The International Monetary Fund (IMF) has warned that price caps on fuel and electricity tariffs below the cost recovery could result in a fiscal cost amounting to 3% of GDP in 2024.
The staff of the Fund in their report on completion of their mission to Nigeria welcomed the recent policy decisions by the government especially the increase in MPR by 400 basis points to 22.75% last month stating that the decision will help tame inflation.
According to the report, Nigeria made improvements in revenue collection and oil production although persistent low revenue mobilisation weakened government’s response to certain macro-economic shocks and promotion of lasting development.
The report also called on the federal government to prioritise tackling food insecurity estimating the number of food insecure Nigerians to be almost 1 in 10 at 8% of Nigeria’s over 200 million population. It then welcomed the federal government’s drive to reform the social welfare system and the release of grains across the country.
Although the federal government stopped subsidy payment on PMS (fuel) since June 2023, there are feelers that there is tacit payment of subsidy considering the exchange rate for the importation has increased significantly without commensurate increase in the petrol pump price.
