Barely fourteen days after the Federal Government suspended the removal of petrol subsidy, the International Monetary Fund has again urged the Nigerian government to stop subsidising fuel.
IMF also asked the Federal Government to remove the official exchange rate for the country
It would be recalled that the Federal Government had on January 24 suspended its plan to remove fuel subsidy in the year 2021.
Furthermore, it also proposed to extend the subsidy removal implementation period by 18 months, saying it would engage the legislature for the amendment of the Petroleum Industry Act.
The IMF had in November last year stressed “the need to fully remove fuel subsidies and move to a market-based pricing mechanism in early 2022 as stipulated in the 2021 Petroleum Industry Act.”
Meanwhile, in a statement released earlier this week at the end of its Article IV consultation with Nigeria, IMF said despite the recovery in oil prices, the general government fiscal deficit was projected to widen in 2021 to 5.9 per cent of GDP, reflecting implicit fuel subsidies and higher security spending.
She maintained that higher debt service to government revenues (through higher US interest rates and/or increased borrowing) pose risks for fiscal sustainability.
Meanwhile speaking, are the executive directors, who all noted that the country’s outlook remained subject to significant risks, including from the pandemic trajectory, oil price uncertainty, and security challenges.
They emphasised the need for major reforms in the fiscal, exchange rate, trade, and governance areas to lift long-term, inclusive growth.
The Directors however urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources. They stressed the importance of further strengthening social safety nets.”
The IMF welcomed the removal of the official exchange rate and recommended further measures towards a unified and market-clearing exchange rate to help strengthen Nigeria’s external position, taking advantage of the current favourable conditions.
