IMF Urges Caution on CBN Act Amendment, Recommends Bold Reforms for Nigeria’s Economy
By Patience Ikpeme
The International Monetary Fund (IMF) has issued a cautionary statement regarding the proposed amendment to the Act establishing the Central Bank of Nigeria (CBN), emphasizing the need for fortifying the apex bank instead.
The IMF’s position was outlined in the Article IV Staff Consultation Report of the Board of Governors, released in Washington yesterday.
According to the report, IMF directors supported Nigeria’s intentions to transition to an inflation-targeting regime while stressing the importance of enhancing the independence and communication channels of the central bank to ensure a smooth transition.
The IMF recommended exercising caution with any amendments to the CBN Act that could potentially compromise the autonomy of the central bank, underlining the significance of preserving its independence.
The IMF also voiced support for increasing the minimum capital requirements for banks and urged the CBN to phase out regulatory forbearance introduced during the pandemic. Additionally, the IMF encouraged the Nigerian authorities to expedite the implementation of outstanding recommendations from the 2021 safeguards assessment.
Amidst these recommendations, the IMF commended the Nigerian government for restarting the cash transfer programme and emphasized the urgent need to expand it to address acute food insecurity.
Furthermore, the IMF applauded Nigeria’s efforts in developing a comprehensive revenue mobilization strategy, including measures to enhance tax enforcement and broaden the tax base.
On the monetary front, the IMF stressed the importance of maintaining a tight policy stance to curb inflation, advocating for exchange rate flexibility and reserve accumulation.
Additionally, the IMF welcomed the removal of distortions in the foreign exchange market and urged further improvements to enhance its functionality, including the adoption of a well-designed intervention framework.
The Executive Board of the IMF recently concluded its Article IV consultation with Nigeria on the 29th of last month. The consultation followed discussions held between the IMF mission and Nigerian authorities in Lagos and Abuja from February 12 to 23, 2024.
Despite Nigeria’s ambitious reform agenda under its new administration, the IMF highlighted near-term risks, emphasizing the necessity of steadfast and well-communicated reforms to restore macroeconomic stability and foster inclusive growth.
The IMF also warned of the potential exacerbation of food insecurity due to adverse shocks in agriculture or global food prices, as well as the risks posed by fluctuations in oil production or prices.
In light of these challenges, the IMF underscored the importance of mobilizing revenue, reprioritizing expenditure, and phasing out energy subsidies to create fiscal space for development spending and strengthen social protection, while maintaining debt sustainability.
Moreover, the IMF directors emphasized the crucial role of reforms to enhance the business environment, improve security, implement governance measures, develop human capital, boost agricultural productivity, and build climate resilience.
These reforms, according to the IMF, are essential to bolster investor confidence, unlock Nigeria’s growth potential, diversify the economy, address food insecurity, and facilitate sustainable job creation. The IMF also reiterated its commitment to supporting Nigeria’s reform efforts through capacity development initiatives.
