- The World Bank and International Monetary Fund have urged the Central Bank of Nigeria to sustain inflation-control measures
- The World Bank said the cost of not maintaining the government’s economic reforms is high
- The IMF stressed the need for coordination between the fiscal and monetary authorities to achieve the reforms
The World Bank and the International Monetary Fund (IMF) have advised the Central Bank of Nigeria (CBN) to sustain its efforts to control inflation.
Senior Economist for Nigeria at World Bank Group, Sameer Matta, gave the advice during the recent launch of the 2025 macroeconomic outlook of the Nigerian Economic Summit Group (NESG).
Matta stressed that the CBN must stay on the path of curbing inflation through its adopted measures such as interest rate hikes and limiting money supply.
It would be recalled that Nigeria’s inflation soared in 2024 due to economic headwinds, reaching 34.80 in December 2024 having surpassed a 28-year record four times in the year.
Matta highlighted the need for improvements on the supply side, including enhancing agricultural yields and strengthening the link between rural and urban areas.
The World Bank economist also suggested that trade policies should be reviewed to target specific sectors and adjust tariffs accordingly.
He said, “I think what is critical in terms of inflation is to stay the course. I think that the central bank needs to continue to be focused on making sure that inflation is under control.
“Obviously, part of it is related to the supply side. What can be done to improve the yield on the agriculture side? What can be done to improve the link between rural and urban areas?
“There is the question of what can be done on the trade policy side. One would be to increase production locally, but that would take time.
“One of the things that can be done on the trade policy side is to think through which sectors could be targeted to allow some tariffs to be adjusted.”
Government’s economic reforms must be sustained – World Bank
Matta stressed that the government’s economic reforms must be sustained as the cost of not adopting reforms is high, representing two per cent of Nigeria’s Gross Domestic Product (GDP) for fuel subsidy and two per cent of GDP for foreign exchange (FX) subsidy.
He said, “The cost of reforms comes mainly from high inflation, and in the case of Nigeria specifically, food inflation is impacted by FX and the fact that lots of agricultural products are impacted by the price of petrol.
“That means the impact of these reforms is being felt by the most vulnerable.
“It is very important that the government continues on the reforms on social protection but also accelerates the roll-out of these cash transfers. It is more important to finance them over the future.
“It will be very important to continue to encourage the authorities to scale up and accelerate these interventions, which are time-bound and targeted at those who are really impacted and done through a digital way to avoid any potential misuse in the future.”
Need for coordination between fiscal and monetary authorities
On his part, Nigeria’s country representative at the International Monetary Fund (IMF), Christian Ebeke, stressed the need for coordination between fiscal and monetary authorities to effectively combat inflation.
He commended the commitment of both the central bank and fiscal authorities to strengthen coordination, which has helped reduce inflationary pressures.
Ebeke also stressed the importance of addressing the distributional consequences of reforms, such as the removal of fuel subsidies and naira reforms, to protect the most vulnerable populations.
He said, “For example, one of the key decisions that took place last year was the commitment by both the Central Bank and the fiscal authorities to strengthen coordination.
“We didn’t see Ways and Means accrue again as we have seen in the past year in Nigeria, and it was welcome.
“This is something that should bring inflation down by tightening financial conditions but also by reducing money in circulation.
“The other important thing for the fiscal authorities to do is to tackle any distribution consequences of the reforms that have been implemented, naira reforms or the completion of the fuel subsidy removal.
“We know that these key reforms in Nigeria will have redistributive consequences on the most vulnerable, and they may not be able to cope.
“Fiscal authorities have a key role to play because the transmission lag of fiscal policies is shorter compared to monetary policies.
“So, issues of social protection are very important. That is how fiscal policies can complement what the monetary authorities are doing.”
World Bank urges Nigeria to sustain economic reforms for 10 to 15 years
Meanwhile, TheRadar earlier reported that the World Bank said Nigeria needs to sustain ongoing reforms for the next 10 to 15 years to achieve economic transformation.
This was disclosed by Indermit Gill, Senior Vice-President of the World Bank Group, on Monday, October 14, at Abuna during the 30th Nigerian Economic Summit (NES), organised by the NES Group (NESG) in collaboration with the Ministry of Budget and National Planning.
