IMF recommends full removal of petroleum subsidy

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IMF Head, Christine Lagarde
IMF Head, Christine Lagarde

The International Monetary Fund (IMF) said that full removal of oil subsidy would help fiscal adjustment for economic growth in Nigeria.

The Country Representative of IMF in Nigeria, Mr Scott Rogers, expressed this opinion when he briefed newsmen on Nigeria Staff Report for 2013 Article IV Consultation.

“Macroeconomic performance and policies in 2012 were broadly positive. Fiscal targets for 2013 and medium term are consistent with macroeconomic stability but additional measures are needed.

“Planned savings in recurrent spending will require public sector reforms and elimination of subsidy would help fiscal adjustment,’’ he said.

According to him, the report recommended the need to mobilise non-oil revenues and strengthen oil price rule and oil savings mechanism.

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.

He said AMCON should minimise fiscal risk and moral hazard and work toward winding down as the sector witnessed stability.

On Nigeria’s development outlook, he said strong growth would continue in non-oil sectors and tighter fiscal/monetary policy would help ease inflationary pressures

“Government’s medium-term expenditure framework calls for substantial fiscal adjustment but success depends on use of Excess Crude Account and Sovereign Wealth Fund’s ability to contain recurrent expenditures

“International reserves will continue to rise, buoyed by relatively high interest rates, at least in short-term,’’ he said.

 

 

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