Lagos- The International Monetary Fund (IMF) has urged the Nigerian government to scrap the fuel subsidy scheme in order to stimulate fiscal adjustment and enhance economic growth.
Scott Rogers, IMF's senior resident representative in Nigeria, made the recommendation at a press briefing to present the highlights of the Staff Report on the 2012 Article IV Consultation, which IMF will soon publish.
IMF warned that continuous fall in the price of oil in the international market could wipe out the savings in the country's Excess Crude Account (ECA) within a year.
"Macroeconomic performance and policies in 2012 were broadly positive.
Fiscal targets for 2013 and medium term are consistent with macroeconomic stability but additional measures are needed.
"Planned savings in recurrent spending will require public sector reforms and elimination of subsidy would help fiscal adjustment," said Rogers.
The IMF report recommended the need to mobilise non-oil revenues and strengthen oil price rule and oil savings mechanism.
Rogers said that government must embark on urgent structural reforms to enhance productivity and global competitiveness.
"Power reform is a quick win for growth and competitiveness. Petroleum Industry Bill will transform oil and gas sector to increase investment.
Trade protection for infant industries should be strictly time-bound and focus on measures to improve competitiveness.
"Export diversification is key to long-term growth and improved macroeconomic statistics, especially in national income accounts," he said.
However, he painted a bright future for the country when he predicted that
Nigeria’s external reserve will swell to $80 billion in four years.
Strong growth would continue in non-oil sectors and tighter fiscal / monetary policy would help ease inflationary pressures, added Rogers.
- CAJ News