International Monetary Fund (IMF) has expressed its concerns on the resurgence of fuel subsidies, as it reiterated the importance of introducing market-based fuel pricing mechanism.
This was disclosed by the IMF team led by Ms. Jesmin Rahman via a statement issued after a virtual meeting with the Nigerian authorities on Thursday.
In the statement, which was seen by Nairametrics, the institution emphasised the need to deploy well-targeted social support to cushion any impact on the poor.
“The mission expressed its concern with the resurgence of fuel subsidies. It reiterated the importance of introducing market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor. The mission recommended stepping up efforts to strengthen tax administration to mobilize additional revenues and help address priority spending pressures.
“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.
“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation.
“With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.”
It added that the IMF mission appreciated the authorities and other counterparts for the open and thoughtful discussions and excellent cooperation.