The International Monetary Fund (IMF) announced on Thursday that it will maintain its growth forecast for Nigeria at 3.3% for 2024, marking a modest increase from the previous year’s 2.9%. This outlook is set against significant challenges, including a sharp rise in food prices which have heightened concerns about food security in Africa’s most populous nation and its leading oil producer.
The IMF’s decision reflects a cautious optimism about Nigeria’s economic trajectory, acknowledging both progress and persistent hurdles. Axel Schimmelpfenning, the IMF’s mission chief for Nigeria, expressed that while the projected growth rate slightly surpasses the population growth rate, the economic situation remains tough. “If Nigeria grows at 3.3%, that is just above the population dynamics, which is a big challenge,” he told journalists during a press briefing.
In recent years, Nigeria has grappled with soaring food price inflation, which stood at 40% in March. This alarming trend poses a severe threat to food accessibility for many Nigerians and underscores the broader economic pressures that the country faces.
Amid these challenges, President Bola Tinubu, who took office about a year ago, has embarked on sweeping reforms aimed at revitalizing the economy. His administration has taken significant steps, including slashing deeply entrenched petrol and electricity subsidies and devaluing the naira currency twice within a year. These actions are intended to narrow the gap between the official and parallel market exchange rates and reduce the economic distortions that have long plagued Nigeria.
Despite the hardship that these measures might cause in the short term, they are widely viewed as necessary to stabilize the economy and lay the groundwork for sustained growth. Schimmelpfenning noted, “The reforms are focused on how to raise that growth so that Nigerians can see real impacts on their living standards.” He acknowledged that while substantial progress has been made, the issues that have accumulated over many years are severe, and it is unrealistic to expect quick resolutions.
Furthermore, global ratings agencies have recently adjusted their views on Nigeria’s economic outlook positively, with Fitch revising Nigeria’s outlook to positive from stable early in May. This reassessment is partly due to the proactive steps taken by the Tinubu administration.
Looking ahead, Schimmelpfenning emphasized the importance of scaling up social support programs, such as cash transfers, and boosting government revenues. This would enable more substantial investment in public services and infrastructure, crucial for improving living standards across the country.
On the monetary policy front, the IMF has commended the Central Bank of Nigeria’s (CBN) recent moves to raise interest rates in an effort to curb the rapid inflation affecting the country. The Fund has encouraged a data-driven approach to further rate adjustments and has urged the CBN to build up its foreign exchange reserves. Additionally, the IMF recommended that Nigeria adopt a transparent and balanced framework for foreign exchange interventions aimed solely at smoothing out excessive short-term volatility.
