buhari cbn imf budget
President Buhari discusses with Central Bank of Nigeria Governor Godwin Emefiele during the 4th Presidential Task Force meeting of ECOWAS on common currency for member states (file photo: State House)

The International Monetary Fund (IMF) has claimed that the Nigerian government may put the Central Bank of Nigeria (CBN) in trouble.

This statement came from the IMF Senior Resident Representative and Mission Chief for Nigeria Amine Mati.

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Mati said this at the end of IMF team’s visit to Lagos and Abuja between September 25 and October and in a reaction to the 2020 budget proposal by President Muhammadu Buhari on Tuesday.

He said, “Over-optimistic revenue projections – leading to higher financing needs than initially envisaged – resulted to overreliance on expensive borrowing from the CBN to finance the fiscal deficit.

“The current account’s shift to a deficit is expected to persist while the pace of capital outflows continues to weigh on international reserves.

“Inflation will likely pick up in 2020 following rising minimum wages and a higher VAT rate, despite a tight monetary policy.”

According to him, “The outlook under current policies remains challenging. Growth is expected to pick up to 2.3 percent this year on the strength of a continuing recovery in the oil sector and the regaining of momentum in agriculture following a good harvest.”

Furthermore, he stated that “A comprehensive package of measures—whose design and implementation will require close coordination within the economic team and the newly-appointed Economic Advisory Council—is urgently needed to reduce vulnerabilities and raise growth.

“The increasing CBN financing of the government reinforces the need for an ambitious revenue-based fiscal consolidation that should build on the initiatives laid out in the Strategic Revenue Growth Initiative.

“A tight monetary policy should be maintained through more conventional tools.”

Budget of Consolidation

Buhari on Tuesday presented a budget of N10.33trillion for the 2020 fiscal year to a joint session of the National Assembly.

The president said it was a budget of Fiscal Consolidation to strengthen Nigeria’s macroeconomic environment; investing in critical infrastructure, human capital development and enabling institutions, especially in key job-creating sectors.

President Buhari said the 2020 budget was based on the new VAT rate, adding that the increased revenues will be used to fund education, health, and infrastructure.

The increase in the budget also reflects the new national minimum wage.