The International Monetary Fund (IMF) on Tuesday asked the Federal Government to pay immediate attention to food insecurity in the country, stating that addressing the issue of food insecurity should be the Nigerian government’s immediate priority.
The IMF acknowledged that the government of President Bola Ahmed Tinubu inherited a difficult economic situation marked by low growth, low revenue collection, accelerating inflation, and external imbalances built up over the years.
But it global institution said: “Addressing food insecurity is the immediate priority. The recent approval of a well-targeted and effective social protection system is an important step towards addressing food insecurity in Nigeria, and its implementation will be crucial.”
It said the decision by the Monetary Policy Committee, MPC, to further tighten monetary policy would help contain inflation and pressures on the Naira.
The statement said an IMF team, led by Axel Schimmelpfennig, IMF Mission Chief for Nigeria, visited Lagos and Abuja from February 12 to 23, 2024, to hold discussions for the 2024 Article IV Consultations with Nigeria.
It said the team met with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, and Governor of the CBN, Olayemi Cardoso and some other senior government and CBN officials, Ministers and representatives of sub-nationals, private sector, and Civil Society Organisations (CSOs).
The statement said that at the end of the visit, Schimmelpfennig issued the following statement:
“Nigeria’s economic outlook is challenging. Economic growth strengthened in the fourth quarter, with Gross Domestic Product, GDP, growth reaching 2.8 per cent in 2023. This falls slightly short of population growth dynamics.
“Improved oil production and an expected better harvest in the second half of the year are positive for 2024 GDP growth, which is projected to reach 3.2 per cent, although high inflation, Naira weakness, and policy tightening will provide headwinds.
“With about eight per cent of Nigerians deemed food insecure, addressing rising food insecurity is the immediate policy priority. In this regard, staff welcomed the authorities’ approval of an effective and well-targeted social protection system.
“The team also welcomed the government’s release of grains, seeds, and fertiliser, as well as Nigeria’s introduction of dry-season farming.”
Schimmelpfennig said recent improvements in revenue collection and oil production are encouraging.
He said Nigeria’s low revenue mobilisation constrains the government’s ability to respond to shocks and to promote long-term development.
“Non-oil revenue collection improved by 0.8 per cent of GDP in 2023, helped by Naira depreciation. Oil production reached 1.65 million barrels per day in January as a result of enhanced security.”
Dangers of capping fuel prices and electricity tariffs
Schimmelpfennig said the capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to three per cent of GDP in 2024.
He said the recently approved targeted social safety net programme that will provide cash transfers to vulnerable households need to be fully implemented.
“This is before the government can address costly implicit fuel and electricity subsidies in a manner that will ensure low-income households are protected.
“The team welcomed the MPC’s decision to further tighten monetary policy. The MPC increased the policy rate by 400 basis points to 22.75 per cent for a total tightening of 1,025 basis points since May 2022.
“This decision should help contain inflation, which reached 29.9 per cent year-on-year in January 2024, and pressures on the naira.”
