IMF Urges Fed Govt to Expand Cash Transfers to Poor Nigerians

The International Monetary Fund (IMF) has urged the Nigerian government to increase its cash transfers to aid impoverished citizens in coping with the current cost of living crisis. Axel Schimmelpfennig, IMF’s Assistant Director for the African Department and Mission Chief to Nigeria, emphasized this during the briefing on Nigeria’s Article IV Consultation held on Thursday.

Schimmelpfennig highlighted the significance of expanding the cash transfer program, potentially benefiting up to 50 million recipients and approximately 65 million Nigerians in need. He also acknowledged the challenges faced by Nigerians amidst rising inflation and ongoing reforms, stressing the importance of providing support while revitalizing economic growth and job creation.

Furthermore, the IMF expressed support for the Central Bank’s efforts to combat inflation, particularly due to its disproportionate impact on the poor. However, the IMF noted limitations in Nigeria’s fiscal policy attributed to low government revenue, which stands at approximately 9.4% of the country’s Gross Domestic Product (GDP), as outlined in its latest staff report.

The report read: “Fiscal policy needs to support vulnerable households, create space to boost social and development spending, and maintain debt sustainability. Fiscal policy is held back by one of the lowest revenue takes in the world of 9.4 percent of GDP in 2023.

“As the government finalizes and presents its reform agenda, sequencing will be key to ensure safety nets are in place or strengthened before proceeding with other measures that could adversely impact poor and vulnerable households.”

The report further stressed the need for the Federal Government to reprioritise expenditures to ensure social protection.

It read: “Expenditure reprioritization is needed to create space for social protection and other priority spending. The authorities have recently approved an enhanced social transfer mechanism developed with World Bank support, and some initial payments have been made.

“In response to governance concerns, the authorities automated and digitalized the system to build a robust mechanism that delivers swift and targeted support to vulnerable households—some 15 million households or 60 million Nigerians potentially benefit from the scheme. Once the safety net has been scaled up and inflation subsides, the government should tackle implicit fuel and electricity subsidies.”

What you should know

▪︎The World Bank recently said that cash transfers can help save Nigerians from intergenerational poverty traps as inflation and low economic growth adversely affect the poor.

▪︎However, new research by the World Bank revealed that the conditional cash transfer program of the Federal Government since 2016 has little effect on household consumption, financial inclusion or employment of beneficiaries, especially women.

▪︎The Federal Government had to suspend the cash transfer programme for further investigation and revamping following alleged misappropriations within the programme.

▪︎Betta Edu was earlier suspended as a humanitarian affairs minister due to the misappropriation of N585 million earmarked for palliative distribution.

▪︎Also, Edu’s predecessor, Sadiya Umar-Farouq, is being investigated by the EFCC. The ex-minister is being probed over an alleged laundering of N37.1 billion during her tenure as a minister.

▪︎The Federal Government recently said that it has revamped its cash transfer program to combat fraud, with immediate implementation of direct payments.