The International Monetary Fund (IMF) and Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, have acknowledged the challenges of balancing economic reforms with citizens’ welfare, as high living costs and persistent poverty continue to undermine the benefits of economic resilience.
Advising developing countries, the minister said this is the wrong time to impose new taxes or increase the burden of taxes on the vulnerable and productive sectors of economies, even as he urged creative areas of revenue mobilisation.
These came as the IMF raised Nigeria’s economic growth forecast by 10 basis points to 4.2 per cent for 2026 and projected growth of 4.3 per cent in 2027. The forecast aligns with the World Bank’s estimate of 4.2 per cent growth for Nigeria in the first half of the year.
The upgrade, however, does not suggest that the economy is on course to meet the $1 trillion target set by President Bola Tinubu.
At a nominal output of $377 billion, the economy would need to grow by nearly 22 per cent yearly over the next five years to reach $1 trillion, assuming the naira’s
If the naira depreciates further, the economy will need to grow even faster to stand a chance of achieving the target within the period.
The IMF said Nigeria’s economy had made substantial progress but warned that the benefits of growth remained unevenly distributed, leaving much of the population struggling.
The Fund noted that resilient economic growth had not translated into sufficient relief for many Nigerians, highlighting persistent poverty and the disproportionate impact of rising food and energy prices on household welfare.
Presenting the Fund’s fiscal policy analysis at the ongoing IMF/World Bank Annual Meetings in Bangkok, Thailand, Research Department Division Chief, Deniz Igan, said policymakers needed to balance immediate household needs with medium-term fiscal stability.
“What we are advocating is for policymakers to balance the near-term needs of the population, and that involves food security. That involves energy security,” she said, noting that food and energy prices had risen disproportionately.
Igan said the Fund had examined fiscal responses that could be most effective in addressing a cost-of-living crisis, in which essential goods become more expensive faster than other items in the consumption basket.
Using Nigeria as an example, she noted that economic growth had held up, partly reflecting the country’s position as an energy exporter, but poverty remained high, and households continued to suffer.
“While the growth held up in Nigeria, given energy exports, poverty rates are still very high, and we are very mindful that the population is suffering,” she said, adding that risks from El Niño could further compound the pressure.
The IMF recommended targeted, temporary income support and cash transfers for the most vulnerable households to alleviate poverty and strengthen food security.
However, Igan stressed that such interventions must be consistent with a sustainable medium-term fiscal framework, supported by better expenditure quality and improved revenue collection.
AT two separate events yesterday, Oyedele presented Nigeria’s reforms as a model for other African countries but admitted that the policy choices had come with significant pain.
At the Africa’s Golden Future panel session, which examined Africa’s economic potential and pathways to unlocking it, Oyedele acknowledged that the sequencing of fuel subsidy removal and foreign exchange (FX) market liberalisation had contributed to a price crisis in the downstream petroleum sector.
Fuel prices more than doubled within hours of President Bola Tinubu taking the oath of office and delivering his inaugural speech, during which he announced the removal of the petrol subsidy. The decision marked the beginning of a series of reforms that would shape the country’s economic trajectory in the years that followed.
About two weeks after the inauguration, the Central Bank of Nigeria (CBN) liberalised the FX market. The naira subsequently lost more than 40 per cent of its
at the reformed official market, with knock-on effects on fuel prices and other costs across the economy.Oyedele acknowledged concerns about the pace of implementation, describing the sequencing of the fuel and FX reforms as too fast.
He, however, argued that although the policies imposed high costs, partial implementation could leave the country bearing the pain of reforms without realising the anticipated gains.
By July 2023, the average price of a litre of petrol had risen to about N600. Oyedele recalled that the price spike, driven by subsidy removal and FX reforms, had prompted price-capping measures, illustrating the severity of the shock from the twin policies.
The minister stressed the importance of communicating policy choices effectively, urging other African countries to learn from Nigeria’s experience, even when citizens did not initially “believe you”.
He also claimed that the Federal Government had supported more than 10 million vulnerable Nigerians, arguing that the country’s reform experience offered lessons for other economies.
MORE than three years into the reforms, Nigerians continue to grapple with their effects. Oyedele acknowledged the pain, insisting that partially implemented reforms could impose costs without delivering corresponding gains.
At a press conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24), which he chairs, the minister highlighted the macroeconomic stability recorded so far, describing it as the foundation for structural growth.
His argument comes amid concerns about the widening gap between Nigeria’s macroeconomic stability and inclusive growth, with economists advocating measures to bridge the divide.
Oyedele, however, insisted that the two were not mutually exclusive, arguing that stability was an important foundation for achieving inclusive growth.
He also said debt sustainability remained a critical issue, arguing that countries must leverage borrowing to fund critical infrastructure and ensure that debt delivers value for future generations.
Responding to a question on the trade-off between debt and tax financing, he said people must remain at the heart of policy choices.
“This is the wrong time to impose new taxes or increase the burden of tax, particularly on the vulnerable population and productive sectors of the economy,” Oyedele said in response to questions about the cost of debt on households and businesses.
“The measures will be first for every country to look inwards, looking inward to find areas of savings
, areas of revenue mobilisation, but also bearing in mind this is the wrong time to impose new taxes or increase the burden of tax, particularly on the vulnerable population and productive sectors of the economy,” he added.Oyedele said borrowing remained necessary for economic growth but should be directed towards job creation and inclusive development.
The Director of the G-24, Iyabo Masha, aligned with Oyedele, saying countries must achieve macroeconomic stability before pursuing structural growth. (Guardian)
