Lagos Nigeria (VOICE OF NAIJA)-The International Monetary Fund (IMF) has warned that Nigeria’s current fuel and electricity subsidy could cost a significant N2.33 trillion or three percent of its Gross Domestic Product, (GDP), in 2024.
Following a report released by the IMF Country Office in Abuja in its Staff Article IV Consultations, the Fund emphasized the significant financial burden of sustaining subsidies on fuel pump prices and electricity tariffs below cost recovery.
The projected expenditure, equivalent to three percent of Nigeria’s real GDP of N77.93 trillion, was outlined in the report published on Tuesday.
The IMF team, headed by Axel Schimmelpfennig, IMF Mission Chief for Nigeria, conducted consultations in Lagos and Abuja from February 12 to 23, 2024, to discuss the report with Nigeria.
While acknowledging the country’s economic growth, which reached 2.8 percent in 2023, the report underscored the need for robust social safety nets, such as the cash transfer program, to shield vulnerable households before addressing the subsidy issue.
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The report highlighted Nigeria’s economic challenges, including high inflation, currency depreciation, and policy tightening, which could impede GDP growth projected at 3.2 percent in 2024.
Addressing food insecurity emerged as a top policy priority, with approximately 8 percent of Nigerians facing food insecurity. The IMF welcomed Nigeria’s efforts to enhance social protection and agricultural productivity through the introduction of targeted programs and dry-season farming.
Despite improvements in revenue collection and oil production, Nigeria’s low revenue mobilization remains a concern, limiting the government’s ability to respond to shocks and promote sustainable development.
Non-oil revenue collection witnessed a modest increase in 2023, aided by naira depreciation, while oil production rose to 1.65 million barrels per day in January, supported by enhanced security measures.