The International Monetary Fund (IMF) said that high inflation in the country is a major source of hardship for Nigerians.
This was said during a press briefing on the January 2024 World Economic Outlook (WEO) Update in Sandton, South Africa.
Daniel Leigh, IMF’s Division Chief, Research Department, also noted that naira weakness is contributing to the rising inflation, alongside structural factors, such as the financing of deficit by the Central Bank of Nigeria (CBN). He added that reducing inflation is a top priority for the country.
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’s also structural factors behind that high inflation, including, you know, on the fiscal side, financing of the deficit. But this is clearly creating hardship.
- “The perspective that we have is bringing down inflation is top priority. And Central Bank has already, Central Bank of Nigeria, has already raised interest rates significantly over the past year to 18.8 percent. So that is the monetary tightening that is helping in our forecast to bring inflation down from 24.6 percent in 2023 percent, to 23 percent this year, and then closer to single digits into 2025 at 15.5 percent.
- “But on top of conquering inflation through the monetary tightening, there’s also a need to provide the social support through the budget. And creating the space for that is the challenge. Our perspective is that more revenue mobilization, strengthening revenue administration, widening the tax base, this is what is going to bring in space for development spending while safeguarding fiscal sustainability.”
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In its latest WEO Update, the IMF downgraded its growth forecast for Nigeria to 3.0% in 2024, down from 3.1% predicted earlier.
Leigh also explained the reason for the downgrade, saying:
- “We do also have a forecast for Nigeria that we downgraded slightly, and that mainly reflects lower than expected outcome in 2023, in the context of the monetary tightening to reduce inflation. And mainly the external shocks in terms of high borrowing costs and that constraining domestic investment and spending.”
The IMF’s downgrade of Nigeria’s growth forecast is a worrying sign for the country’s economy. Rising inflation at 28.92% is a major concern, and it is essential that the authorities take urgent steps to address it.
