The International Monetary Fund (IMF) has on Friday urged Nigeria and seven other oil-producing countries in Africa to implement politically difficult oil subsidy reforms, as the current drop in oil prices offers unique economic opportunity.
Speaking during a press conference in Washington DC, United States of America at the ongoing IMF/World Bank Spring Meetings, the IMF’s Director for African Development, Antoinette Sayeh disclosed that in the short run, dealing with oil shock should be the priority.
Removal of oil subsidy in Nigeria and other African countries has been a very sensitive and controversial issue.
The IMF said although the eight African oil exporting countries would be hard hit with generally limited fiscal and external pressure, they are expected to undertake significant fiscal adjustment, which will ultimately dent their growth outlook.
“Faced with a massive shock and with limited buffers, oil exporters will have no choice but to undertake fiscal adjustment. Spending cuts should be directed, to the extent, to non-priority recurrent spending, but significant cuts in public spending cuts in public investment are unavoidable.
“Where feasible, exchange rate flexibility will also be important, to preserve scarce external reserves. The drop in oil prices also provides a unique opportunity to advance politically difficult energy subsidy reforms across the region,” Sayeh said.