The International Monetary Fund (IMF) has reconfirmed its prediction that Nigeria’s economy will expand by 3.3% in 2024, up from 2.9% the previous year. This increase is attributed to improvements in the services and trade sectors.
However, the IMF highlighted that Nigeria, Africa’s most populous country and its top oil producer, still faces significant economic hurdles. Notably, food price inflation hit 40% in March, sparking concerns about food affordability.
Axel Schimmelpfenning, the IMF’s mission chief for Nigeria, commented, “If Nigeria grows at 3.3%, that is just above the population dynamics, which is a big challenge.” He added that the Nigerian government is planning to “gradually phase out” fuel subsidies, which are expected to cost up to 3% of GDP this year due to the difference between local pump prices and international dollar costs.
Schimmelpfenning further stated, “The reforms are focused on how to raise that growth so that Nigerians can see real impacts on their living standards.” He cautioned that recovery wouldn’t be instant, saying, “We think a lot has happened. We also have to recognize that the problems built up over many years were quite severe. We can’t expect that everything is going to be resolved overnight.”
There has been a shift in how global rating agencies view Nigeria’s economic prospects, following its reform efforts. Fitch, for instance, has recently changed Nigeria’s outlook from stable to positive.
Discussing priorities, Schimmelpfenning emphasized the importance of expanding cash transfer programs and increasing government revenue to improve services for Nigerians. The IMF praised the Central Bank of Nigeria’s recent interest rate hikes aimed at controlling inflation and advocated for a data-driven approach for future rate adjustments.
The IMF urged the Central Bank to boost its foreign exchange reserves and called for a transparent and balanced approach to managing the currency market.
Despite being the best-performing currency globally in early April, the Nigerian currency was the worst-performing in the world in February, experiencing significant volatility and trading at rates as high as N1,900 per US$.
In a stark warning, the IMF in April stated that these positive economic forecasts could be unrealistic unless Nigeria undertakes substantial economic reforms. The IMF cautioned that “the country’s economy could be at risk if it simply fails to produce.”
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