The International Monetary Fund has indicated that the ongoing cost-of-living crisis in Nigeria has been worsened by static growth in individual income, persistent poverty and food insecurity.
The announcement was made in the context of escalating inflation, a currency crisis, sluggish economic expansion, and closures of businesses.
In a recent publication named 'IMF Executive Board Concludes Post Financing Assessment with Nigeria,' the international financial institution indicates that insufficient revenue collection has negatively affected the delivery of services and the funding of public projects.
The report highlighted that the year-over-year rate of overall inflation surged to 27 percent in October, with food prices increasing by 32 percent. This spike in inflation is attributed to the impacts of eliminating fuel subsidies, the devaluation of the currency, and subpar agricultural output within the nation.
Part of the statement read, “Nigeria faces a difficult external environment and wide-ranging domestic challenges. External financing (market and official) is scarce, and global food prices have surged, reflecting the repercussions of conflict and geo-economic fragmentation.
“Per-capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis. Low reserves and very limited fiscal space constrain the authorities’ option space. Against this backdrop, the authorities’ focus on restoring macroeconomic stability and creating conditions for sustained, high and inclusive growth is appropriate.”
While Nigeria is experiencing economic challenges, it was mentioned in the report that on January 12, 2024, the Executive Board of the International Monetary Fund completed the Post Financing Assessment and approved the Staff Appraisal without meeting, due to time constraints. The report further stated that Nigeria has a sufficient ability to repay the IMF.
The International Monetary Fund conveyed a positive outlook, noting that the recently established government has begun effectively addressing long-standing fundamental problems despite difficult conditions.
Right away, it implemented two policy changes that previous administrations had been reluctant to tackle, specifically the elimination of fuel subsidies and the consolidation of the official currency exchange rates.
The statement further explains that maintaining stable prices is the primary focus of the newly assembled team at the Central Bank of Nigeria, showing their commitment by moving away from their prior involvement in development financing. On the matter of government finances, the officials are formulating a comprehensive plan to enhance the collection of domestic revenues.
Data from the Debt Management Office indicates that Nigeria has an outstanding debt of $2.8 billion owed to the International Monetary Fund. As for the 2024 fiscal year, the Federal Government intends to allocate approximately 8.2 trillion naira for the purpose of repaying and managing its debt obligations.
In a recent report, the consultancy company PricewaterhouseCoopers has issued a caution regarding Nigeria. The firm has indicated that the increasing expenses associated with servicing the nation’s debt could potentially impact Nigeria’s capacity to fulfill its debt obligations, as well as influence its creditworthiness and the expense of acquiring new loans.
PwC indicated that the cost of servicing debt is expected to increase from 8.25 trillion Naira in 2024 to 9.3 trillion Naira in 2025, and it could climb even higher to 11.1 trillion Naira by 2026.
