In its recent post-financing assessment report concerning Nigeria, the International Monetary Fund (IMF) has painted a grim picture of the nation’s economic future.
The IMF warns that Nigeria’s inflation rate could soar to an unprecedented 44% if the Central Bank of Nigeria (CBN) fails to tighten its monetary policy significantly.
This alarming inflation rate is projected under a scenario where the naira continues to face severe pressures, compounded by the potential impact of a climate shock hitting the country early in 2024.
The report outlines a concerning sequence of events where the combined effects of insufficient monetary tightening, persistent pressure on the naira, and adverse climate conditions could severely disrupt Nigeria’s economic stability.
The IMF forecasts a possible 35% depreciation of the naira in 2024, further exacerbating the inflationary pressures.
Despite these challenges, the IMF believes Nigeria will repay the Fund, assuming the prioritisation of external debt service continues.
However, the need to address urgent humanitarian concerns, including rising poverty and food insecurity, threatens this repayment capacity, which would necessitate significant trade-offs. The uncertainty surrounding Nigeria’s net international reserves and the potential for further exogenous shocks adds additional risk to the country’s economic stability and citizens’ well-being.
