The tight monetary policy stance of the Central Bank of Nigeria (CBN), has received the approval of visiting officials of the International Monetary (IMF), who were on duty in the country to assess economic developments, under the Article IV programme.
The officials, in company of the Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, noted that with inflation still above the central bank’s target, the tight monetary policy stance is appropriate, but encouraged the authorities to enhance transparency, communication and improve the monetary policy framework.
But differing from the country’s current unique approach to monetary policy, they called for the use of traditional methods like raising the monetary policy rate or cash reserve requirements and want CBN to end direct intervention in the economy to focus on price stability mandate.
Meanwhile, they also reiterated their warning on persisting structural and policy challenges, which continue to constrain growth to levels below those needed to reduce vulnerabilities, lessen poverty and improve weak human development outcomes, such as in health and education.
“A large infrastructure gap, low revenue mobilisation, governance and institutional weaknesses, continued foreign exchange restrictions, and banking sector vulnerabilities are dampening long-term foreign and domestic investment and keeping the economy reliant on volatile oil prices and production.
“We urge the authorities to reinvigorate implementation of structural reforms to diversify the economy and achieve the Sustainable Development Goals, improving the business environment, implementing the power sector recovery programme, deepening financial inclusion, reforming the health and education sectors, and implementing policies to reduce gender inequities,” they said in a statement made available to The Guardian.
The IMF team noted that the medium-term outlook of the country remains fragile, with downside risks, urging a redoubling of efforts to raise per capita growth and reduce poverty. The directors emphasised the need for revenue-based consolidation to lower the ratio of interest payments to revenue and make room for priority expenditure.
They also applauded the ongoing tax reforms aimed at increasing non-oil revenue, through tax policy and administration, stressing that strengthening domestic revenue mobilisation – excises, comprehensive VAT reform and elimination of unnecessary tax incentives is the way forward.
Also, in what looks like an indictment of government’s investment, the team highlighted the importance of shifting the expenditure mix toward priority areas, both in significant increase in public investment greater efficiency.