The IMF has called on Nigeria to offset economic reforms’ harsh impacts with social investments. While reforms aimed at fiscal stability have garnered praise, they have heightened poverty rates. The IMF stresses the necessity of social safety nets and improved revenue collection to fund these initiatives, drawing lessons from other countries with similar experiences.
Nigeria’s ambitious economic reforms have rekindled investor confidence and garnered international praise. However, the ramifications for the country’s poorest citizens raise concerns regarding inequality and hardship. The International Monetary Fund (IMF), represented by Gita Gopinath, emphasizes the need for the Nigerian government to implement social investments to alleviate the burden of these reforms on vulnerable populations.
During her initial visit to the country, Gopinath applauded the government’s overdue economic actions, including foreign exchange market liberalization and the abolishment of fuel subsidies. Yet, she cautioned that the lack of accelerated social protection programs could hinder the benefits of these reforms, particularly as poverty levels rise to 47% by 2024 due to subsidy removal.
The removal of fuel subsidies, a necessary measure to reduce excessive public spending, has paradoxically resulted in soaring living costs, exacerbating poverty for many Nigerians. Additionally, while the liberalization of the foreign exchange market is beneficial for attracting foreign investment, it has resulted in heightened inflation, particularly for basic goods and imported items, further straining the economy.
Despite recent adjustments that reported a decrease in the official inflation rate, high prices remain a critical issue for everyday citizens. Gopinath noted that although inflation was officially recorded at 24% in January 2025, the perception of rising costs among the populace indicates otherwise. The IMF stresses the importance of tight monetary policies and fiscal responsibility to stabilize the economy.
Nigeria’s experience is not unique; similar reforms have taken place in countries like Egypt and Indonesia, where leaders balanced economic adjustments with substantial social investment initiatives. Both countries expanded cash transfer programs to support vulnerable households amid subsidy cuts.
In a recent meeting with Gopinath, Nigeria’s Finance Minister Wale Edun presented plans for enhancing transparency and efficiency in social investment systems through a biometric approach. He highlighted the government’s focus on tax reforms and strategies to increase domestic revenue, as the nation’s crude oil production experienced a boost, further impacting the economy positively.
However, a significant challenge remains in increasing government revenue, which currently accounts for less than ten percent of GDP. Gopinath pointed to the necessity of improving tax administration and reducing exemptions, asserting that transparent tax systems are vital for increasing revenue and enabling funding for social programs.
For Nigeria’s reforms to succeed, they must not only stabilize the economy but also positively affect the lives of everyday Nigerians. Continued investments in critical areas such as health, education, and infrastructure, supplemented by targeted social programs, will be paramount to alleviating poverty. Gopinath emphasized the need for consistency in implementing these reforms over extended periods to produce tangible results.
In summary, the International Monetary Fund has urged Nigeria to mitigate the adverse effects of its economic reforms on vulnerable citizens through targeted social investments. While the country’s economic reforms aim to promote stability and attract investment, the immediate consequences present challenges that necessitate careful consideration of social welfare programs. Ultimately, the long-term success of these reforms will be evaluated based on their ability to improve the quality of life for the Nigerian populace.
Original Source: businessday.ng
