The IMF raised its growth prediction for Nigeria’s economy to 3.3% in 2024 from 2.9% in the previous year on Thursday, citing improvements in the trade and services sectors.
The most populated country in Africa and the world’s largest oil producer, the IMF said, expressed worry about food security due to the 40% increase in food prices in March and the continued tough economic forecast.
“Growing at 3.3% would put Nigeria slightly above population dynamics, which presents a significant challenge,” Axel Schimmelpfenning, the head of the IMF mission in Nigeria, told reporters.
President Bola Tinubu has implemented extensive changes since entering office almost a year ago. These include cutting expensive gasoline and power subsidies and depreciating the naira twice in a year to reduce the difference between the official and parallel market exchange rates.
The Fund forecast that fuel subsidies could cost up to 3% of GDP this year as the increases in pump prices have not kept up with their dollar cost, Schimmelpfennig said, adding that officials remain committed to phasing that out in another one or two years.
“The reforms are focused on how to raise that growth so that Nigerians can see real impacts on their living standards,” Schimmelpfenning said.
Global ratings agencies have reviewed Nigeria’s economic outlook upwards due to the impact of reforms, with Fitch the latest to revise Nigeria’s outlook to positive from stable on May 3.
“We think a lot has happened. We also have to recognise that the problems built up over many years were quiet severe. We can’t expect that everything is going to be resolved overnight,” he added.
Schimmelpfenning said scaling up a cash transfer programme and boosting government revenues so that the country has more resources to provide services to its citizens is a key priority.
On monetary policy, the IMF welcomed the Central Bank of Nigeria’s (CBN) recent interest rate hikes to curb galloping inflation, calling for a data-driven approach to further rate tightening.
The IMF urged the CBN to build up its foreign exchange reserves and recommended a transparent and balanced framework for forex interventions aimed solely at smoothing out excessive short-term volatility.
