The International Monetary Fund (IMF) has warned of potential short-term risks in Nigeria due to the ongoing cash shortage affecting business operations, which may result in a decrease in the inflation rate. The organization emphasized elevated inflation levels, high debt repayment costs, pressures on the external sector, and volatility in the oil industry as factors contributing to these risks.
According to The Guardian, the scarcity of the naira has resulted in a significant drop in food prices at major farm produce markets throughout the country. The International Monetary Fund (IMF) has emphasized the need for a strong monetary policy tightening to prevent a de-anchoring of inflation expectations. This is due to factors such as the rising international food and fertilizer prices and the persistent widening of the parallel market premium.
In the 2022 Article IV Consultation with Nigeria, the IMF directors recommended a combination of decisive fiscal and monetary tightening for macroeconomic stability and structural reforms to enhance governance, support the agricultural sector, and promote inclusive and sustainable growth.
The IMF directors also advised the finalization of securitization of the Central Bank of Nigeria’s (CBN) overdrafts and stressed the importance of adhering to the statutory limits in the CBN’s budget financing. They emphasized the need for bold fiscal reforms to establish policy space, secure public debt, and reduce vulnerabilities.
Finally, the IMF directors called on the authorities to follow through on their plan to remove fuel subsidies by mid-2023 and increase targeted social spending for maximum impact.
The International Monetary Fund (IMF) has called on the authorities to improve revenue mobilization through tax administration reforms, expanding the tax automation system, and improving taxpayer segmentation. In the medium term, the IMF directors suggested modernizing the Nigeria Customs Service administration, rationalizing tax incentives, and increasing tax rates to match the levels of the Economic Community of West African States (ECOWAS).
According to The Guardian, the scarcity of the naira has resulted in a 50% drop in grain prices as farmers struggle to sell their produce. For example, the price of maize has decreased from N27,000 per bag to N13,000 to N15,000, depending on whether payment is made in cash or by transfer. The price of soya beans, which once sold for as much as N36,000 to N40,000 per bag, is now about N18,000 in Igbeti, Oyo State. Similarly, the price of beans has declined from N40,000 to N27,000 per bag. Millet, sorghum, and guinea corn are also selling for around N12,000 per bag.
A farmer from Oyo State, Abdulrasheed Ibrahim, told The Guardian that the farmers had to sell their produce at lower prices to raise money for other purposes. Despite the price drop, he said, they still struggle to make sales as people do not have enough money to buy the product. A trader from Kano State, who identified himself as Abdullahi, also expressed his concerns about the impact of the naira crisis on their sales.
The President of the All Farmers Association of Nigeria, Farooq Mudi, stated that farmers are lowering the prices of their commodities to raise funds for the next planting season, including paying their workers. According to Mudi, farmers are selling their produce below the cost of production because they need to buy fertilizer and pay laborers, many of whom do not have bank accounts and prefer to receive cash payments.
Source: The Guardian