IMF urges Nigeria to tighten monetary policy, boost non-oil revenues

IMF First Deputy Managing Director David Lipton, IMF Managing Director Christine Lagarde and IMF Communications Department Director Gerry Rice during the Managing Director’s press conference at the 2018 IMF/World Bank Annual Meetings on Thursday, October 11 in Bali, Indonesia. Ryan Rayburn/IMF Photo

The International Monetary Fund (IMF) has urged Nigeria to tighten its monetary policy and strengthen non-oil revenue mobilisation efforts for a stronger economy.

The Managing Director of IMF, Ms Christine Lagarde, gave the advice on Thursday at a news conference on some of the key issues affecting the global economies.

Lagarde said that domestic revenue mobilisation, which stood at five per cent of the country’s Gross Domestic Product (GDP), was too low for to elevate the Nigerian economy to the level it should be.

“I remind you. You know that probably inside out that domestic revenue mobilisation is five per cent of GDP in Nigeria and that is just way too low, relative to where Nigeria should be in order to address issues of health, education, proper social spending on the people and particularly the young people of Nigeria.

“That would certainly be a very strong recommendation that I would give her and structural reforms that would probably include really making sure that the refineries and the oil facilities that are available in Nigeria work well and work for the benefit of Nigeria.”

Lagarde said that work was ongoing on the possible spill over effect of the trade war between the U.S. and China on Nigeria.She, however, said that spillovers could occur in various volatile ways.

According to her, for that reason there cannot just be direct spillovers.

She added that the IMF was carrying out the exercise on country by country basis, very often taking scenarios that either would be proven true or hopefully proven wrong.

The IMF chief commended Nigeria for appointing another female, Mrs Zainab Ahmed as Minister of Finance to replace Mrs Kemi Adeosun, who resigned in September.

Lagarde described the world economy as strong, because the growth recorded is expected to remain steady at 3.7 per cent in 2018 and 2019.

She, however, said that the growth was not enough given that the increase had been stagnant for three years running.

She added that growth was more unevenly allocated around the world and that risks of trade barriers were rising.

The IMF chief said that if the tensions regarding the trade barriers were to escalate, the global economy would take a significant hit.

“Our strong recommendation is to de-escalate those tensions and to work toward a global trade system that is stronger, fairer and is fit for purpose and for the future.

“This is because if services are not sufficiently covered, if digital transformation is not covered in that trade framework, then we are missing the point and we are probably losing out on the productivity gains that we could have,” she said.

She added that 10 years after the great global financial crisis, the world was safer, but not safe enough.

She explained that with global and public debt at an all-time high, any slight change could provoke capital outflows and economic instability in emerging markets.

“To guard against this, our recommendation is certainly to encourage countries to have the right combination of domestic policies, using all the tools or the arrows that they have and for global policies to also reflect those requirements of safety.

“We also need to press ahead with the financial regulatory agenda and to resist the risk of backsliding,’’ Lagarde added.

The 2018 Annual Meetings of the IMF and WBG was organised to bring together experts to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development and aid effectiveness.