IMF Staff Completes 2024 Article IV Mission to Nigeria

IMF News, March 4, 2024

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An International Monetary Fund team, led by Axel Schimmelpfennig, IMF mission chief for Nigeria, visited Lagos and Abuja February 12–23, 2024 to hold discussions for the 2024 Article IV Consultations with Nigeria.
The team met with Minister of Finance Edun, Central Bank of Nigeria Governor Cardoso, senior government and central bank officials, the Ministry of Agriculture, the Ministry of the Environment, as well as representatives from sub-nationals, the private sector and civil society.

IMF staff described Nigeria’s economic outlook as challenging.
Findings:
- GDP growth reached 2.8 percent in 2023.
- 2024 GDP growth is projected to reach 3.2 percent, supported by improved oil production and an expected better harvest in the second half of the year.
- Growth of 2.8 percent in 2023 "falls slightly short of population growth dynamics."
- High inflation, naira weakness, and policy tightening are expected headwinds for 2024 growth.

Immediate policy priority: addressing rising food insecurity.
Findings and recommendations:
- About 8 percent of Nigerians are deemed food insecure.
- Staff welcomed the authorities’ approval of an effective and well-targeted social protection system and emphasized that implementation will be crucial.
- The team welcomed the government’s release of grains, seeds, and fertilizers, and Nigeria’s introduction of dry-season farming.
- The recently approved targeted social safety net program will provide cash transfers to vulnerable households and needs to be fully implemented before the government can address costly, implicit fuel and electricity subsidies while ensuring protection for low-income households.

Findings:
- Recent improvements in revenue collection and oil production are encouraging.
- Non-oil revenue collection improved by 0.8 percent of GDP in 2023, helped by naira depreciation.
- Oil production reached 1.65 million barrels per day in January as the result of enhanced security.
- The capping of fuel pump prices and electricity tariffs below cost recovery could have a fiscal cost of up to 3 percent of GDP in 2024.
Policy implication:
- Nigeria’s low revenue mobilization constrains the government’s ability to respond to shocks and to promote long-term development.

Findings:
- The Monetary Policy Committee (MPC) increased the policy rate by 400 basis points to 22.75 percent, for a total tightening of 1,025 basis points since May 2022.
- Inflation reached 29.9 percent year-on-year in January 2024.
Assessment:
- The MPC’s decision to further tighten monetary policy should help contain inflation and pressures on the naira.