Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, on Tuesday, stressed the need for Nigeria and other developing countries who are implementing reforms and other forms of structural adjustment programmes to ensure that the vulnerable populations in the respective countries are protected.
Edun said this on same day the International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) report downgraded Nigeria’s growth prospects for 2024, from 3.3 per cent to 2.9 per cent.
Responding to THISDAY’s question during a media briefing of the Intergovernmental Group of 24 (G24), on International Monetary Affairs and Development, which is a group of countries that includes members of the World Bank and IMF, as well as other developing countries, Edun noted that developing countries must focus on implementing sustainable reforms at the macroeconomic level while ensuring that the most vulnerable populations are protected from the immediate costs of those reforms.
Also responding to a question on lessons Nigeria and other G24 countries implementing reforms have learnt from the process Edun, who doubles as the Second Vice Chairman of the G24 said: “The key lesson that I think I will focus on is that in devising these programmes and carrying out reforms, what is particularly important because the benefits are over the longer term and the costs are front-loaded, is the social safety net that will help the poor and the vulnerable cope with the upfront costs with a spike in their cost of living. It has to be adequately planned for and dealt with.
“It shouldn’t be a question of afterthought that you now decide that there need to be certain poverty alleviation initiatives linked to that or linked to helping the poor and most vulnerable.
“Another thing is communication. I think one of the critical things in carrying out these macroeconomic reforms that are so fundamental is communicating what is being done, what is to be expected, and also the timing of the various activities.
“So, if it is a programme to give direct benefits, direct transfers of funds, to a group of people, then they should be published for everyone to understand. There should be a dashboard that people can follow, thereby engendering and building public trust.”
He underscored the importance of planning for social safety nets to help the poor and vulnerable cope with the immediate impact of such reforms, which often lead to a spike in the cost of living.
Edun also reiterated that Nigeria’s ability to address its ongoing foreign exchange crisis hinges on boosting crude oil production, even as he acknowledged challenges Nigeria was facing in managing FX supply.
He also noted that Nigeria and other G24 countries would benefit more if multilateral institutions such as the World Bank and IMF increased funding to not just to only meet immediate needs but also pursue the long-term developmental needs of developing countries.
“We continue to ask for an improved global financial architecture that provides us with more concessional funding, particularly for those countries that, as I said earlier, are undertaking the macroeconomic reforms that everybody agrees are sensible and will lead to better lives for their people,” he said.
Furthermore, he pointed out that while interest rates were starting to ease in developed countries, many developing nations, including Nigeria, were still grappling with high inflation and elevated interest rates.
This, he said, highlighted the need for more concessional financing from multilateral institutions to make borrowing more affordable for developing economies.
“I think around this time last year, we were still dealing with heightened levels of inflation, particularly in the developed countries, and that meant elevated rates of interest, as their number one priority, the fight against inflation and tight monetary policy by the central banks. “That has changed, and there is now, as we have seen monetary easing or at least easing of rates of interest by central banks, but that’s in the developed world.
“In the developing world, rates are still high, and that fight against inflation means that the interest rates also will remain high. But as far as the developed world is concerned, lower interest rates translate to more affordability. Nobody wants to borrow, nobody likes to borrow, but when it becomes necessary, it’s something that must be managed as well as possible.
“And so, the first port of call is concessional financing, either financing from the World Bank.
“The developing world continues to call for larger sums that can really make a difference, not just to be able to help a country cope with its immediate payment needs, but to have funds to grow the economies. That is what the fight against inflation translates to for the developing countries.”
He commended the recent 36 per cent reduction in the IMF’s borrowing cost, describing it as a step in the right direction to help developing countries manage their debt while accessing the resources needed for economic growth.
IMF Downgrades Nigeria’s Growth Prospects for 2024 to 2.9%, Forecasts Recovery to 3.2% in 2025
Meanwhile, the IMF in its latest World Economic Outlook (WEO) report has downgraded Nigeria’s growth prospects for 2024, from 3.3 per cent to 2.9 per cent.
The WEO was released at the ongoing IMF/World Bank Annual Meetings in Washington DC, United States.
The multilateral institution, however, raised its forecast for the West African country for 2025 to 3.2 per cent.
The adjustments reflected concerns over Nigeria’s ongoing macroeconomic challenges, particularly the effects of recent flooding and oil production setbacks.
The IMF attributed its downward revision of Nigeria to two major factors – agricultural disruptions caused by severe flooding and security and maintenance issues hampering oil production.
These challenges, according to Division Chief in the IMF’s Research Department, Jean-Marc Natal, who spoke during a media briefing on the WEO, were key drivers of the revision.
Natal said: “There has been, over the last year and a half some progress in the region. You saw, inflation stabilising in some countries, going down even and reaching a level, close to the target.
“So, half of them are still at a large distance from the target, and a third of them are still having double-digit inflation. In terms of growth, it’s quite uneven, but it remains too low. The other issue is that in the region it is still high.
“It has stopped increasing, and in some countries already starting to consolidate, but it’s still too high, and the debt service is, correspondingly, still high in the region. There’s been some progress, so in terms of the recommendation in countries where inflation is very high, you would, you would recommend, tight monetary policy, and in some cases, when possible, help by consolidation on the fiscal side.
“In many countries, they are, trade-offs, and consolidating fiscal is difficult when you also have to provide for relief, like in Nigeria, for example, due to the flooding. So, targeting the support to the poor and the vulnerable is part of the package when you consolidate.”
According to the WEO, the broader Sub-Saharan Africa region was facing similar challenges, with growth rates remaining steady at 3.6 per cent this year and expected to increase to 4.2 per cent in 2025.
However, the region continues to grapple with weather shocks and conflicts that are holding back stronger growth.
Also speaking, IMF’s Economic Counselor and Director of the Research Department, Pierre-Olivier Gourinchas, highlighted the uneven nature of the recovery.
“The sub-Saharan African region is seeing growth rates that are fairly steady this year compared to last year, about 3.6 per cent, and then expected to increase to about 4.2 per cent next year.
“So, we’re seeing some pickup in growth from this year to next year, but now this is certainly a region that’s been adversely impacted by weather shocks and in some cases, conflict, so the growth remains subdued and somewhat uneven, and that’s certainly something that we are concerned about.”
In a separate media briefing on the latest Global Financial Stability Report released by the IMF, the Assistant Director, Monetary and Capital Markets Departments of the Fund, Jason Wu, noted that Nigeria’s economy was on a path to stability as a result of the reforms taken by the government.
Wu added: “We recognise that many citizens do face difficulty. The flood was quite devastating. Inflation is still very high, at about 30 per cent.
“I think importantly, macroeconomic conditions within the country should stabilise and that includes inflation that will provide room to guard against external shocks, which is less controllable, for the economy of Nigeria.”
On his part, the Financial Counselor and Director, Monetary and Capital Markets Department, IMF, Tobias Adrian said: “In terms of financial stability, you know, we are engaging with many countries to build capacity on regulatory issues and make sure that banks are well capitalised, that monetary policy frameworks are sound.”
Obinna Chima, Eromosele Abiodun and Nume Ekeghe
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