- The IMF has issued a fresh report on Nigeria's economic status amid the coronavirus pandemic
- According to the financial institution, Nigeria may be heading into a financial crisis if urgent steps are not taken
- Nevertheless, the IMF commended some measures already taken by the FG and recommends some new measures
The International Monetary Fund (IMF) has raised an alarm that Nigeria is plunging itself deeper into a financial crisis amid the coronavirus pandemic.
The financial institution said on Monday, February 8, that only a fundamental policy reset can salvage the impending economic crisis, Business Day reported.
According to IMF estimates, Nigeria spent N92 of every N100 earned in 2020 servicing its fast-growing debt stock.
A breakdown of Nigeria's external debt by the Debt Management Office (DMO) shows the country is owing $31.98 billion as of September 2020.
Legit.ng notes that more than half of the debt is owed by multilateral institutions such as the IMF, World Bank and the African Development Bank (AfDB).
Nigeria's economy hit hard by pandemic
The IMF said the coronavirus pandemic has greatly affected Nigeria's economy, Nigerian Tribune reported.
It also noted that the sharp drop in oil prices led to the contraction of the nation's GDP by 3.2%.
The inflation also rose while the unemployment rate reached 27%.
This has worsened the socio-economic conditions of Nigerians, despite the $3.5 billion loan the IMF gave Nigeria to cushion the effects of COVID-19 pandemic in April 2020.
Commendations for the FG
Despite the negative remarks, the IMF commended the Nigerian government for acting swiftly to adopt a pandemic-related support package equivalent to 0.3 per cent of GDP in the 2020 revised federal budget.
The financial institution also welcomed the removal of the fuel subsidy and steps to implement cost-reflective tariff increases in the power sector.
Looking ahead: Solutions
To address the current economic crisis, the IMF recommended some steps to be taken which are listed below:
1. Urgent policy adjustment and more fundamental reforms to sustain macroeconomic stability and lift growth and employment
2. Need for significant revenue mobilization to reduce fiscal sustainability risks
3. Need for improved social safety nets to cushion potential negative impacts on the poor
4. Gradual and multi-step approach to establishing a unified and clear exchange rate regime
5. Phasing out CBN's financing of the budget deficit in order to reduce inflation
6. Strengthening governance and anti-corruption frameworks
Meanwhile, the federal government is taking stock of its initiatives aimed at cushioning the effects of the COVID-19 pandemic on Nigerians and Nigerian businesses.
A statement sent to Legit.ng by Laolu Akande, the spokesman of Vice President Yemi Osinbajo indicates that ministers and heads of agencies are reporting further progress in the implementation of the Economic Sustainability Plan (ESP) of the Buhari administration.
The statement also highlighted seven major stimulus packages of the Buhari administration.