulnerable populations. The fund praised the ongoing tax reform efforts, calling them essential for improving revenue mobilisation, ensuring debt sustainability, and creating fiscal space for developmental needs.

    A major reform under Cardoso’s leadership was the dismantling of Nigeria’s long-standing multiple exchange rate regime. The CBN introduced a “willing-buyer, willing-seller” system facilitated by a digital trading platform known as B-Match. The impact has been significant: gross and net international reserves rose in 2024, supported by a strong current account surplus and increased portfolio inflows. FX inflows surged to $6.9 billion in Q1 2025, and external reserves peaked at $40.9 billion by the end of 2024—covering more than eight months of imports, well above international benchmarks.

    Additionally, the FX premium—the gap between official and parallel market rates—narrowed from over 60 percent to under three per cent. As the IMF remarked, “reforms to the FX market and foreign exchange interventions have brought stability to the naira.” In January 2025, Nigeria returned to the Eurobond market for the first time in four years, a milestone that the IMF attributed to renewed investor confidence and improving macroeconomic conditions.

    The IMF also praised ongoing efforts to strengthen Nigeria’s banking sector. This includes the recapitalisation plan that will significantly raise banks’ minimum capital by March 2026. According to the IMF Executive Board, this move will improve banks’ ability to absorb shocks, increase credit access, and support long-term planning for a projected $1 trillion Nigerian economy. Efforts to improve financial inclusion were also noted. Under Cardoso, the CBN is extending banking services to underserved populations through digital channels and financial literacy programmes like the Women’s Financial Inclusion Initiative (Wi-Fi).

    The IMF acknowledged Nigeria’s progress in strengthening its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) frameworks. However, it stressed the importance of fully resolving remaining deficiencies to exit the Financial Action Task Force (FATF) grey list—a designation that subjects Nigeria to increased monitoring due to financial crime vulnerabilities. Despite these gains, the IMF warned of persistent risks. Inflation, while declining, remains high. Other challenges include infrastructure gaps, insecurity, red tape, and fiscal slippages. The Fund emphasised the importance of improving agricultural productivity, electricity supply, health and education spending, and climate resilience to ensure long-term, inclusive growth.

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    The Article IV Report also projected that Real GDP will grow by 3.4 per cent in 2025, supported by the new domestic refinery, higher oil production, and a strong services sector. Amid a complex and uncertain external environment, medium-term growth is expected to remain around 3.5 per cent, supported by domestic reform gains. The IMF further observed that gross and net international reserves rose in 2024, supported by a strong current account surplus and better portfolio inflows, adding that Reforms to the FX market and foreign exchange interventions had stabilised the naira.

    Net FX reserves position rises

    Cardoso-led Central Bank of Nigeria (CBN) recently announced quantum leap in the net FX reserve position at $23.11 billion at the end of last year. Cardoso had upon assuming office in October 2023, prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience. In the foreign exchange market, the apex bank faced a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime characterised by multiple forex rates, which had encouraged arbitrage opportunities.

    This regime stifled much needed foreign investment, and led to the depletion of our external reserves which fell to $33.22 billion in December 2023.  “Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso said.

    According to the apex bank data, NFER stood at $23.11 billion, the highest level in over three years – a marked increase from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021. The NFER, which adjusts gross reserves to account for near-term liabilities such as FX swaps and forward contracts, is widely regarded as a more accurate indicator of the foreign exchange buffers available to meet immediate external obligations.

    Gross external reserves also increased to $40.19 billion, compared to $33.22 billion at the close of 2023. The increase in reserves reflects a combination of strategic measures undertaken by the CBN, including a deliberate and substantial reduction in short-term foreign exchange liabilities – notably swaps and forward obligations. The strengthening was also spurred by policy actions to rebuild confidence in the FX market and increase reserve buffers, along with recent improved foreign exchange inflows – particularly from non-oil sources. The result is a stronger and more transparent reserves position that better equips Nigeria to withstand external shocks. The expansion occurred even as the CBN continues to reduce short-term liabilities, thereby improving the overall quality of the reserve position.

    “This improvement in our net reserves is not accidental; it is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability. We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms,” Cardoso commented.

    Reserves have continued to strengthen in 2025. While the first quarter figures reflected some seasonal and transitional adjustments, including significant interest payments on foreign-denominated debt, underlying fundamentals remain intact, and reserves are expected to continue improving over the second quarter of this year. Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment expected to boost non-oil FX earnings and diversify external inflows. The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.

    More FX sources bolster inflows

    Foreign capital inflows to the domestic economy remains crucial elements in the drive to achieve monetary and fiscal policy stability. The apex bank is cultivating more sources of FX to increase dollar inflows, boost access to manufacturers and retail end users. From moves to boost diaspora remittances through new product development, the granting licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the CBN has simplified dollar-inflow channels for FX dealers to boost business and economic growth.

    The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the policy shifts showed the level of creativity, policy and hard work Cardoso puts in ensuring that more forex flows into the economy and remain accessible to businesses. He said diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

    According to him, the CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year. The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

    Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds. Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms. For instance, the CBN under Cardoso, recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.

    These and other measures, including the granting licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs). The CBN recently released the reviewed guidelines of International Money Transfer Services in Nigeria. These guidelines mark a significant shift in how IMTOS conduct their operations, reflecting the CBN’s ongoing efforts to enhance transparency and efficiency in foreign exchange transactions and to bolster diaspora remittances into Nigeria.

    Further circular titled “New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances” highlighted the apex bank’s commitment to improving the Nigerian foreign exchange market infrastructure by increasing the flow of remittances through formal channels. It introduces measures aimed at providing licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries.

  • Glimmers of hope

    Glimmers of hope

    •Clearing of $3.4bn IMF Loan and N100bn Sukuk loan is a sign that the economy is responding positively to  reforms

    It is unsurprising that the report that a major debt obligation of $3.4 billion owed by Nigeria to the International Monetary Fund (IMF) has been cleared by the President Bola Tinubu administration was greeted by initial cynicism in some quarters. But details released by officials of the Federal Government, as well as information on the website of the International Monetary Fund (IMF) have confirmed the veracity of the report. The loan was obtained in April 2020 by the immediate past President Muhammadu Buhari administration to enable the country cope with challenges posed by the COVID-19 pandemic.

    The hardships associated with the tough but inevitable economic reforms undertaken by the incumbent government, particularly the removal of fuel subsidy and the merger of the parallel foreign exchange markets, had predisposed many to a reflexively negative attitude to the impact, potential and prospects of its policies.

    The clearing of this debt burden is, however, a bold statement that, despite current inflationary spirals and other difficulties, the reforms are addressing distortions in the country’s economic fundamentals and gradually yielding positive outcomes. It suggests that Nigeria’s finances are being responsibly managed, with the requisite expertise and diligence which will boost the confidence of domestic and foreign investors in the economy.

    This positive perception is further strengthened by the news that the Federal Government has also successfully repaid its N100 billion (US$223 million) Sovereign Sukuk loan which was accessed in 2017 to fund road infrastructure projects across the country and boost economic development.

    The clearing of the principal of the IMF loan inspires confidence that the government will be readily able to pay remaining sundry charges and fees estimated at about $30 million.

    Since government is a continuum, the Tinubu administration deserves commendation for according requisite priority to the meeting of obligations inherited from preceding governments. This will facilitate its ability to attract future assistance that may be required to meet the country’s developmental objectives. 

    Indeed, the administration had given an early indication of its orientation and commitment in this regard. For instance, the Central Bank of Nigeria, (CBN), wasted no time in clearing the backlog of foreign exchange earnings of international air operators which amounted to about $850 million that could not be repatriated from the country due to severe dollar shortages experienced under the Buhari administration.

    In February, 2024, the CBN governor, Mr Olayemi Cardoso, reported that the apex bank had settled all valid inherited foreign exchange backlogs of $7 billion to enable multinationals, corporations and foreign investors repatriate their funds without undue stress. According to him, “This initiative has restored confidence among market participants and reinforced Nigeria’s commitment to honouring financial obligations in a timely and efficient manner”. Commenting on this development at the time, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, had stated that “With the clearance of the backlog, there is now more space for the CBN to stabilise the  currency and be able to intervene in the currency market periodically and be able to build reserves”.

    Indeed, the greater transparency in the operation of the foreign exchange market and relative stability in the value of the Naira due to the reform initiatives of the monetary authorities have considerably impacted the country’s economic performance as indicated by improved external reserve levels. According to the CBN, as at the end of 2024, Nigeria’s net foreign exchange reserves marked a significant increase to $23.11 billion, which represented the highest level in three years. This was an appreciable improvement from the $14.59 billion net foreign exchange recorded in 2021, $8.19 billion in 2022 and $3.99 billion at the end of 2023. Similarly, the gross external reserves rose from $33.2 billion at the end of 2023 to $40.19 billion as of December 2024.

    The improved foreign reserve levels have been attributed to gains of the economic reform initiatives, including increased foreign exchange inflows from non-oil sources, attraction of more sustainable and stable foreign exchange inflows as a result of the restoration of trust in the foreign exchange market, improved oil production and a more favourable export environment.

     Indeed, the National Bureau of Statistics (NBS) reports that in the second quarter of 2024, the country’s foreign trade surplus increased to N6.5 trillion which represented a 96.60% increase from the first quarter and a 202.11% surge from the N64.44 trillion recorded in the second quarter of 2023.

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    However, despite a positive trade balance of N3.4 trillion in 2024, it was noted that the country still had a high import bill of N16.6 trillion, largely comprising manufactured goods and raw materials. In the same vein, while agricultural exports witnessed a 232% year-on-year increase to N1.54 trillion, exports of manufactured goods reportedly slumped by 52.3% from the third quarter of 2024 to N494.2 billion, reflecting a weaker performance in industrial production. This underscores the urgent need to intensify current efforts to bridge the prevalent wide infrastructure deficit, with particular emphasis on markedly improved electricity supply to boost overall economic productivity and employment generation.

    Despite the positive signals indicated by the clearing of the IMF and Sukuk sovereign debts, experts note that the country’s debt level remains high. According to the Director-General of the Debt Management Office (DMO), Ms Patience Oniha, Nigeria’s total debt stock stood at N144.67  trillion as at December, 2023, with external debt amounting to about $42.5 billion. She assured, however, that the public debt remains sustainable given the appreciable decrease in debt service to revenue ratio over the last two years, gradually growing revenues and an expanding Gross Domestic Product (GDP) base.

    This is most likely why the reputable credit rating firm, Fitch, despite noting that the country needs to pay $5.2 billion towards its foreign loans in 2025, still changed Nigeria’s rating from negative to stable, which is perceived as a positive indicator to investors. It is expected that the new tax reform bills of the Tinubu administration, when they go into effect, will significantly enhance economic performance, especially through improved tax efficiency and revenue earnings.

    But the government has a duty to accompany ongoing reform implementation with a more stringent crackdown on corruption, retrieval of illegally acquired funds and further cuts in governance costs. It should continue to curb other wasteful expenditures.

  • Controversy over 7.2 per cent VAT rate

    MIXED reactions on Thursday trailed the 7.2 per cent Value Added Tax (VAT) proposed by the Federal Executive Council (FEC).

    The Chartered Institute of Taxation of Nigeria (CITN) lauded the increase, saying it was long overdue.

    According to the institute, the proposal will help government to realise its developmental objectives.

    But, the Manufacturing Association of Nigeria (MAN) faulted the timing, saying it is inappropriate.

    The association said the step will spur spontaneous increase in price of goods and services.

    However, the President of the Chartered Institute of Taxation of Nigeria (CITN), Dame Olajumoke Simplice, defended the new rate, urging the government to sustain it.

    Speaking on Thursday with The Nation, she said despite the increase, Nigeria’s VAT is still one of the lowest in the world, adding that the new rate should be pegged at 7.5 per cent or 10 per cent.

    Noting that the last VAT review was 25 years ago, she said Nigeria has the lowest VAT rate in the ECOWAS sub-region.

    According to the CITN boss, the VAT review should take place every five years, stressing that it should be tax on consumption.

    She said: “VAT is a tax on consumption and is only paid when you consume goods or pay for services. Nigeria’s decision to raise VAT is good for its trade relations with other countries. Besides, VAT is very easy to collect and should be utilized for development of the economy.”

    Simplice said government should also be held accountable for the funds from the VAT are spent. In her view, the funds should be judiciously used for developmental projects.

    Acknowledging that the new VAT rate will increase prices of goods, she said manufacturers will pass the effects to consumers.

    Simplice advised tax payers to form pressure groups to monitor tax revenue spending and ensure accountability on the part of government.

    The International Monetary Fund (IMF) has consistently advised Nigeria to raise its VAT and channel the funds to developmental projects and budget funding.

    At the conclusion of the IMF 2018 Article IV Consultation with Nigeria , its Executive Board emphasized the need for a growth-friendly fiscal adjustment, which front-loads the non-oil revenue mobilisation and rationalises current expenditure to reduce the ratio of interest payments to revenue to a more sustainable level and create space for priority social and infrastructure spending.

    The board said: “In addition to ongoing efforts to improve tax administration, directors underlined the need for more ambitious tax policy measures, including reforming the value added tax (VAT), increasing excises, and rationalising tax incentives.

    Speaking on tax reforms at the Fiscal Monitor Session of the event, IMF Assistant Director, Fiscal Affairs Department, Cathy Pattillo, said tax reform in Nigeria was important.

    She said IMF’s main recommendation for Nigeria is the need for a comprehensive tax reform that would sustainably increase non-oil revenue.

    Pattillo added: “The reason why that is needed is that Nigeria has one of the lowest ratios of non-oil revenue to Gross Domestic Product (GDP) at around 3.4 per cent in the world. And the total tax revenue to GDP at six per cent is also very low compared to peers”.

    She said that the interest to tax ratio is low, adding that the funds realised should be spent on important developmental projects, including infrastructure and human capital. She also advised Nigeria increase excise taxes, and begin aggressive streamlining of tax incentives and exemptions.

    Read Also: Fed Govt raises VAT by 2.2%

    MAN said although, government should generate more revenue to fund its developmental initiatives, owing to declining revenue from oil, the timing was inappropriate because the minimum wage of N30, 000 has just been agreed upon.

    MAN Director-General Segun Ajayi-Kadir said in a statement that the increase could send a wrong signal that the government was not sensitive to the plight of the low- and middle-income earners, who are in the majority.

    He also said it was a case of government taking back what was given with the right hand through the National Minimum Wage with the left hand through the increase in VAT.

    Ajayi-Kadir said the economy had just recently exited recession, with the fragile growth rate of less than two per cent recorded in 2018, which should be delicately managed.

    He said Nigeria’s precarious macro-economic condition required palliatives that would improve investment and not higher tax burden.

    Ajayi-Kadir said: “The prevailing high lending rate, double digit inflation, low per capita income, high unemployment rate and a low 1.91 per cent growth rate amidst 2.6 per cent population growth rate that are already cumulatively limiting competitiveness could be further worsened.”

    The DG also said the burden of the VAT increase will be shifted to consumers that are already struggling, adding that the economy will experience demand crunch, while inventory of unsold items would soar.

    He said the profitability of manufacturing concerns will be negatively impacted, while many factories will witness serious downturn or wind down operations.

    Ajayi-Kadir added: “This will also worsen the already high unemployment position of the country, which is above 23 per cent, as Nigerians currently employed by manufacturing concerns and other businesses may join the reserved army of unemployed and further bloat the unemployment rate in the country.”

    He advised the government to widen the tax net rather than increase the rate to meet the growing need for more revenue to address the development objective of the country.

    Ajayi-Kadir  added:  “There is also the need to harmonize taxes/levies/fees payable by businesses in the country so as to attract more investment that would translate to higher productivity and more tax revenue for the government in the medium and long term,” it counseled.

    Rejecting the new rate, the People’s Democratic Party (PDP) in a statement by its spokesman Kola Ologbondiyan, said Nigerians cannot bear the burden of the increase, given the prevailing agonising economic situation.

    Describing the move as anti-people and suppressive, the party said it has confirmed that government is “extremely exploitative, inconsiderate and absolutely insensitive” to the suffering of Nigerians.

    The party maintained that the decision was in bad faith and cannot be justified under any guise.

    PDP said: “Indeed, only an administration that does not have the mandate of the people can seek to adopt such oppressive stance against its citizens.

    ”President Buhari ought to be aware that an increase in VAT will worsen our decrepit economy and put more pressure on families and business as it will result in increase in costs of goods and services that have direct bearing on the welfare of the people.

    ”Our party charges the Buhari Presidency not to further punish Nigerians by imposing harsh tax regime to make up for its crass incompetence and lack of capacity to effectively harness and manage our resources to create wealth for the benefit of the people.

    PDP urged the National Assembly to protect Nigerians and save the nation from collapse by rejecting “this injurious decision” by taken by the government.

    Amid the controversy, the Senate Committee on Finance has said it will invite the Minister of Finance and the Chairman of the Federal Inland Revenue Service (FIRS) to shed light on the reasons for the proposed increase.

    Reacting to the announcement by the Minister of Finance, Hajia Zainab Ahmed, after a Federal Executive Council Meeting yesterday, Senator Solomon Adeola, (APC, Lagos West), Chairman of the Senate Committee on Finance, said that the proposed increase has generated mixed reactions among Nigerians because of its likely effects on living standard and the economy.

    He said: ”We are glad that the Minister of Finance indicated that the VAT Act will have to be amended for the increase to take effect. But we are concerned about the current economic situation of the country as it affects the generality of the people.” Senator Adeola stated.

    He stated that the interaction with the two key officials of the Federal Government will form part of the basis for possible amendments of the VAT Act and to assuage any sentiments against the proposed VAT increase if eventually the Act is amended.

  • IMF removes age limit for position of managing director

    THE International Monetary Fund (IMF) has approved the removal of the age limit for the position of IMF managing director, paving the way for Kristalina Georgieva to head the multilateral lender.

    Since 1951, the IMF’s bylaws had prohibited the appointment of a candidate aged 65 or over as managing director.

    It had also prohibited the managing director from serving past his/her 70th birthday, the IMF executive board said in a statement.

    The board of governors has approved the proposal by the executive board to remove the age limit for the position of IMF managing director, it said.

    The amendment, effective immediately, brings the managing director’s terms of appointment into line with those of members of the IMF executive board, which the managing director chairs, and those of the president of the World Bank, who are not subject to an age limit, the executive board said.

    The 66-year-old Georgieva, a Bulgarian national, served on the European Commission and has been the Chief Executive Officer of the World Bank since January 2017.

    So far, the only candidate, Georgieva was selected by the European Union to lead the IMF after narrowly defeating former Dutch Finance Minister, Jeroen Dijsselbloem.

    The position of IMF chief has always been held by Europeans while the head of the World Bank has traditionally been American, an informal arrangement that has stayed in place for over seven decades.

    Read Also: IMF chief, Lagarde resigns

    In July, Christine Lagarde announced her resignation from the IMF position with effect from Sept. 12, shortly after she was nominated for the presidency of the European Central Bank (ECB), triggering a selection process for the global lender’s next managing director.

    Nominations to the position closed on Sept. 6 and the IMF executive board intend to complete the selection process by Oct. 4.

  • IMF removes age limit for position of managing director

    THE International Monetary Fund (IMF) has approved the removal of the age limit for the position of IMF managing director, paving the way for Kristalina Georgieva to head the multilateral lender.

    Since 1951, the IMF’s bylaws had prohibited the appointment of a candidate aged 65 or over as managing director.

    It had also prohibited the managing director from serving past his/her 70th birthday, the IMF executive board said in a statement.

    The board of governors has approved the proposal by the executive board to remove the age limit for the position of IMF managing director, it said.

    The amendment, effective immediately, brings the managing director’s terms of appointment into line with those of members of the IMF executive board, which the managing director chairs, and those of the president of the World Bank, who are not subject to an age limit, the executive board said.

    The 66-year-old Georgieva, a Bulgarian national, served on the European Commission and has been the Chief Executive Officer of the World Bank since January 2017.

    So far, the only candidate, Georgieva was selected by the European Union to lead the IMF after narrowly defeating former Dutch Finance Minister, Jeroen Dijsselbloem.

    Read Also: IMF chief, Lagarde resigns

    The position of IMF chief has always been held by Europeans while the head of the World Bank has traditionally been American, an informal arrangement that has stayed in place for over seven decades.

    In July, Christine Lagarde announced her resignation from the IMF position with effect from Sept. 12, shortly after she was nominated for the presidency of the European Central Bank (ECB), triggering a selection process for the global lender’s next managing director.

    Nominations to the position closed on Sept. 6 and the IMF executive board intend to complete the selection process by Oct. 4.

  • Fuel subsidy removal will do Nigeria more harm than good – Expert

    Mr. Tunde Olatunji, an expert in Development Economy and Finance, has urged the Federal Government not to remove fuel subsidy as suggested by the International Monetary Fund (IMF).

    Olatunji, who is a member of the Osun House of Assembly, told the News Agency of Nigeria (NAN) in Osogbo on Tuesday that the removal of fuel subsidy would do more harm to the economy than good.

    NAN recalls that the IMF said in April that with the low revenue mobilisation that existed in Nigeria in terms of tax to Gross Domestic Product, it would be good for the country to remove fuel subsidy.

    Addressing a news conference at a joint annual spring meetings with the World Bank in Washington DC last month, the Managing Director of IMF, Christine Lagarde, said that by so doing, the country would be able to move funds into improving health, education, and infrastructure.

    But Olatunji said that before the Federal Government could remove the subsidy, it should ensure that it strengthened the country’s refining capacity.

    Read Also: Is fuel subsidy ideologically inevitable?

    “Nigeria should not talk about removing fuel subsidy now until we have another arrangement in place.

    “Removing subsidy is not rocket science, but we must develop our local capacity for refining our products.

    “Even if we are not exporting locally refined products, we can meet our domestic consumption needs and thereafter we can begin to plan on removing the subsidy.

    “Any attempt to remove the fuel subsidy without any other arrangement in place, will be like ‘solving one problem by creating another’.

    “If we take away fuel subsidy, the pump price will go up, which will have a ripple effect on all goods and services and at the end of the day people will begin to pay more,” he said.

    Olatunji added that the advice offered by IMF might be because of corruption which has affected the economy through the subsidy before the advent of the President Muhammadu Buhari administration.

    “Most countries in the world decide which commodity to subsidise.

    “As a matter of fact, America as at today subsidises its agriculture products and I don’t think they are planning to take it away now.

    “Subsidy is not a crime. As a matter of fact, it is an economic tool.

    “It is when the subsidy regime gets abused and monies meant for it go into private pockets that it becomes an issue,” Olatunji said.

     

     

     

  • Ending extreme poverty in Africa by 2030 doubtful, says World Bank

    The World Bank Group (WBG’s) projection to end extreme poverty in Africa is no longer feasible, its President, David Malpass, has said.

    The WBG chief, who spoke during a press briefing on Thursday at the on-going Word Bank Group/the International Monetary Fund (IMF) Spring Meetings in Washington DC,  said a combination of waning structural reforms in major economies, financial stress in some large emerging markets and elevated policy uncertainty globally have altered the bank’s earlier forecast.

    He said: “On current trends, per capita income in growth in sub-Saharan Africa as a whole is now projected to stay below one per cent until at least 2021 which elevates the risk of a further concentration of extreme poverty on the continent.”

    He stressed that this fact is extremely troubling because “it jeopardises the World Bank’s primary goal of ending extreme poverty by 2030.”

    On the other hand Malpass said: “Extreme poverty has dropped to 700 million globally at the last count,” saying that’s down from much higher levels in the 1990’s and 2000’s.

    Read Also: How North can tackle poverty, by Dangote

    Against the cheering figures reported globally, Malpass said: “The number of people living in extreme poverty is on the rise in sub-Saharan Africa,” warning that by 2030, “nearly nine in 10 extremely poor people will be Africans and half of the world’s poor will be living in fragile and conflict-affected settings,” adding this calls for urgent action by countries themselves and by the global community.

    He said the WBG was now in a position, given its comfortable financial status to stand in the gap to tackle the poverty scourge.

    His words: “Fortunately, the World Bank group is financially strong. And with the capital package which was agreed to a year ago at the Spring Meetings, and which I was proud to support, the organization is becoming even more responsive, efficient and effective,” to address the issue, stating that the World Bank’s vision and mission is poverty reduction and it can be addressed.”

    On expressed fears about China’s credit to sub-Saharan countries, Malpass said, debt on its own does not pose a threat, saying the danger lies In its misappropriation.

    “As far as China, and as far as the buildup of debt, let me take a second – a few moments on that. Debt is something that helps economies grow but if it’s not done in a transparent way, with good outcome from the build-up of debt, then you end up having it being a drag on economies.

    “And history is full of those situations where too much debt dragged down economies.

    “So what we are trying to do — and The World Bank is a key part of the Debt Transparency Project and the collection of data that has been encouraged by the G20 — and so this is a project that we are working hard on, and the keys are to have transparent disclosure of the debt as it is being created, and also then have the focus on good outcomes in terms of quality projects.”