Nigeria is grappling with a deepening economic crisis, according to a recent report by the International Monetary Fund (IMF). The IMF highlighted stagnant per-capita growth, escalating poverty, and heightened food insecurity as contributing factors to the ongoing cost-of-living challenges in the country.
This assessment coincides with a backdrop of surging inflation, an exchange crisis, feeble economic growth, and the closure of businesses. The report, titled ‘IMF Executive Board Concludes Post Financing Assessment with Nigeria,’ emphasized that inadequate revenue collection has impeded the government’s ability to provide essential services and invest in public projects.
In particular, the report noted a concerning 27 percent year-on-year increase in headline inflation in October, with food inflation reaching 32 percent. Factors such as the removal of fuel subsidies, exchange rate depreciation, and subpar agricultural production were identified as key drivers of this inflationary trend.
The IMF acknowledged Nigeria’s challenging external environment and domestic issues, including scarce external financing and soaring global food prices due to conflict and geo-economic fragmentation. The report highlighted the stagnation of per-capita growth, high poverty rates, and widespread food insecurity, further exacerbating the cost-of-living crisis. The IMF also pointed out the limited fiscal space and low reserves constraining the government’s options.
Despite these challenges, the IMF expressed optimism about the current administration’s efforts to address deep-rooted structural issues. The report commended the government’s bold policy reforms, such as the removal of fuel subsidies and the unification of official exchange rates. The IMF acknowledged the Central Bank of Nigeria’s commitment to price stability and the government’s ambitious agenda for domestic revenue mobilization.
The report also mentioned that on January 12, 2024, the IMF Executive Board concluded the Post Financing Assessment, endorsing the Staff Appraisal on a lapse-of-time basis. It confirmed that Nigeria’s capacity to repay the IMF remains adequate.
However, the report drew attention to Nigeria’s substantial debt owed to the IMF, amounting to $2.8 billion, as of the latest available data. PricewaterhouseCoopers (PwC), in a separate report, warned about the potential repercussions of rising debt service costs on Nigeria’s credit rating outlook, borrowing costs, and debt servicing ability. The report projected an increase in debt service from N8.25 trillion in 2024 to N9.3 trillion in 2025 and further to N11.1 trillion in 2026, urging caution regarding the high debt servicing to revenue ratio.
