IMF Reaffirms Support for Nigeria’s Currency and Subsidy Reforms, Aiming to Boost Economic Stability and Growth

In support of its recommendations on Nigeria’s foreign currency rate and subsidy removal, the International Monetary Fund (IMF) emphasized that these reforms are critical for the country's economic stability. In a statement to Premium Times on Wednesday, October 30, the IMF reiterated that these measures aim to improve Nigeria’s macroeconomic outlook.

During the recent IMF/World Bank meetings in Washington, D.C., Abebe Selassie, IMF’s Director of the African Department, praised the reforms implemented by President Bola Tinubu's government. According to Selassie, the adjustments in FX rates and the removal of subsidies align with the IMF’s long-standing guidance aimed at boosting investment in infrastructure, healthcare, and education. “Removing the subsidy unlocks the economy's vast potential, attracting investment and fostering growth,” Selassie stated, adding that redirecting subsidy savings could benefit vulnerable households impacted by current economic challenges.

In response to concerns raised by Nigerian media about the IMF's role in these reforms, the organization noted that it had previously examined Nigeria’s foreign currency and fuel subsidy policies, highlighting inefficiencies in the subsidy system. The IMF pointed out that the subsidy often benefits wealthier Nigerians who do not require government assistance, and that subsidized fuel is frequently smuggled to neighboring countries with higher prices, inadvertently benefiting those outside Nigeria.

The IMF also criticized Nigeria’s fixed exchange rate regime, stating that the gap between the official and parallel currency rates places significant pressure on the Central Bank’s reserves. Until mid-2023, Nigerians paid a premium of over 60% on the black market. By supporting a market-determined exchange rate, the IMF suggests fairer access to dollars at a more consistent price.

“We stand by our advice,” the IMF stated, reemphasizing that these recommendations are part of a broader policy framework designed to enhance living standards and support macroeconomic stability. The policy package includes economic adjustments and social support for those most affected by inflation.

In closing, the IMF clarified that while it provides similar guidance to all member countries, each nation ultimately makes policy choices based on its unique circumstances.