The International Monetary Fund (IMF) has defended its recommendations to Nigeria on foreign exchange rate adjustments and subsidy removal, emphasizing that these reforms are essential for the country’s economic stability.
The Washington-based
institution reaffirmed its stance in a statement sent to Premium Times on
Wednesday, October 30, noting that these measures aim to improve Nigeria’s
macroeconomic outlook.
Abebe Selassie, Director of the
African Department at the IMF, recently praised the reforms initiated by
President Bola Tinubu’s administration at the IMF/World Bank meetings in
Washington, D.C. Selassie emphasized that subsidy removal and FX rate reforms align
with the IMF’s longstanding recommendations, which encourage investment in
infrastructure, health, and education.
“Removing the subsidy unlocks
the economy’s vast potential, attracting investment and fostering growth.” He
added that reallocating subsidy savings could support vulnerable households,
aiding those affected by current economic hardships.
In response to concerns from
Nigerian media about the IMF's involvement in subsidy removal, the IMF
clarified it had reviewed Nigeria’s petrol subsidy and foreign exchange
policies before the reforms, highlighting inefficiencies in the subsidy model.
“The petrol subsidy
benefits not only low-income households but also wealthier Nigerians who do not
require government support,” the IMF noted. Additionally, it argued that
subsidized petrol is often smuggled to neighboring countries with higher fuel
prices, benefiting citizens outside Nigeria.” Selassie stated
The IMF criticized Nigeria's
fixed exchange rate policy, stating that the disparity between official and
parallel exchange rates placed a heavy burden on the Central Bank’s reserves
and forced many Nigerians to pay a premium for dollars. “Until mid-2023,
Nigerians faced a premium of around 60 percent on the parallel market,” the IMF
remarked. “Market-determined exchange rates provide fair access to dollars at a
uniform price.”
Reaffirming its
recommendations, the IMF said, “We stand by our advice,” noting that its
recommendations are designed to foster macroeconomic stability and improve
living standards. The IMF described the reforms as part of a comprehensive
policy mix, including social transfers for those most affected by inflation and
economic adjustments.
The IMF concluded by noting
that it provides similar guidance to all member countries, but each government
ultimately makes its policy choices based on multiple inputs.
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