High inflation is creating hardships in Nigeria, the International Monetary Fund has disclosed.
The Division Chief, Research Department, Daniel Leigh, revealed this at the fund’s press briefing for its January 2024 World Economic Outlook Update. Leigh noted that current reforms in the country have led to currency depreciation. He stated the weakening of the naira has contributed to the increase in inflation.
Leigh said, “There were reforms, and the currency depreciated, and some of this weakness in the naira has contributed to the increase in inflation.
“Now there are also structural factors behind that high inflation, including, you know, on the fiscal side, financing of the deficit. But this is clearly creating hardship.”
He stated that bringing down inflation must become a top priority for the country. “The Central Bank of Nigeria has already raised interest rates significantly over the past year to 18.8 per cent. So that is the monetary tightening that is helping in our forecast to bring inflation down from 24.6 percent in 2023 per cent, to 23 per cent this year, and then closer to single digits into 2025 at 15.5 per cent.”
Leigh declared that while conquering inflation through monetary tightening, the country must also provide social support through its budget. “Creating the space for that is the challenge. Our perspective is that more revenue mobilisation, strengthening revenue administration, widening the tax base, this is what is going to bring in space for development spending while safeguarding fiscal sustainability,” he added.
On Tuesday, the IMF released its World Economic Outlook update for January. In it, the Washington-based lender downgraded Nigeria’s economic growth projections for 2024 to 3.0 per cent.
It further estimated that the Nigerian economy will grow by 2.8 per cent in 2023. Commenting on this projection in the briefing, the IMF’s chief economist, Pierre-Olivier Gourinchas, said, “On Nigeria’s growth rate, we have — this has been pointed out, a slight downward revision for this year (2024), 3 per cent, it’s a negative 0.1 percentage point. Next year is unchanged at 3.1 per cent.”
In its October World Economic Outlook update, the IMF blamed Nigeria’s slow growth on weaker oil and gas production.
It said, “Growth in Nigeria is projected to decline from 3.3 per cent in 2022 to 2.9 per cent in 2023 and 3.1 per cent in 2024, with negative effects of high inflation on consumption taking hold.
“The forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work.”
The IMF’s growth projections are a lot less than what (3.76 per cent), the Federal Government expects the economy to grow by.