The Central Bank of Nigeria has been encouraged by the International Monetary Fund to take steps to suspend or limit its funding of the government’s fiscal deficits if it wants the booming inflation to subside.
The National Bureau of Statistics reports that the country’s inflation increased from 22.22 percent in April 2023 to 22.41 percent in May 2023.
The agency is anticipated to release the June 2023 inflation data on Monday, July 17, and some analysts anticipate it to be close to or higher than 23% as a result of the removal of fuel subsidies and the liberalization of foreign exchange rates, which increased the cost of goods and services last month.
President Bola Tinubu announced the end of the fuel subsidy regime during his inaugural speech on Monday, May 29, 2023, raising the pump price to N500 per liter from N185 per liter.
The Director of the IMF Communication Department, Ms. Julie Kozack, stated during a press conference on Thursday that her institution anticipates additional inflation in Nigeria in the upcoming months.
Under the direction of Mr. Godwin Emefiele, the previous administration of Mr. Muhammadu Buhari borrowed multiple trillions of Naira from the CBN to cover budget deficits.
His administration sought the parliament to convert the CBN loans, commonly known as Ways and Means, into government securities or bonds with a duration of roughly 40 years after receiving numerous critiques.
The request was accepted by the ninth National Assembly, which was led by Speaker Femi Gbajabiamila and Senate President Ahmad Lawan, before President Buhari’s term ended on May 29.
According to Ms. Kozack, who was responding to previous initiatives of the current administration, “increasing well-targeted social spending will be critical to mitigating the impact of the removal of fuel subsidies on the most vulnerable.”
“Strengthening revenue mobilization through tax administration reforms is also essential to create fiscal space, reduce vulnerabilities, and put public debt on a sound footing,” she continued.
To support the country which has the largest economy in Africa, she added that the IMF would continue to consult with the regional authorities.
