The International Monetary Fund’s Country Representative for Nigeria, Dr Christian Ebeke, on Thursday, revealed that Nigeria’s economy faced the risk of regressing should economic polices initiated by the current administration be reversed.
He noted that the progress resulting from the policies has yet to reach its potential, notwithstanding some of the recorded economic gains, such as the reduction in the country’s inflation rate.
As a result, the IMF representative urged that the administration under the country’s current president, Bola Tinubu, hold onto the reforms and policies initiated a couple of years back.
“Government intervention in controlling prices and volumes is no longer sustainable for Nigeria. The objective going forward must be to stay the course on both fiscal and monetary policy,” he said.
As reported by the Punch Newspaper, one of the most significant threats to the economy, according to the IMF representative, is complacency, especially at the subnational level, where the reforms have given governments more fiscal flexibility.
He explained that state governments’ inclination for pro-cyclical spending, particularly in the run-up to elections, might undo the progress made by the Nigerian government.
“The risk of believing that the job is already done is more evident at the subnational level. Fiscal space has increased significantly for states, and in a pre-election year, pro-cyclical fiscal policy becomes a very acute risk,” Ebeke said.
Some of the country’s economic experts have expressed similar concerns.
What some economists stated
“The picture that emerges suggests that the economy has moved away from acute macroeconomic dislocation toward a more predictable environment.
The key question before us is no longer whether reform is necessary, but how we consolidate the gains already achieved and convert them into durable, inclusive growth,” the Chairman of the Nigerian Economic Summit Group, Niyi Yusuf, stated.
“However, stabilisation alone does not equate to prosperity. Growth remained modest and uneven.
It was driven by a narrow set of sectors, with weak transmission to employment and household incomes.
Real purchasing power remained under pressure, and welfare outcomes continued to lag behind macro indicators.
These realities underscore a critical point: stability is a necessary condition for growth, but it is not sufficient,” he added.
“Basically, the challenge we’re facing now is that after two very difficult years of reforms to reposition the economy for growth, reform reversal is one of the things that we should be very careful about because of politics.
Inflation is coming down, and the government needs to unveil its growth strategies, which are really important,” Investment banker and economist, Tilewa Adebajo, told the Punch.
Nigeria’s economic reforms
Since entering office in May 2023, Nigerian President Bola Ahmed Tinubu has launched some of the country’s most contentious reform programs in decades, altering the economy, public finances, and Nigeria’s relationship with foreign investors.
The most immediate and far-reaching decision came on Tinubu’s first day in office, when he announced the elimination of fuel subsidies.
For years, the subsidy scheme bled government income while holding up the energy market.
Its abolition was portrayed as a difficult but necessary step toward freeing up fiscal space, reducing corruption, and redirecting public funding to infrastructure, healthcare, and social services.
However, the move immediately resulted in a significant increase in fuel prices and living expenses, which average citizens have been unable to properly manage.
On the flip side, the government argues that reforms, while seemingly harmful, have laid the foundation for long-term economic stability.
Currently, the country’s inflation figures have reduced year-on-year.
Closely related to this was the decision to unify Nigeria’s foreign exchange market.
Tinubu’s administration abolished the multiple exchange-rate system.
By enabling the naira to trade more freely, the government hoped to restore market trust, promote transparency, and attract much-needed foreign investment.
As a result, the naira initially fell sharply; even at one time, coming in as one of Africa’s worst-performing currencies.
Some of the losses have been reversed, but not to a point where the Nigerian naira boasts a strong exchange rate.
On the fiscal front, the president advocated for comprehensive tax reforms aimed at increasing revenue and broadening the tax base.
His administration has aimed to simplify Nigeria’s fragmented tax structure, improve compliance using digital tools, and reduce the country’s overreliance on oil earnings.
