Uwaleke: Reject ‘Ugly’ Aspects of IMF Staff Report on Nigeria

*Urges MPC to stop further hike in MPR

• Says growth pattern, unhealthy for a developing economy 

Ndubuisi Francis in Abuja

A financial expert and Director of the Institute of Capital Market Studies (ICMS), Nasarawa State University, Prof. Uche Uwaleke has advised Nigerian authorities to accept the ‘good’,  note the ‘bad’ and reject the ‘ugly’ aspects of the recent International Monetary Fund (IMF) Article IV recommendations on Nigeria.

In a statement made available to THISDAY, Uwaleke, a former Commissioner for Finance in Imo State said  his candid advice  to the federal government in respect of the IMF recommendations was to, accept the ‘good’, note the ‘bad’, reject the ‘ugly'”

On the “good” aspects, Uwaleke said the IMF advised Nigeria to intensify efforts at revenue mobilisation, register or license global crypto trading platforms in Nigeria and subject to the same regulatory requirements applicable to financial intermediaries; develop a transparent foreign exchange intervention strategy  and adopt fully the International Financial Reporting Standards (IPSAS) to enhance transparency.

He also underlined the ‘bad’ aspects of the IMF recommendations which he wants Nigerian authorities to ‘note’ as the call on Nigeria to scale up social transfers to alleviate food insecurity, raise the domestic and external borrowing ceilings, and discontinue the plan to issue domestic forex securities to bring onshore dollar liquidity to the official market.

Others are to phase out Capital Flow Management (CFMs) such as the payment limits on naira denominated credit and debit cards for overseas transactions as well as the requirements for international oil companies (IOCs) to hold a portion of repatriated export proceeds in Nigeria for 90 days before transferring offshore.

The ‘ugly’ aspects of the IMF staff report, which he advised the federal government to reject include removing implicit fuel and electricity subsidies,and to further tighten monetary policy to bring down inflation relying increasingly on the policy rate.

While reacting to the latest gross domestic product (GDP) figures for the first quarter of 2024, released by the National Bureau of Statistics (NBS), Uwaleke observed that the aggressive hike in Monetary Policy Rate (MPR) by the  Central Bank of Nigeria (CBN) in February 2024 had a negative impact on output in Q1 2024.

Noting that the economy is tanking, he advised that the CBN’s Monetary Policy Committee (MPC) should pause policy rate hike. 

“Just like in Q4 2023, when growth was driven by the oil sector, growth in Q1 2024 was also driven by the oil sector at 5.70%.

“Oil sector growth was aided partly by the increase in crude oil production during the quarter (from 1.55mbpd in previous quarter to 1.57mbpd).

“The Non-oil sector performance was powered by the Services sector chiefly Financial services and ICT.

“Manufacturing and agriculture sectors appeared hugely impacted by economic headwinds during  the quarter. Growth rates were a mere 1.49% and 0.18% respectively. 

“The Agric sector (comprising 4 activities although dominated by crop production) tanked significantly in Q1 2024 to 0.18% from 2.10% in previous quarter.

“With the agric sector’s dismal performance, it is easy to understand why food inflation has climbed to over 40% as of April 2024,” he said.

According to him, the financial sector grew by 31.24 per cent, a clear demonstration that it is detached from the productive sectors of the economy.

He added: “In my view, this identified growth pattern, weighted in favour of the services sector, is not healthy for a developing economy such as ours. 

“Little wonder, economic growth does not appear inclusive reflecting in rising unemployment and poverty levels,.”

He submitted that it was time to reset this faulty economic structure, leveraging technology, in favour of the productive sectors, including industry and agriculture.

Indeed, he noted that structural change is strongly recommended by the United Nations Development UNCTAD) as one of the ingredients of building productive capacities.