The International Monetary Fund has said that it has become imperative for Nigeria to look away from import substitution, as a tool to boost effective participation in the African Continental Free Trade Agreement (AfCFTA).
Economists, speaking during the press conference on IMF/NIGERIA 2021 article iv consultation staff report emphasized the need for bold reforms in the trade regime as well as investments, to promote diversification to harness the gains from the AfCFTA.
Rahman Jasmin, IMF mission chief for Nigeria, noted that while it is important for countries to reduce foreign dependence on imported goods and boost local production, shutting Nigeria’s borders to neighboring countries may become more detrimental to its economic growth.
“Nigeria must shift away from import substitution if it must reap the benefits of AfCFTA, no country can produce all it needs.
“It is time for governments to begin to look at imports the right way. There is a need for deep trade agreement between countries as this is critical to the nation’s growth and economic transformation, she said.
According to the report, Nigeria’s ratification of the AfCFTA could yield a positive boost to the non-oil sector while oil production could rebound, supported by the more generous terms of the Petroleum Industry Act.
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Commenting on the issues around fuel subsidy in Nigeria, Jasmin stressed on the need for a strong political will to ensure outright removal of subsidy, adding that Nigeria has continued to spend huge amounts of its resources on subsidy, leaving other aspects of the economy behind.
Maintaining subsidy regimes are costly and regressive, in 2021 1.9 trillion was spent on fuel subsidies which is more than what is spent on healthcare and this benefits only the high class, it does not make sense.
“The removal is on economic grounds and it will have an effect on the economy. The removal will target the poor and vulnerable.
“The government has been working with the World Bank on targeted social assistance to tackle the immediate impact on Nigerians, we hope that the program takes place. We understand that the subsidy removal has been postponed for 18 months, but it is an important step to take and it requires a strong political will and transparency in the use of resources,” she said.
The report also stated that low vaccination rates which expose the country to future pandemic waves and new variants, higher debt service to government revenues as well as increasing cases of violence and insecurity still remains a challenge to the nation’s economic recovery.
“On the upside, the non-oil sector could be stronger, benefitting from its recent growth momentum, supportive credit policies, and higher production from the new Dangote refinery.”
In his remark, Thomas Alun, IMF senior economist stressed on the need for fiscal consolidation to create policy space and reduce debt sustainability risks while improving domestic revenue mobilization through taxes.
