IMF to FG: Enhance transparency in oil sector, contain borrowing

The International Monetary Fund (IMF) has advised Nigeria to enhance transparency in the oil sector to ensure that the subsidy removal savings are transferred to the government’s budget.

Abebe Selassie, the director of the African department at the IMF, gave the advice on Friday while presenting the findings of the Regional Economic Outlook for Sub-Saharan Africa report at the IMF and World Bank spring meetings in Washington, DC, the United States.

Selassie was responding to questions on the federal government’s reforms and Nigeria’s debt profile, which currently sits at N142.3 trillion as at September 2024.

Speaking to journalists, the director said the fund has been very impressed by the reforms Nigeria has undertaken to address microeconomic imbalances in the country.

The director said the subsidy was taking “a very large” share of the limited tax revenues, which was not effectively used to help the most vulnerable people.

“So it’s been really good to see the government taking these head on, and also beginning to roll out the third component of the reforms that we’ve been advocating for, [that] government has been pursuing, which is to expand social protection to target generalised subsidies to help the most vulnerable,” he said.

“This has all been very good to see, but more can be done, particularly on the latter front: expanding social protection and also enhancing a lot more transparency in the oil sector, so that the removal of subsidies does translate into flow of revenue into government budget.

“So, there’s still a bit more work to do in these areas.”

Selassie disclosed that the IMF had a mission in Nigeria, where discussions with the authorities focused on issues related to the nation’s macroeconomic conditions.

Still, the director advised the federal government to consider reforms in other areas to engender more private sector investment, and also how more resources can be “adopted” to help Nigeria generate the revenues needed to build more schools, universities, and infrastructure.

“So there’s a comprehensive set of reforms that Nigeria can pursue that would help engender more growth and help diversify the economy away from reliance on oil,”

“And this diversification is all the more important given what we’re seeing happening to commodity prices.”

Selassie acknowledged that while the government is undertaking reforms, there will be a financing need.

He urged the authorities to adopt “a judicious and agile” way of dealing with the financing challenges the country faces.

The IMF official said Nigeria’s financing gap “can only be filled” by permanent sources such as revenue mobilisation in the long run.

“But in the interim, carefully looking at all of the options the country has to borrow in a contained way, will be part of that solution,” he said.

“And I think the government has been going about this prudently and cautiously so far, and we’re encouraged by that.”

In January, the Debt Management Office(DMO) said the total domestic debt was N73.4 trillion ($45.8 billion) while the total external debt was N68.8 trillion ($43 billion).

The debt body said the increase was primarily due to rising domestic borrowing and the impact of exchange rate depreciation on external debt when converted to naira terms.

The Federal Government is set to launch the National Agribusiness Policy Mechanism (NAPM) to strengthen agricultural productivity, stabilise food prices, and drive economic growth.

The NAPM is part of broader initiatives aimed at transforming the country’s agricultural sector through data-driven policies and public-private partnerships.

Speaking on Friday in Abuja during a meeting of the Presidential Food Systems Coordinating Unit (PFSCU) Steering Committee at the Presidential Villa, Abuja, Vice President Kashim Shettima said the initiative will align agricultural efforts across all government tiers through real-time data analytics.

“The Green Imperative Project (GIP) is an idea whose time has come. It has been in the incubation period for several years, and now it is coming to fruition; we have to get it right.

“We have had many interventions in this country in the past. We must make this work, and it’s the states that will drive the process,” the Vice President said.

Signed between Nigeria and Brazil on March 17, 2025, the Green Imperative Project (GIP) is a $1.1 billion initiative aimed to modernise 774 mid-sized Nigerian farms with Brazilian agricultural technologies, creating jobs and boosting productivity across the nation.

VP Shettima further said President Bola Tinubu has approved ₦15 billion for the National Emergency Management Agency (NEMA) to prepare for floods as the rainy season kicks in.

“This is one of the first proactive decisions by the government to prepare for the flooding season,” the Vice President noted.

Earlier, the Technical Assistant to the President on Agriculture and Executive Secretary of PFSCU, Marion Moon, explained that NAPM aims to address challenges of high food inflation and agricultural yields that lag 60 per cent behind global averages.

She revealed that the pilot survey for NAPM has been completed across 13 states, with a full launch planned for June 2025.

The NAPM, supported by data analytics partnerships and a digital platform under development, is designed to tackle food inflation, inefficient subsidies, and outdated farming practices, to give the country a unified framework to optimise public spending and drive sustainable rural development.

Those present at the meeting included Governors of Jigawa State, Umar Namadi, and Ekiti State, Biodun Oyebanji; Deputy Governors of Borno State, Umar Kadafur, and Ebonyi State, Patricia Onyemaechi Obila.

Others are Minister of Agriculture and Food Security, Senator Abubakar Kyari; Minister of State for Agriculture and Food Security, Aliyu Abdullahi; Permanent Secretary of the Federal Ministry of Finance; heads of agriculture and manufacturing private sector players, and international development partners.

The Chief Executive Officer of the Financial Derivatives Company, Bismarck Rewane, has emphasised the need for Nigeria to adopt a pragmatic and balanced approach to managing its fragile economy.

Speaking on Channels Television’s Business Morning, the financial expert cautioned against drastic expenditure cuts, highlighting the importance of security, investment, and inflation control.

His remarks follow a report by the International Monetary Fund (IMF), which suggests Nigeria’s economic outlook is marked by significant uncertainty.

When asked about cutting government spending, Rewane drew a vivid analogy, stating that cutting expenditure is not the same as optimising it.

“The IMF is advising that we optimise expenditure, as there are numerous leakages at both state and federal levels, which act as a negative investment multiplier,” he explained. “But to ask us to cut our expenditure at a time when we need to invest more is like asking a man with an ulcer to go on a fasting mission.”

However, he warned that exemption from spending cuts does not mean free spending for the government at both state and federal levels. “We must optimise expenditure, not spend like drunken sailors,” he said.

Rewane acknowledged the necessity of President Bola Tinubu’s reforms, such as the removal of fuel subsidies and currency realignment, but stressed that these measures alone are inadequate for achieving economic stability.

“We must stop looking backwards,” he said. “What was appropriate in 2023 may not suffice for 2025.”

He also highlighted the challenges posed by insecurity in oil-producing regions, which continue to hinder Nigeria’s economic recovery. Without resolving these issues, oil production—a key revenue source—will remain underwhelming.

Inflation and Fiscal Challenges
Commenting on inflation, Rewane expressed cautious optimism, predicting a modest rise to 25–27%, contrary to the IMF’s projection of 30% in 2025 and 37% in 2026.

He pointed out that continued liquidity in the system may force the Central Bank of Nigeria to maintain or increase interest rates to manage inflation expectations.

Rewane criticised the Debt Management Office (DMO) for reducing bond issuance from ₦1.8 trillion in the first quarter of the year to ₦1.2 trillion in the second quarter, calling it a step in the wrong direction.

“Increased bond issuance is key to mopping up liquidity and controlling inflation. This is one of the painful choices we make to control inflation,” he noted.

He also raised concerns about Nigeria’s undervalued crude oil exports, stating, “We sell for 70 cents, while our neighbours get $1.20. How long can this go on?”

While praising the Dangote Refinery for reducing local fuel prices, he warned that plans by the Organisation of Petroleum Exporting Countries (OPEC) to increase output could further depress oil prices.

On the global front, Rewane addressed US President Trump’s signal to reduce tariffs on China, noting that while it could ease pressure, uncertainty would persist.

He predicted greater stability between May and June, adding that any recession as projected by the IMF would likely be mild and not deep.

“I don’t believe the world can live with unexpected gyrations. Yes, a recession may come, but it will be mild, not deep,” he said.

Rewane concluded by stressing the need to fill Nigeria’s fiscal gap through borrowing, reducing leakages, and fiscal consolidation.

“These are serious times, and we must respond with serious adjustments,” he said.