Economy
IMF calls for spending reform by governments
The International Monetary Fund has said that member countries must embark on government spending reforms stating that in many countries, public finances remain on edge as economies struggle to return to pre-crisis levels of economic growth. At the ongoing Spring Meeting it highlighted the need for governments to embark on growth-supporting fiscal reforms that will bring social economic benefits to their citizenry.
It said that ensuring the sustainability of public finances requires difficult choices on both the taxation and spending sides of the budget. “While tax reform can help boost potential growth through the removal of distortions, spending reforms help strengthen public service delivery. Coupled with the projected increase in age-related expenditures resulting from an aging population, pressures on government spending in the future will only increase”.
According to IMF “The Fiscal Monitor sets out the main elements needed for meaningful spending reform: ensuring the sustainability of social spending and public sector wages noting that health care systems in many countries have room to improve efficiency without drastically cutting services. It said that for public pension systems, raising the retirement age and adjusting contributions and benefits are the key options. It further said that containing the growth of the public sector wage bill in a lasting way would require replacing the across-the-board wage and hiring freezes with deeper, efficiency-enhancing structural reforms supported by social dialogue.
It said that fiscal reforms by governments require achieving efficiency gains while aiming to reduce inequality and that large gains can be made in some countries by improving the efficiency of spending on education. In other countries, particularly emerging markets and low-income countries, improving the efficiency of public investment processes could make it easier to meet infrastructure needs.
It suggested the Establishment of institutions that promote spending control. Fiscal rules, such as those that define and limit spending, can impose binding commitments on the path of public spending. It said that decentralizing spending such that sub-national levels of government become more involved in delivery of services can help contain public sector growth and improve spending efficiency, provided it is well planned and implemented.
According to one of its report to members participating at the Spring Meeting, the IMF said it finds that recent policy moves have helped to broadly stabilize public debt ratios in most advanced economies, but debt in these countries remains at historic highs. The surge in public debt will take some time to unwind, and credible medium-term plans must be designed to both bring down debt ratios and at the same time enhance long-term growth prospects.
Across advanced economies, the pace of fiscal consolidation is set to slow in 2014 as focus shifts to how to best design fiscal policies supportive of both further consolidation and a still uneven recovery.
“In most countries, persistently high debt ratios continue to cast shadows over the medium term,” said Sanjeev Gupta, Acting Director of the IMF’s Fiscal Affairs Department. “Against this background, the top priority remains the design and implementation of credible medium-term consolidation plans to lower debt ratios to safer levels, while carefully balancing equity and efficiency goals.”
The IMF Fiscal Monitor is published twice a year to track public finance developments around the world. In 2013, a faster-than-expected pace of fiscal consolidation in several advanced economies helped stabilize the public debt ratio and reduce the average overall fiscal deficit among these economies to 5 per cent of GDP—almost half its peak in 2009.
Higher revenues, in part buoyed by growth, and lower spending helped both the United States and United Kingdom significantly narrow their 2013 budget deficits. In Japan, however, the deficit held steady at just under 8 percent of GDP, and the country is now stepping up its consolidation efforts. To dispel policy uncertainty and support a rebound in economic growth, formulating a longer-term, growth-friendly fiscal strategy remains a priority in Japan, as well as in the United States.
Although budget plans for 2015 have not yet been adopted, fiscal consolidation looks set to continue next year. As a result, debt-to-GDP ratios will start declining in about half of the highly indebted advanced economies by 2015—by end-2013 only a few had reached that point.
In emerging market economies, deficits remain significantly above pre-crisis levels, as most countries opted to postpone fiscal adjustment in 2014. In those emerging market economies closely integrated with international capital markets, the effects of normalizing global liquidity conditions is leading to increased borrowing costs and some financial volatility.
Even though the recent bouts of turbulence were not triggered by fiscal imbalances, less investor appetite for risk and tighter financing conditions may worsen the public debt situation in most of these countries. According to the Fiscal Monitor, well designed fiscal reform can boost investor confidence while at the same time strengthening safety nets and propping up domestic saving where it had been earlier eroded.
Fiscal deficits continued to widen in 2013 in many low-income countries as government spending persistently outpaced economic growth and revenue. Overall, debt ratios are projected to increase during the coming two years—although in most countries, at a moderate pace. Emerging evidence raises concerns on the efficiency of debt-financed spending; for example, it often does not seem to have been used to raise much needed public investment. According to the report, where fiscal adjustment is warranted in these countries, it should safeguard social safety nets and raise spending efficiency to address large remaining infrastructure gaps.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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