Nigeria facing worsening economic crisis – IMF

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The International Monetary Fund (IMF) has stated that Nigeria is confronted with a deteriorating economic crisis.

The global lender stated this in a new report titled, “IMF Executive Board Concludes Post Financing Assessment with Nigeria.”

According to the IMF, Nigeria’s chronic cost-of-living crisis has been made worse by stagnant per-capita growth, extreme poverty, and elevated food insecurity.

The study was released in the midst of business closures, sluggish economic growth, rising inflation, and an exchange crisis.

 

The report claims that poor tax collection has impeded state investment and service delivery.

 

It stated that October’s headline inflation rate of 27% year over year (food inflation was 32% year over year) was a result of the elimination of fuel subsidies, depreciation of the currency rate, and low agricultural output in the nation.

 

The report partly reads, “Nigeria faces a difficult external environment and wide-ranging domestic challenges. External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation.

 

“Per-capita growth in Nigeria has stalled; poverty and food insecurity are high, exacerbating the cost-of-living crisis. Low reserves and very limited fiscal space constrain the authorities’ option space.

 

“Against this backdrop, the authorities’ focus on restoring macroeconomic stability and creating conditions for sustained, high, and inclusive growth is appropriate.”

The report highlighted that on January 12, 2024, the Executive Board of the International Monetary Fund completed the Post Financing Assessment and approved the Staff Appraisal based on a lapse-of-time mechanism.

Furthermore, it stated that Nigeria possesses sufficient capacity to repay its obligations to the IMF.

The IMF was also upbeat about how well the new administration had started to address deeply ingrained structural problems under difficult conditions.

It immediately enacted two policy changes, the elimination of gasoline subsidies and the harmonisation of the official exchange rates, which its predecessors had avoided.

It added, “The new CBN team has made price stability its core mandate and demonstrated this resolve by dropping its previous role in development finance. On the fiscal side, the authorities are developing an ambitious domestic revenue mobilisation agenda.”

The Debt Management Office reports that Nigeria owes the IMF $2.8 billion as of right now. The federal government intends to spend over N8.2 trillion on debt payments in its budget for 2024.

PricewaterhouseCoopers, a professional services business, issued a warning in a recent research regarding Nigeria’s increasing debt payment expenses and their potential impact on the country’s credit rating outlook, ability to repay debt, and borrowing prices.

According to PwC, debt service might increase to N11.1 trillion in 2026 from N8.25 trillion in 2024 and N9.3 trillion in 2025.

“With a high debt servicing to revenue ratio, the government aims to increase domestic debt in 2024 to meet its deficit funding requirements,” the report read in part.