IMF Praises FG Over Adoption Of Finance Act, Deep Offshore Basin Act

IMF Praises FG Over Adoption Of Finance Act, Deep Offshore Basin Act

By Dipo Olowookere

**Praises CBN’s Raising of Cash Reserve Ratio

**Wants Banking System Vulnerabilities Addressed

The International Monetary Fund (IMF) has applauded the federal government for adopting the finance bill and the deep offshore basin act.

In a statement issued after a visit to the country from January 29 to February 12, 2020, the global lender said the adoption of these policies would help address some vulnerabilities observed during the conduct its annual Article IV Consultation discussions on Nigeria’s economy.

Leader of the team, Amine Mati, who is the Senior Resident Representative and Mission Chief for Nigeria, said the Finance Bill and Deep Offshore Basin Act will help the country boost revenue, while the end-December budget cycle for 2020 will improve execution.

It further said the tightening of monetary policy in January 2020 by the Central Bank of Nigeria (CBN) through higher cash reserve requirements to respond to looming inflationary pressures was a welcome, noting that, “Progress on structural reforms, particularly in Doing Business, finalizing power sector reforms, and strengthening governance, is commendable.”
ALSO READ Osun to Establish N216b Industrial Park

However, it urged government to pay attention to the slow pace of economic recovery, noting that declining real incomes and weak investment continue to weigh on economic activity.

It said, “Inflation—driven by higher food prices—has risen, marking the end of the disinflationary trend seen in 2019. External vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals. The exchange rate has remained stable, helped by steady sales of foreign exchange in various windows.”

In addition, the IMF said, “High fiscal deficits are complicating monetary policy. Weak non-oil revenue mobilization led to further deterioration of the fiscal deficit, which was mostly financed by CBN overdrafts. The interest payments to revenue ratio remains high at about 60 percent.”

In view of the above, the IMF said, “Under current policies, the outlook is challenging. The mission’s growth forecast for 2020 was revised down to 2 percent to reflect the impact of lower international oil prices. Inflation is expected to pick up, while deteriorating terms of trade and capital outflows will weaken the country’s external position.”
ALSO READ Jumia Offers 80% Discount to Promote Easter Shopping

“Major policy adjustments remain necessary to contain short-term vulnerabilities, build resilience, and unlock growth potential.

“Non-oil revenue mobilization—including through tax policy and administration improvements—remains urgent to ensure financing constraints are contained and the interest payments to revenue ratio sustainable. Recourse to central bank overdrafts should be limited and the mission supports the authorities’ plans to use the low domestic yield environment to front load their financing requirements,” it said.

It stressed that, “Further tightening of monetary policy—albeit through more conventional methods—is needed to contain domestic and external pressures arising from large amounts of maturing CBN bills. The mission reiterated its advice on ending direct central bank interventions, securitizing overdrafts to introduce longer-term government instruments to mop up excess liquidity and moving towards a uniform and more flexible exchange rate. Removing restrictions on access to foreign exchange for the 42 categories of imported goods would be needed to encourage long-term investment.”
ALSO READ Local Stock Market Improves by N133b

According to the IMF, “Banking system vulnerabilities should continue to be addressed. The mission welcomed recent efforts to reduce legacy non-performing loans. The introduction of risk-based minimum capital requirements would also help strengthen bank resilience.

“Notwithstanding the significant increase in lending, concerns about shortened maturity, asset quality and conflicting monetary policy signals call for revisiting the minimum lending to deposit ratio directive.”

“Structural reforms—particularly executing the much-delayed power sector recovery plan, implementing the anti-corruption and financial inclusion strategy, and addressing infrastructure and gender gaps—remain essential to boosting inclusive growth.

“Nigeria’s border closure will continue to have significant economic consequences on the country’s neighbours. It is important that all involved parties quickly resolve the issues keeping the borders closed—including to stop the smuggling of banned products,” it said.

Continue Reading...

No Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Man Dies During Beer Parlor Fracas In Anambra
Man Dies During Beer Parlor Fracas In Anambra

A 44-yea-old man, Osondu Ike, yesterday, lost his life during an altercation that broke out at a drinking joint at Uruezeani village, Allor, Idemili South Local Government Area of Anambra State. A witness told our reporter that the deceased, who was having get together with friends, at a drinking joint, …

APC Moves To Take Over Power In Abia, Commences LG Tour
APC Moves To Take Over Power In Abia, Commences LG Tour

As part of moves to reposition the party for the 2023 election, the Abia State chapter of APC has commenced a tour across the 17 local government areas in the state. The party also says the tour will allow it to hold town hall meetings with key stakeholders. In a …

Betting Companies In Kaduna Urge State Government To Lift Ban On Betting Shops
Betting Companies In Kaduna Urge State Government To Lift Ban On Betting Shops

The Association of Nigerian Bookmakers is the national trade association of sports betting operators and our attention has been drawn to the recent forceful closure of several sports betting shops across Kaduna State by officials of Kaduna State Internal Revenue Service (KADIRS) under the guise of alleged non registration and …