June 18, 2021

The International Monetary Fund expressed concern over Nigeria’s move to renew fuel subsidies and urged the government to continue efforts to unify its exchange rates.

Ms. Jesmin Rahman, team lead of the IMF mission to Nigeria who led staff virtual meetings with Nigerian authorities, said this in a statement in Washington D. C.

She said tax revenue collections were gradually recovering but, with fuel subsidies resurfacing, additional spending for Covid-19 vaccines, and addressing security challenges, the fiscal deficit of the government was expected to remain elevated at 5.5 per cent of GDP.

It also has multiple naira rates running in parallel that were put in place during a 2016 oil price crash to avoid a big devaluation but which have underpinned an unofficial exchange market.

“The mission (IMF team) expressed its concern with the resurgence of fuel subsidies,” the IMF said in a statement following virtual meetings with the Nigerian authorities.

“The mission recommended maintaining the momentum toward fully unifying all exchange rate windows and establishing a market-clearing exchange rate,” it added.

CBN has recently been letting the currency’s official value gradually weaken in an apparent move to allow it to converge with what is known as the NAFEX rate, a market-determined rate for investors and exporters. read more

The IMF’s comments come after the World Bank this week said the central bank’s management of the foreign exchange regime had reduce access to foreign exchange, undermining investor confidence and investment appetite.

The IMF also said in its statement on Thursday that Nigeria’s banking industry remained well-capitalised with the level of non-performing loans (NPLs) contained.