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IMF Lauds CBN’s Efforts In Strengthening Banking Sector … Urges Review Of 2025 Budget
World’s apex financial institution, the International Monetary Fund(IMF), has applauded the efforts of the Central Bank of Nigeria (CBN) in strengthening the Banking sector and driving recapitalization.
IMF also urged the fiscal authorities to review the 2025 budget in light of some hiccups they will have in the economy.
In its latest released report on Nigeria’s economic reforms analysis, IMF noted that reforms in the foreign exchange market and ongoing stability of the naira have supported price discovery and enhanced dollar liquidity in the economy.
The report analysis revealed that Nigerian authorities had implemented major reforms over the past two years, which had improved macroeconomic stability and enhanced resilience.
The financial body highlighted a significant risk that Nigeria may face, specifically if the fiscal deficit projections for the year is exceeded.
This risk, the report noted, is driven by a combination of falling oil prices, lower production levels, and challenges in executing capital expenditures.
It called the country’s fiscal authorities to take immediate action to recalibrate the country’s fiscal policies and budget expectations to reflect the current economic realities.
“Ensuring that the fuel subsidy savings accrueable to the government would yield the proposed neutral stance—the full-year savings are estimated at two per cent of GDP.
“If the savings are not realised starting H2-2025 and given that tax policy reforms under consideration are not expected to deliver significant revenue gains in 2025, adjustment would have to come from the expenditure side (0.6 per cent of GDP), with staff recommending to prioritise adjustments to recurrent spending to protect growth-enhancing investments”, the report disclosed.
According to the report, IMF directors had noted that the CBN was rightly maintaining a tight monetary policy stance, which should be sustained until disinflation is firmly established.
They also welcomed the cessation of deficit monetisation and commended ongoing efforts to strengthen central bank governance, which is a crucial steps toward laying a solid institutional foundation for effective inflation targeting.
The Fund stressed the need for the implementation of a robust foreign exchange intervention framework focused on containing excess volatility, noting that the exchange rate was an important shock absorber.
It also agreed with the call to phase out existing capital flow management measures in a properly timed and sequenced manner.
The report also lauded the fiscal authorities for the successful signing of the tax reform bills into law, noting that it is a crucial step toward improving revenue generation and creating fiscal space for development spending, all while maintaining debt sustainability.
Recall that President Bola Tinubu recently signed four tax reform bills into law, marking what he called a bold new era of economic governance in the country.
The four bills that have now become Acts are the Nigeria Tax Bill (Fair Taxation), the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.
The CBN, led by Cardoso, eliminated the long-standing multiple exchange-rate system by introducing a “willing-buyer, willing-seller” framework supported by a digital trading platform called B-Match.
By: Corlins Walter