IMF urges Nigeria To Remove Oil Subsidy
The International Monetary Fund (IMF) has urged the President Goodluck Jonathan-led administration to remove fuel subsidy completely, to ensure fiscal adjustment.
IMF’s Senior Resident Representative/Mission Chief, Williams Scott Rogers, speaking with the media on Thursday, also insisted that Nigeria requires public sector reforms, stressing that it was necessary for planned savings in recurrent spending.
He also recommended that the Federal Government should mobilise non-oil revenues and strengthen oil-price rule and oil savings mechanism, while pushing for the maintenance of tight monetary policy.
Commenting on the Nigerian banking sector, Rogers gave a pass mark, disclosing that it had improved considerably, as credit to the private sector improved under fully capitalised banks.
Notwithstanding the improvement, the IMF Country Representative advised that more work on consolidated and cross-border supervision should be encouraged, stressing that there was an urgent need for structural reforms to enhance productivity and global competitiveness.
“To this extent, power reform is a quick win for growth and competitiveness,” he said, submitting that trade protection for “infant-industries” should be strictly time-bound, while focus should be on measures to improve competitiveness.
According to Rogers, export diversification was key to long-term growth and improvement in macro-economic statistics, especially in national income accounts.
On the declining oil price in the international market, Rogers called for caution on the part of the Federal Government.
“A decline in international oil prices to $97 per barrel (annual average) would begin to erode ECA balances. A fall to $80 – $85 would wipe out ECA balances within a year,” it warned.
The world lending body told Nigerians that the ongoing regime of subsidy would continue to hurt the economy.
It urged the Federal Government to implement the full removal of the subsidy, declaring that the decision would help fiscal adjustment for economic growth.
He said: “Planned savings in recurrent spending will require public sector reforms and elimination of subsidy would help fiscal adjustment.”
He said there was a need to strengthen implementation capacity of public investment, adding that maintaining tight monetary policy till signs of durable reduction of inflationary pressures was imperative.
Rogers said that government must embark on urgent structural reforms to enhance productivity and global competitiveness.
“Power reform is a quick win for growth and competitiveness. Petroleum Industry Bill will transform oil and gas sector to increase investment
“Trade protection for infant industries should be strictly time-bound and focus on measures to improve competitiveness.
“Export diversification is key to long-term growth and improved macroeconomic statistics, especially in national income accounts,’’ he said
On the banking sector, he said IMF commended the efforts of Assets Management Corporation of Nigeria (AMCON) in buying off bad loans of banks.