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IMF proposes more taxes, higher interest rates after subsidy removal



IMF Headquarters

…says loan servicing obligation too high, insists no debt restructuring talks

• Look inwards for funding, foreign loans becoming scarce, costly, Fund tells Nigeria

The International Monetary Fund, on Friday, said for Nigeria’s fuel subsidy removal policy and foreign exchange unification initiative to translate to economic growth and stability, the Federal Government must collect more taxes to fund the national budget and pay public debts.

The IMF Africa Department Director, Abebe Selassie, made the position known during a press briefing on the Sub-Saharan Africa Regional Economic Outlook at the ongoing World Bank Group/International Monetary Fund Meeting in Marrakech, Morocco.

He spoke against the backdrop of the harsh economic conditions in Nigeria on the back of the removal of fuel subsidy and foreign exchange unification by President Bola Tinubu after taking office in late May.

The deregulation of the downstream oil sector has pushed petrol prices from about N185/litre to about N600/litre, a development that has caused pain and untold hardships for more Nigerians.

Aside from this, policies aimed at unifying the official and parallel market rates of the naira announced in early June by the government have worsened the sharp rise in the prices of goods and services following the jump in the pump price of petrol.

Despite the initial savings made from fuel subsidy removal by the Federal Government, over 90 per cent of government revenue still goes into debt servicing, leaving it with a meagre amount to cater to major economic growth and development projects.

However, the IMF said on Friday that Nigerian policymakers must urgently complement the fuel subsidy removal with a set of policies that could ameliorate the economic challenges facing the country.

Selassie said, “The exchange rate reforms that the government did were very, very welcome, trying to unify the rate, similarly the fuel subsidy. But that will not help and will not stick unless you also are tightening monetary policy; unless you’re also doing something to mobilise more tax revenues. So, a holistic package of reforms is what’s needed.


“So, you have a medley of things mainly rooted in the fiscal challenges that Nigeria has faced, not having tax revenues. At the same time, this is a country with incredible potential and we have seen reforms moving in the right direction in recent months. What is needed, we feel, is making the reforms holistic and help reinforce each other. Just as things were not reinforcing each other in the past, I think there is scope to make the reforms reinforce each other.”

The IMF director noted that Nigeria had over-relied on oil revenue, making it difficult to tap its potential in other areas.

He said, “Why are there not enough tax revenues? I think in the past, over-reliance on oil was when prices were high. Second, of course, also is the subsidy regime, which also entails quite a lot of loss of government resources being directed where they perhaps should not be. So, I think these are all interlinked issues, including causing some of the inflation that you’re seeing, because, given the difficulty to tap international capital markets, the government has had to rely more on domestic financing, which has either crowded out the private sector or of course caused the monetary injection, which again has weakened the exchange rate.”

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Selassie, however, said the leaders at the Central Bank of Nigeria and the Ministry of Finance were new, adding that there was a need to give them more time to act.

He expressed confidence in their ability to make the right economic decisions, saying, “I think we have to give a bit of time to the new administration also, I mean, the central bank governor has just been appointed. The Minister of Finance has only been in office for a few weeks. So, we’re hopeful that they will move in the right direction, and we stand there to provide any policy advice the government needs.”

Debt talks

On Nigeria’s debt, the IMF director said the country leaders had yet to initiate any discussion on debt cancellation or forgiveness.

The Debt Management Office data showed that Nigeria had a total debt stock of $113.4bn as of June 30, 2023.


The IMF director said, “I am not aware of any discussions that are going on debt profiling and restructuring in Nigeria. There are, of course, like elsewhere in the region, debt pressures. And I think in Nigeria, by far the most important cause of the pressures is the fact that the government doesn’t generate enough tax revenues for all the services it needs to provide. So, interest payment as a share of revenues is very high and not leave much room to spend on other issues. I think that is the key issue and the one that needs to be worked on.”

He also said Nigeria’s debt was still manageable but noted that more revenue must be generated to service it.

“When we look at the debt in Nigeria, our sense is that the stock is manageable in general. It’s the debt servicing that is much more difficult. And the debt servicing is hampered, as I said earlier, by the country not generating enough non-oil tax revenues. I think that is by far the most important area of reform, by far the most important area of work that there is for any administration in Nigeria,” Selassie added.

Forex ban removal

Selassie said, “On the trade restrictions, our view has always been that in Nigeria, as in many other cases, our economies now are so sophisticated and so complex. I don’t think that these kinds of restrictions work. The best way to manage modern economies is for the government authorities to use both the fiscal policy lever and monetary policy lever to affect the right kind of outcomes, rather than going in and saying I don’t like this good, so I don’t want it to come in, et cetera.

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“That tends to create unhelpful distortion. But in general, I think the direction that the CBN has moved is a helpful one.”

Look inwards

Meanwhile, the IMF has advised the Nigerian government and other economies in sub-Saharan Africa to look inwards for funding, pointing out that foreign loans are becoming scarce and costly.


It said this in its regional outlook report.

The report read in part, “Sub-Saharan Africa is only now emerging from a series of unprecedented global shocks and is still in the grips of an acute funding squeeze. On the positive side, global inflation is receding, and international financial conditions are starting to ease. But the underlying funding challenge may still endure—the crisis has demonstrated the risks of relying on volatile private capital markets for development funding, while other traditional sources such as official development assistance and bilateral lending are shrinking.

“Funding for development seems likely to become increasingly scarce and ever more costly, making it more difficult for countries to sustain even current levels of per capita spending on priorities such as health, education, and infrastructure, much less increasing the spending required to meet the Sustainable Development Goals.”

It added, “But the region is far from powerless. More patient and less pro-cyclical private investment inflows remain a critical and underused resource, and there is significant scope for the region to accelerate investment climate reforms while carefully considering the role of added public incentives. Ultimately and most important, domestic resource mobilisation is the key to sustainable development. Boosting public revenues is clearly vital. But expanding the pool of private savings is also essential, and to this end, promoting financial market development and financial inclusion should also be a priority.”

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, had on Tuesday said the government would explore new ways to collect tax revenue more efficiently.

Also on Thursday, the new CBN Governor, Olayemi Cardoso, removed the eight-year forex ban on 43 items.

Chinese loans waning

Meanwhile, the IMF has said Nigeria and other countries in sub-Saharan Africa are at a crossroads in their relations with China because the Chinese government is beginning to reduce its exposure on the continent.


In its report released on Friday titled, ‘At crossroads: Sub-Saharan Africa relations with China’, the IMF said African countries must now explore domestic funding.

The report read in part, “Sub-Saharan Africa has forged broadly beneficial economic ties with China over the last two decades. China has become the region’s largest trading partner, a major credit provider, and a significant source of foreign direct investment. However, China’s support to Africa has also faced some criticisms. Recently, China has retrenched its financing activities in sub-Saharan Africa amid a growth slowdown and reduced risk appetite.

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“The projected future deceleration in China’s growth is likely to affect African trading partners negatively over the medium term, mainly through reduced trade. Therefore, it is crucial that countries in the region strengthen their resilience and implement structural reforms to foster economic diversification, deepen intraregional trade, enhance competitiveness, and catalyze domestic growth.”

As a result of the development, the IMF report advised African countries, including Nigeria, to review their economic policies in view of China’ scaling down on the continent.

The report added, “Sub-Saharan Africa has to adapt to evolving economic ties. Sub-Saharan Africa has benefited from China’s growth takeoff, but the region needs to adapt to China’s growth slowdown and declining economic engagements. Navigating these new realities in a context of global uncertainty and amid increasing geo-economic fragmentation will require building resilience and implementing structural reforms that foster alternative sources of growth, including through diversification and enhancing competitiveness.

“Building resilience will help cushion against the negative spillovers from China’s growth decline. Increasing regional trade integration offers African countries the opportunity to diversify export destinations and import sources. The African Continental Free Trade Area is particularly promising, but its implementation will require substantial reduction of trade barriers and improvements in the broader trade environment, including reduction of non-tariff trade barriers. If all are realized, the median goods trade within Africa could increase by 53 percent and with the rest of the world by 15 per cent.

“This has the potential to raise the real per capita GDP of the median African country by more than 10 per cent and lift an estimated 30–50 million people out of extreme poverty. Rebuilding buffers and strengthening policy frameworks will help reduce macroeconomic vulnerabilities and external reliance. This includes reviving efforts to boost domestic revenue mobilization to reduce dependence on external revenue and financing while strengthening spending efficiency and generating alternative and sustainable sources of funding for development priorities. Measures include improving revenue administration and tax policy reforms.

“To offset China’s declining economic engagement in the region, structural reforms are necessary to foster alternative sources of strong, sustainable, and inclusive growth, such as: Promoting economic diversification, which is vital for forging new trade relationships beyond China and can mitigate the repercussions from changing global trade patterns. Oil-exporting countries need to gradually manage the transition away from a heavy reliance on Chinese demand.


“Moreover, as the world embraces the green energy transition, the region can seize opportunities in the strong demand for critical mineral exports that support renewable energy development. Countries can strive to develop more local processing capabilities while moving up higher value chain segments. Essential reforms—including adopting best practices in mining laws and enhancing public financial management—are crucial to capturing the potential windfalls and optimising economic benefits.” (Punch)

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More pressures on pockets as food inflation rises to 40%



More pressures on pockets as food inflation rises to 40%
•High electricity tariff to drive further rise — Analysts

•It’s bad for businesses – NACCIMA •Small businesses to lose capital base— ASBON

At the backdrop of sustained rise in prices of staple food items in the market, Nigeria has recorded an unprecedented food inflation rate of 40 percent in March 2024.

Economists and financial analysts explained that the development would put more pressure on the purchasing power of average Nigerian and they also predict that the trend will continue for some months before stabilising.

The food inflation drove the headline inflation rate to 33.2 percent, up from 31.7 percent recorded in the month of February.

The figures released yesterday by National Bureau of Statistics, NBS, in its Consumer Price Index, CPI, report for March 2024, represented a 2.09 and 1.5 percentage percentage points increases month-on-month.

But the analysts see a wider headline inflationary rise in this month to 34.6 percent, representing a 2.4 percentage month-on-month rise resulting from the recent hike in electricity tariff.

Electricity tariff hike to drive further inflation – CardinalStone

Analysts at CardinalStone Finance Limited, a Lagos based investment house, indicated that further inflationary upswing should be expected following the recent drastic hike in electricity tariff.

They stated: ‘’The inflation outlook is biased to the upside, a consequence of the recent implementation of a new electricity tariff. For context, the Nigerian Electricity Regulatory Commission (NERC) have hiked price for Band A customer from N68 to N225 per kilowatt hour.


‘’Nevertheless, we see some downside risk from the recent currency sustainability. ‘’Overall, we project inflation to print 34.6% in April 2024.’’

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Further rise will be slower – Alpha Morgan

In the meantime, analysts at Alpha Morgan Capital said: “From our analysis, we project that inflation will further increase but at a continuously slower rate. We tie this prediction primarily to the recent monetary interventions by the Central Bank of Nigeria in mopping up excess liquidity, curbing volatile exchange rate movement through various aggressive currency interventions, government fiscal policies, such as agricultural interventions, among others.”

Devpt is bad for businesses – NACCIMA

Meanwhile, OPS said that the persistent rising inflation could sound the death knell for small businesses in the country, with consequential loss of jobs and worsened insecurity.

Commenting, Director General of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Sola Obadimu, said: “Persistent rising inflation is bad for business as well as for individuals.

“It erodes income in value terms and purchasing power becomes weaker for both individuals and businesses. Inventories will continue to grow.

“It is bad for planning purposes and breeds growing uncertainty. Cost of doing business continues to grow leading to higher cost of goods. It’s cyclical.


“Even when businesses or individuals tend to earn higher income, the value (in real terms) becomes lower.”

In his reaction, President of Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said the development will worsen survival of small businesses.

He stated: “The new and rising inflation rate, affecting largely food, essential commodities, raw materials, electricity and alternative power generation, transportation among others, will continue to worsen the survival and growth of SMEs.

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It will, no doubt, squeeze out the meager working capital of SMEs and make us more vulnerable to extinction.

“Not all costs can be passed to the consumers but even at that, certain costs will be passed onto them, and since they also have had their disposable income eroded by inflation, sales of goods and services of SMEs will drastically drop. For an average citizen, their standard of living and welfare will significantly drop too.

“More Nigerians will suffer from hunger, and lack of access to basic necessities and amenities, worse of it is health and medical needs.

“Overall, the implications of this on SMEs is that many more businesses will die off and become ailing, job losses will increase as many more businesses will lay off workers.

“There will be an increase in bad loans as more SMEs will be unable to fulfill their loan obligations leading to decreased access to funding from banks that will be more averse to lending to SMEs particularly with the increased interest rate, now coupled with inflation.


“More insecurity will prevail in the land for many will look for alternative illegal ways of survival. More will migrate in the name of Japa.

“The extinction of more businesses will open doors for imported products to take their space which eventually will also stress the Naira exchange rate.”

In its CPI report NBS stated: “In March 2024, the headline inflation rate increased to 33.2 percent relative to the February 2024  headline inflation rate which was 31.7 percent .

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“On a YoY basis, the headline inflation rate was 11.16 percentage points higher compared to  the rate recorded in March 2023, which was 22.04 percent.

On food inflation the bureau said: “The food inflation rate in March 2024 was 40.01 percent on a year-on-year basis, which was 15.56 percentage points higher compared to the rate recorded in March 2023 (24.45 percent).

“The rise in Food inflation on a year-on-year basis was caused by increases in prices of the following items garri, millet, akpu uncooked fermented (which are under the bread and cereals class), yam tuber, water yam (under potatoes, yam, and other tubers class), dried fish sadine, mudfish dried (under Fish class), palm oil, vegetable oil (under Oil and Fat), beef feet, beef head, liver (under Meat class), coconut, water melon (under Fruit Class), Lipton tea, Bournvita, Milo (under coffee, tea and cocoa class).” (Vanguard)

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N20, N10, N5 rendered ‘irrelevant’ as inflation bites harder



N20, N10, N5 rendered ‘irrelevant’ as inflation bites harder

Across major markets, prices of goods are moving away from the lower denomination of the Naira currencies as inflation bites harder.

Not too long ago, a sachet of pure water cost N5.

However, in the past couple of years, these notes have struggled to get items they could be attached to.

A market survey by DAILY POST showed that more than half of Nigeria’s legal tenders cannot make purchases.

Despite this, the Central Bank of Nigeria, CBN, recognizes the following denominations; 50 kobo, N1 and N2 which are coins, and N5, N10, N20 and N50 which are printed on polymer materials.

A sachet of pure water now sells for N30. Retailed sugar no longer sells for N10, while candies like Tom Tom are retailed at two pieces for N50. To further compound the woes of these notes, goods are now rounded up to 50 or 100, which further makes these currencies irrelevant.

In the past six months, the Naira has depreciated considerably. At one point, it was about N1,900 to a single dollar until the intervention by the CBN with the naira now trading at about N1050 to a dollar.

The implication of it is that N1000, which is Nigeria’s highest denomination, is less than a single dollar.


Anyone with $1000 is a millionaire in naira based on the current exchange rate, and anyone with $1 has more than N1,000.

Despite the recent surge in the value of naira, prices of commodities have not shown any significant signs of climbing down.

Experts believe that Nigeria’s inflation is a product of many factors, with FX being one of the numerous factors.

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But despite this, the Nigerian government is still printing some of the lower denomination currencies at a huge cost.

According to reports, in 2016, CBN had to temporarily halt the printing of N5, 10, N20 and N50 due to the cost of production.

The report said it costs N1000 to print each lower denomination because Nigeria Security Printing and Minting plc (NSPM) is unable to print on polymer.

Now experts are calling on the CBN to discontinue the printing of the lower denominations and review the currencies in line with realities.

Abiodun Ayangbemi, an economist, emphasised that the CBN must discontinue the printing of the lower denomination because the majority of those currencies have failed the basic principles of money— means of exchange and store of value.


“The monetary authorities cannot continue to print those denominations when there is basically nothing to use them for,” he said.

Lekan Olaleye, a monetary policy expert, asked the federal government to take a copy of the re-denomination policy adopted by Ghana some years back.

He argued that the CBN should remove two zeros from the existing notes.

It would be recalled that Ghana had in 2007, re-denominated the Cedis by striking out four zeros from their currency and producing the new Ghana Cedis.

A former CBN Governor, Sanusi Lamido had in 2012 announced a plan to introduce N5000 notes. In the same vein, there was also a plan to coin the lower bank notes of N5, N10 and N20.

However, the policy was met with a strong outcry from the public, who condemned the plan. Thus, the government shelved the plan.

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Years after the botched plan, prices of goods and services have spiked beyond the 2012 level. (Daily Post)

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We’re not aware of Ganduje’s suspension – Kano APC Chairman



Ganduje, wife, son to be arraigned before Kano court April 17
APC National Chairman and former Governor of Kano State, Abdullahi Ganduje

The Ganduje ward executives of the All Progressive Congress (APC) in Kano State, have denied the reported suspension of APC National Chairman, Dr Abdullahi-Umar Ganduje.

The ward executives made the denial while briefing journalist at the APC State Secretariat, on Monday in Kano.

According to the ward Chairman, Malam Ahmad Ganduje, those purported to have announced the suspension were not members of the party.

He said they were solemnly behind the APC national chairman and have confidence in his style of leadership.

The ward chairman added that they had passed a vote of confidence on Ganduje, and urged all party members in the ward and across the state to remain calm and law abiding.

In his remarks, the APC Chairman, Dawakin Tofa Local Government Area, Alhaji Inusa Dawanau, said the party will take legal action against those the “impersonators”, who announced Ganduje’s suspension.

The News Agency of Nigeria (NAN) reports that, Malam Haladu Gwanjo, who claimed to be the Legal Adviser of APC in Ganduje Ward, had earlier announced the purported suspension of party’s national chairman.
Gwanjo, who cited alleged corruption and other vices as reasons for the suspension, said that the decision was taken by nine executive members of party in Ganduje ward.(NAN)

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