The international money lender said this in its End-of-Mission statement issued after the completion of the IMF Staff 2024 Article IV Mission to Nigeria, a copy of which was obtained by journalists in Abuja on Tuesday.
The International Monetary Fund (IMF) has called for quick action to remedy food insecurity in Nigeria, stressing that addressing food insecurity in the country should be an immediate priority for the President Bola Tinubu-led Nigerian government.
The international money lender said this in its End-of-Mission statement issued after the completion of the IMF Staff 2024 Article IV Mission to Nigeria, a copy of which was obtained by journalists in Abuja on Tuesday.
The end-of-mission statement includes statements by IMF staff teams that convey preliminary findings after a visit to a country.
The IMF said that the Tinubu government inherited a difficult economic situation marked by low growth, low revenue collection, accelerating inflation, and external imbalances built up over the years.
The News Agency of Nigeria quoted the IMF as saying that “Addressing food insecurity is the immediate priority. The recent approval of a well-targeted and effective social protection system is an important step towards addressing food insecurity in Nigeria and its implementation will be crucial.”
The Fund said that the decision by the Monetary Policy Committee to further tighten monetary policy would help contain inflation and pressures on the naira.
According to the statement, an IMF team, led by Axel Schimmelpfennig, IMF mission chief for Nigeria, visited Lagos and Abuja from February 12 to February 23, 2024, to hold discussions for the 2024 Article IV Consultations with Nigeria.
The IMF said the team met with the Minister of Finance and Coordinating Minister of the Economy of Nigeria, Wale Edun, and the Governor of the Central Bank of Nigeria, Olayemi Cardoso.
Others were senior government and CBN officials, the Ministries of Agriculture and Environment, as well as representatives from sub-nationals, the private sector and civil society organisations.
The statement further noted that at the end of the visit, Mr Schimmelpfennig said that “Nigeria’s economic outlook is challenging. Economic growth strengthened in the fourth quarter, with gross domestic product growth reaching 2.8 per cent 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 per cent, although high inflation, naira weakness, and policy tightening will provide headwinds.
“With about eight 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 fertiliser, as well as Nigeria’s introduction of dry-season farming.”
Schimmelpfennig said that the recent improvements in revenue collection and oil production were encouraging.
According to Schimmelpfennig, Nigeria’s low revenue mobilisation constrains the government’s ability to respond to shocks and to promote long-term development.
Schimmelpfennig said that “Non-oil revenue collection improved by 0.8 per cent of GDP in 2023, helped by naira depreciation. Oil production reached 1.65 million barrels per day in January as a result of enhanced security.”
Schimmelpfennig added that the capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to three per cent of GDP in 2024.
He said that the recently approved targeted social safety net programme that will provide cash transfers to vulnerable households needed to be fully implemented.
According to him, ”This is 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 MPC’s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 per cent for a total tightening of 1,025 basis points from May 2022.
“This decision should help contain inflation, which reached 29.9 per cent year-on-year in January 2024, and pressures on the naira.”