IMF to FG: Addressing food security your swift priority

…Says MPC decision to tighten monetary policy‘ll contain inflation, pressures on Naira

By Mathew Brangyet

The International Monetary Fund (IMF) has told the Nigerian government that addressing food insecurity should be its immediate priority for the safety and growth of the economy.

The IMF, however, noted that the President Bola Tinubu-led administration inherited a difficult economic situation marked by low growth, low revenue collection, accelerating inflation, and external imbalances built up over the years.

It raised the concern in its End-of-Mission statement issued after the completion of the IMF Staff 2024 Article IV Mission to Nigeria in Abuja on Tuesday.

The End-of-Mission statement included statements of IMF staff teams that convey preliminary findings after a visit to a country, stating; “addressing food insecurity is the immediate priority.”

It also observed that the recent approval of a well-targeted and effective social protection system is an “important step toward addressing food insecurity in Nigeria and implementation will be crucial.”

The Fund said the decision by the Monetary Policy Committee (MPC) to further tighten monetary policy would help contain inflation and pressures on the Naira.

According to the statement, an IMF team, led by Axel Schimmelpfennig, IMF mission chief for Nigeria visited Lagos and Abuja from February 12 to February 23, 2024, to hold discussions for the 2024 Article IV Consultations with Nigeria.

It said team met with the Minister of Finance and Coordinating Minister of the Economy of Nigeria, Wale Edun, and the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso.

Others were the senior government and CBN officials, the Ministries of Agriculture and Environment, as well as representatives from sub-nationals, the private sector and Civil Society Organizations (CSOs).

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The statement said 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 were 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”.

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 needed 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.”