IMF demands structural reforms to improve Nigeria’s growth outlook

…Edun says investors relishing opportunity in Nigeria

The International Monetary Fund (IMF) has asked Nigerian authorities to embark on structural reforms to improve the nation’s economic outlook.

Tobias Adrian, financial counsellor and director of Monetary and Capital Markets at IMF, said in Washington DC that Africa’s most populous nation needs structural reforms to have a chance for long-term economic growth.

“The various foreign exchange measures introduced by the authorities earlier this year were necessary. These steps have helped improve the country’s vigilance and overall financial stability. There is also more to be done on structural issues to enhance the growth outlook,” Adrian said at the ongoing IMF/World Bank Annual Meetings in Washington D.C.

Structural reforms are designed to ensure an economy is fit and better able to realise its growth potential in a balanced way, according to the European Central Bank (ECB). They include: the overall business environment, a simpler tax system or less bureaucracy to make it easier for companies to conduct business and plan for the future.

Nigeria faces a tough business environment due to multiple taxation, delays in the justice system, high cost of energy and funds, and poor infrastructure.

Though tax reforms are ongoing, Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, said the Nigerians pay over 200 unofficial taxes.

Adrian said Nigeria must do more to resolve these challenges to prepare the economy for long-term growth.

He noted that the monetary policy reforms so far carried out by the Central Bank of Nigeria (CBN) are encouraging.

“The central bank has been transitioning to an inflation-targeting regime and has liberalised the exchange rate, which we welcome. The rate hikes implemented so far have been appropriate, especially given the challenges posed by high inflation, which still stands around 30 percent.”

Read also: Why Nigeria must raise revenue, check debt servicing costs -IMF

FG eyes improved FX supply

On his part, Wale Edun, Nigeria’s minister of Finance and Coordinating Minister of the Economy, said the government’s goal is to improve the supply of foreign exchange organically without heavy intervention from the CBN.

He acknowledged that while the CBN might still intervene in the market from time to time, the ultimate aim is to achieve a stable exchange rate without reliance on the central bank’s interventions.

“We are trying as much as possible to improve our supply organically without the central bank having to put in money all the time. And so, we are trying to get to a level where that stability is there without the central bank intervening or the market depending on the central bank,” he said,

Investor confidence rising

Edun also highlighted the positive impact that foreign portfolio investment (FPI) has had on the economy.

“We have had some significant amount of improvements in terms of flows from the relative side, foreign portfolio investment (FPI) have put in a significant amount,” he said.

He stressed that the removal of fuel subsidies, combined with the market-based pricing of petroleum, has brought positive changes.

He said that the country has seen improved its confidence among investors, with many willing to commit more resources to the Nigerian market.

“We have seen good response from investors through the FPI. We have also seen improved confidence for people who want to put in a lot more resources.”

Read also: Will the IMF’s tough measures break or build the economy?

Dollar bond subscription

Nigeria raised over $900m in its first domestic FGN US dollar bond in September. The bond, which was over 180 percent oversubscribed, marked a crucial step in broadening Nigeria’s funding avenues amidst global economic headwinds.

Edun told investors that, “The IMF said to us that we shouldn’t do domestic issues of dollar bonds. We did it and we were 100 percent oversubscribed, but we still value their viewpoint and took it into account.”