IMF’s Division Chief of Research Department, Daniel Leigh,
disclosed this at the Fund’s World Economic Outlook (WEO) update press
conference on Tuesday.
Nigeria’s inflation rate stood at 28.92 percent as of
December 2023, and has been on the rise for 11 consecutive months.
Reacting to the foreign exchange reforms introduced by the
Central Bank of Nigeria (CBN) to curb inflation and the free fall of the naira,
Leigh said the monetary tightening stance of the apex bank would help reduce
inflation rate.
Leigh said one of the drivers of inflation is the weak naira
following reforms by the financial regulator.
He stated: “Now there’s also structural factors behind that
high inflation, including, you know, on the fiscal side, financing of the
deficit. But this is clearly creating hardship. The perspective that we have is
bringing down inflation is top priority.
“And the CBN has already raised interest rates significantly
over the past year to 18.8 percent. So that is the monetary tightening that is
helping in our forecast to bring inflation down from 24.6 percent in 2023
percent, to 23 percent this year, and then closer to single digits into 2025 at
15.5 percent.”
According to Leigh, while the monetary tightening to conquer
inflation is ongoing, Nigeria should prioritise revenue mobilisation, and widen
its tax base to provide social support.
“On top of conquering inflation through monetary tightening,
there’s also a need to provide social support through the budget and creating
the space for that is the challenge.
“Our perspective is that more revenue mobilisation,
strengthening revenue administration, widening the tax base, this is what is
going to bring in space for development spending while safeguarding fiscal
sustainability,” Leigh added.
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