- Fuel Subsidy Removal, FX Unification: It Wasn’t Us-IMF
- The Decisions Were Deeply Domestic, Political Choices Made By Government
- Government Can Mitigate Hardship By Expanding Social Protection For Most Vulnerable
- Beware Of IMF, World Bank Advices, Economist Warns FG
Amid growing hardship and biting economic conditions experienced by Nigerians due to the twin policies of the fuel subsidy removal and the unification of the foreign exchange market, the International Monetary Fund (IMF) has washed its hands off the policies.
The fund declared that though they supported the moves, they were purely domestic and political choices by the government of the day.
The Matrix reports that upon assumption of office, President Bola Tinubu announced an end to the subsidy regime, and capped it off with the liberalisation of the foreign exchange (FX) market.
READ ALSO: “We Didn’t Force Nigeria On Fuel Subsidy Removal” -IMF
Both policies unleashed significant economic hardship on Nigerians with a double-digit inflation rate of more than 30 percent, and petrol prices surging by over 360 percent from 2023 — amid a weak currency.
The IMF had come under scathing attacks from analysts and economic experts for influencing both decisions which have brought untold hardship on Nigerians.
Reacting to this, the Fund through Abebe Aemro Selassie, director of the African department at the IMF while speaking during a press briefing in Washington DC agreed that the policies had brought untold hardships to many, but affirmed that they were both domestic and political choices to be made.
“We express our thoughts on what would be a better use of public resources and I think over the years, what Nigeria has been thirsting for is a lot of investment in infrastructure. A lot of investment that’s required in health, education and the like,” Selassie started.
“Those have been our strong views expressed in Nigeria as continued sustaining subsidies for fuel and other areas.
“At the end of the day, these are deeply domestic and deeply political choices that governments have to make. The decision was a domestic one. We don’t have programmes in Nigeria. Our role is limited to regular dialogue, as we have with other nations like Japan or the UK
“They have made choices that we think move in the direction of better use of public resources, in a way that will unlock this incredible potential that the economy has to make it more dynamic, to invest, to facilitate growth and we welcome those reforms.”
Speaking on the effect of subsidies, he disclosed that when subsidies were significant and the exchange rate was being kept at an artificial level, there were other imbalances in the economy — including high levels of inflation and shrinking reserves.
READ ALSO: Tinubu Didn’t Remove Fuel Subsidy, It Was Already Gone Before His Election – Dogara
“When subsidies were significant and the exchange rate was being kept at an artificial level, there were other imbalances in the economy — including high levels of inflation and shrinking reserves and government abilities to borrow from markets was heavily compromised and this was the really difficult trade-off that the government in Nigeria over recent years have faced.
“Also, the inability to have a healthy macroeconomic situation, one that would foster growth, diversification, and resources to invest in health and education that were needed, because so much resources were being used by fuel subsidies. It wasn’t sustainable.”
“Due to this, pains were being felt elsewhere in the sector.
“Secondly, the immediate effect of this kind of policy changes always causes a lot of dislocation… and we have absolutely no doubt that conditions at the moment are extremely difficult” on top of the situation which I noted earlier. Food accounts for a higher share of the consumption basket. Now you have fuel prices going up, which will have an additional effect on other essential goods. So, all of this is well recognized.
“This is why we have over and over again harped about the need to put in place measures to target the most vulnerable and do social protection over the years as these reforms have been implemented.
“I know there are some steps that are being taken in that direction, but I think some of the savings from the fuel subsidy reform, the exchange rate subsidy being removed, should, in our view, be directed to help to cushion the effect on the most vulnerable households.”
“We recognize the significant social costs involved,” he noted. “The government can mitigate these by expanding social protection for the most vulnerable.”
Meanwhile, the Chief Economist at SPM Professionals, Paul Alaje, on Friday called on the Federal Government to be careful with advice given by global financial institutions like the World Bank and the International Monetary Fund (IMF).
READ ALSO: IMF Downgrades Nigeria’s 2024 GDP Rise In Revised Economic Outlook
He gave the advice during an interview on Channels Television’s Politics Today, saying that adhering to sweet talk by the institutions could lead to further hike in the dollar-to-naira exchange rate.
“The elephant in the room is the exchange rate. All the gains this administration has made, that is, if Naira increases to 2,000, it will wipe off everything. That is why we need to be extremely careful and not to listen to the sweetness of what some institutions are telling us,” he said.
