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The International Monetary Fund (IMF) has reiterated its support for Nigeria’s recent moves to adjust foreign exchange rates and phase out subsidies, stating these steps are critical to stabilizing the nation’s economy. IMF representatives stressed that these reforms, while challenging, are necessary to foster long-term growth and financial resilience in Nigeria.
The International Monetary Fund, headquartered in Washington, reaffirmed its position in a statement to Premium Times on Wednesday, October 30, emphasizing that the recommended reforms are designed to improve Nigeria’s broader economic stability and enhance its macroeconomic prospects.
Speaking at the IMF/World Bank meetings in Washington, D.C., Abebe Selassie, who leads the IMF’s African Department, applauded the reform efforts of President Bola Tinubu’s administration.
He underscored that changes like subsidy removal and foreign exchange adjustments are in line with the IMF’s guidance, designed to free up resources for necessary investments in infrastructure, public 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.
Responding to Nigerian media queries, the IMF explained that it had evaluated Nigeria’s petrol subsidy and foreign exchange policies before the government implemented recent changes. The review underscored inefficiencies in the subsidy structure, which the IMF argued was an economic burden that hindered potential investments in essential sectors.
“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.
Read also: Africa’s Representation On IMF Board Expands To Three
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.
