Poverty: Nigeria Needs Social Safety Net, Protect Most Vulnerable—IMF

• Boost Cash Transfer System

BY BONNY AMADI

The International Monetary Fund (IMF) says Nigeria must scale up its cash transfer system to cushion the effects of economic shocks and tackle high poverty levels.

The recommendation was contained in an article published on Monday, written by Axel Schimmelpfennig, the IMF’s mission chief to Nigeria, and Christian Ebeke, the fund’s resident representative in Nigeria.

The IMF, in the report, acknowledged that although recent progress by the government is encouraging, major challenges persist with inflation still above 20 percent, while weak infrastructure, particularly unreliable electricity continues to hinder economic activity.

The fund said Nigeria lacks an effective social safety net to protect its most vulnerable citizens from economic shocks.

The IMF added that Nigeria remains exposed to global headwinds, including volatile oil prices, elevated borrowing costs, and economic uncertainty, with crude oil still accounting for 30 percent of government revenue.

To strengthen the economy and reduce poverty, the IMF called for stronger and sustained growth to lift millions out of poverty and food insecurity.

The IMF noted that while the federal government’s economic reforms are beginning to show results, poverty, food insecurity remain high, and global uncertainties present additional challenges.

“Upon taking office in 2023, the new government faced low growth and rising poverty. Between 2014 and 2023, real per capita GDP declined on average by 0.7 percent annually. In 2023, the poverty rate stood at 42 percent,” the fund said.

“This difficult situation was compounded by limited access to dollars, which meant that people had to turn to the parallel currency market and thereby pay a much higher price than the official rate.

“In the meantime, public finances were strained by an opaque fuel subsidy system, which also caused recurrent petrol scarcity. And central bank financing of the fiscal deficit pushed up inflation.

“In response to these challenges, Nigerian policymakers have embarked on a series of bold reforms over the last two years. In 2023, the new government and the Central Bank of Nigeria liberalized the foreign exchange market, stopped central bank financing of the fiscal deficit, and reformed fuel subsidies.

“Since these reforms were implemented, international reserves have increased, and anyone can now access foreign exchange in the official market.