The International Monetary Fund (IMF) has issued a stark assessment of Nigeria’s economic situation, citing stalled per-capita growth, pervasive poverty, and heightened food insecurity as exacerbating factors in the country’s ongoing cost-of-living challenges.
This declaration comes amidst a backdrop of escalating inflation, currency instability, sluggish economic expansion, and widespread business closures.
The IMF’s observations were outlined in its latest report titled ‘IMF Executive Board Concludes Post Financing Assessment with Nigeria.’
According to the report, the inadequate collection of revenue has hindered the government’s ability to provide essential services and invest in public infrastructure.
The document highlights that headline inflation soared to 27 percent year-on-year in October, with food inflation reaching a staggering 32 percent. These alarming figures are attributed to the removal of fuel subsidies, currency devaluation, and poor agricultural output.
The report emphasizes, “Nigeria is grappling with a challenging external environment and numerous domestic hurdles. External financing, both from markets and official sources, is scarce, while global food prices surge due to conflict and geopolitical tensions.”
It continues, “Per-capita growth has stagnated, and the prevalence of poverty and food insecurity has compounded the cost-of-living crisis. With minimal reserves and severely restricted fiscal space, the government’s policy options are severely limited. Given this scenario, the government’s focus on restoring macroeconomic stability and fostering sustained, inclusive growth is deemed appropriate.”
Despite Nigeria’s economic woes, the report notes that on January 12, 2024, the IMF’s Executive Board concluded the Post Financing Assessment and endorsed the Staff Appraisal without the need for further discussion. It also affirms Nigeria’s capacity to meet its financial obligations to the IMF.
Furthermore, the IMF expresses optimism about the new administration’s proactive approach in addressing long-standing structural challenges despite formidable circumstances. Notably, the government swiftly implemented two contentious policy reforms—eliminating fuel subsidies and unifying the official exchange rates.
“The new leadership at the Central Bank of Nigeria has prioritized price stability and has demonstrated its commitment by shifting away from its previous role in development finance. On the fiscal front, the government is formulating an ambitious agenda to enhance domestic revenue mobilization,” the report states.
Data from the Debt Management Office indicates that Nigeria’s outstanding debt to the IMF stands at $2.8 billion. Meanwhile, the Federal Government’s 2024 budget allocates approximately N8.2 trillion for debt servicing.
In a separate report, professional services firm PricewaterhouseCoopers (PwC) has cautioned that the escalating costs of servicing Nigeria’s debt could impact the country’s ability to repay its obligations, influence its credit rating outlook, and elevate borrowing costs.
PwC warns that debt servicing expenses could surge from N8.25 trillion in 2024 to N9.3 trillion in 2025, and further escalate to N11.1 trillion in 2026.
“With a high ratio of debt servicing to revenue, the government plans to increase domestic borrowing in 2024 to bridge its deficit,” the report highlights.
