The International Monetary Fund (IMF) has said that Nigeria has adequate capacity to repay all its loans.
The executive board of the financial institution said this in a statement issued on Monday February 7, following the conclusion of its 2021 article IV consultation with Nigeria. At the onset of the COVID-19 pandemic, Nigeria received a $3.4 billion facility from the IMF in April 2020.
“Directors noted that Nigeria’s capacity to repay the Fund is adequate. They encouraged addressing data gaps to allow timely and clear assessments of reserve adequacy” the statement reads
The directors emphasized the need for major reforms in the fiscal, exchange rate, trade, and governance areas for long-term and inclusive growth.
“Directors highlighted the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks. In this regard, they called for significant domestic revenue mobilisation, including by further increasing the value-added tax rate, improving tax compliance, and rationalising tax incentives,” the statement reads.
“Directors also urged the removal of untargeted fuel subsidies with compensatory measures for the poor and transparent use of saved resources. They stressed the importance of further strengthening social safety nets.
“Directors welcomed the removal of the official exchange rate and recommended further measures towards a unified and market-clearing exchange rate to help strengthen Nigeria’s external position, taking advantage of the current favourable conditions.
“They noted that exchange rate reforms should be accompanied by macroeconomic policies to contain inflation, structural reforms to improve transparency and governance, and clear communications regarding exchange rate policy.”the statement read
The directors recommended that Nigeria strengthen its monetary operational framework over the medium term by focusing on price stability and scaling back the central bank’s quasi-fiscal operations. They also welcomed the resilience of the banking sector and the planned expiration of pandemic-related support measures.