The International Monetary Fund (IMF) has commended the Central Bank of Nigeria’s decision to remove restrictions on 43 items previously restricted from accessing foreign exchange at the official window.
The IMF also acknowledged that the newly appointed officials under President Bola Tinubu have initiated a series of reforms aimed at delivering favourable outcomes for Nigerians. It however, noted that the reforms may require time to achieve the desired results.
Also, in a speech he presented at the ongoing World Bank and the IMF meetings, the World Bank President, Ajay Banga, praised the ingenuity of Nigerian entrepreneurs, saying that he feels their yearnings to contribute to the growth of society.
The Director of the African Department, IMF, Abebe Aemro Selassie, friday unveiled IMF’s approval of Nigeria’s decision to remove forex restrictions on the 43 items, during a media briefing on the Regional Economic Outlook for Sub-Saharan Africa in Marrakech, Morocco, at the ongoing IMF/World Bank Annual meetings.
Selassie, also harped on the need to enhance tax reforms so as to improve revenue generation, create more fiscal space and reduce its burden of servicing and acquiring debts.
On the trade restrictions, he said, “The view of the IMF is that Nigeria and many other economies are so sophisticated and complex, that I don’t think that these kinds of restrictions work.
“The best way to manage a modern economy is to have fiscal policy lever and monetary policy lever to use to affect the kind of policy outcome you want, rather than saying I don’t like these goods and so I don’t want it to come in, etc, that tends to create an unhelpful distortion.
“Of course, there are tax policies you can also use if you really want to be against certain types of imports. In general, I think the direction the CBN has moved is a helpful one.”
Selassie further revealed that Nigeria’s debt was sustainable, just as he said the country was not in talks with the IMF on debt restructuring.
“I am not aware of any debt discussions that are going on, debt profiling or debt restructuring in Nigeria. In Nigeria, the most important cause of the pressures is the fact that the government does not generate enough tax revenue for all the services it needs to provide.
“Interest payment as a share of revenue is very high and does not leave much room to spend on other issues, that is the key issue that needs to be worked on.
“While there is not enough tax revenue, I think in the past reliance on oil when prices were high and secondly the subsidy regime which also implies and entails lots of government resources being directed where they should not be.
“These are all interlinked issues including causing some of the inflation that you have and the difficulty to tap into the international capital market. That is why the government has had to rely more on domestic financing which of course has crowded out the private sector and put constraints on monetary injections which has weakened the exchange rate.”
He noted that Nigeria has “incredible potential and we have seen reforms moving in the right direction in recent months.
He said: “What is needed, we feel, is making the reforms holistic and help reinforce each other (monetary and fiscal policy).
“Just as things were not reinforcing each other in the past, there is scope to make the reforms reinforce each other. So, the exchange rate reforms that the government did were very welcome in trying to unify the rates.
“Similarly, the fuel subsidy will not help or stick unless they tighten monetary policy and also you are doing something to mobilise more tax revenue.
“So, a holistic package of reforms is what is needed and we have to give a bit of time to the new administration also.
“The CBN governor has just been appointed, and the minister of finance has only been appointed a few weeks. So, we are hopeful that they will move in the right direction and we stand to provide every policy advice that the government needs.”
On Nigeria’s debt level, he added that it was manageable.
He said: “So the assessment of debts should not be based on the nominal value of a debt stock but on how it relates to many other economic variables.”
Regarding monetary policy coordination, he added that it was important to emphasise that addressing the exchange rate gap required more than just necessary adjustments and corrections.
He stressed that it must be complemented by the implementation of stricter monetary policy conditions.
The CBN had on Thursday, declared that importers of 43 items previously restricted from accessing foreign exchange (FX) at the official window were now allowed to purchase FX in the Nigerian foreign exchange market going forward.