Subsidy removal, naira devaluation… 5 things IMF boss, Lagarde, discussed with Buhari

Christine Lagarde, managing director of the International Monetary Fund (IMF), advised President Muhammadu Buhari and his team to be flexible with its monetary policy and let go of petroleum subsidies.

At a meeting in Abuja on Tuesday, Lagarde said Nigeria would not need any programme and/or loan from the IMF to enhance its economy.

Speaking at a press conference in Abuja, Lagarde, who said a lot had changed in the country within the last four years, called for discipline in Nigeria’s monetary scene.

“I was in Nigeria four years ago, and in four years, many things have changed; a massive democratic change has occurred in this country peacefully. Nigeria has become the largest economy in Africa, certainly the most populated and a very attractive market,” she said.

“Things have changed in a very complicated way. Oil has seen its price divided by more than half, and the financing costs are beginning to rise, interest rates would begin to rise, emerging markets are decelerating their growth.

“We had these excellent discussions this morning with President Buhari, and we discussed the challenges ahead, stemming from oil price reduction, the necessity to apply fiscal discipline, and the need to respond to the population needs, by addressing the medium term necessity of improving competitiveness of Nigeria, yet focusing on the short term fiscal situation.”

IMF TO AUDIT NIGERIA’S BUDGET

Lagarde revealed that the IMF team of economists would be in Nigeria next week to review Nigeria’s budget.

“It is not for me here and now to actually approve or comment on the budget, because we have procedures at the IMF under which a team of economists is going to come next week actually, to do what we call the article four, which is a review, audit and a discussion between countries; the IMF on the one hand, the country authorities on the other,” she said.

IMF SUPPORTS BUHARI’S ANTI-GRAFT WAR

IMF said the president’s decision to tackle corruption is very important to the agenda and reforms of the IMF.

“What I mentioned to Mr President this morning was that his determination to fight corruption and his determination to bring about transparency and accountability at all levels of the economy were very important agenda item,” she said.

“He himself is definitely committed too it, as he indicated this morning, and as he inspires among his team members.”

IMF SUPPORT FOR SUBSIDY REMOVAL

Consistent with its previous recommendations to the Nigerian government, the IMF says it supports reforms in the country, which include subsidy removal.

“A vibrant economy still has to deal with a lot of poor people with a lot of inequality and those two components should always be the driver of reforms, whether it is looking at subsidies and how they are structured and how they can be phased out,” Lagarde said.

“Whether it is monetary policy and where flexibility is needed, all of those are ambitions that we quickly recognise and support.

“For those of you who wonder why the IMF managing director is visiting Nigeria, well it is to have a good discussion about these new objectives, these reforms, Agenda, that have been identified and supported by the president and also to appreciate the impact that it would have on neighbouring countries.”

NOT ANOTHER “SAP” OR CONDITIONAL LOAN

One major reason why Nigerians are sceptical about the IMF is the Structural Adjustment Programme (SAP) in the Ibrahim Babangida years, which many believe was the start of Nigeria’s economic woes.

However, Lagarde any possible tension about a recurrence, saying she was not in the country for another programme or loan facility negotiation.

“I am not here nor is my team here to negotiate a loan with conditionalities. We are not into programme negotiation and frankly, at this point in time, given the determination and resilience displayed by the president and his team, I don’t see why an IMF programme would be needed.

“Discipline is going to be needed, of course implementation is going to be needed, of course implementation is going to be key, but the objectives and ambition would serve the country well, in order to be actually sustainable.”

FLEXIBILITY WITH THE NAIRA

Speaking on Nigeria’s current account, Lagarde said the country needs to shift grounds on its currency monetary policy, hinting at naira devaluation.

“The current account, we believe that with very clear primary ambition to support the poorer people of Nigeria, there could be added flexibility in the monetary policy, particularly if as we think, the price of oil is likely to be low for longer,” she said.

“The occurrences should not deplete the reserves of the country, simply because of being seemingly rigid. I’m not suggesting that rigidity be totally removed, but some form of flexibility would help.”

Lagarde will also be meeting with senate president Bukola Saraki, Yakubu Dogara of the house of representatives and select legislators, before heading to Cameroon.