By Our Correspondent

Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Thursday said Nigeria’s Inflation Rate is likely to drop below 10 percent (10%) in year 2013.

This is coming on the heels of the conclusion Executive Board of the IMF of 2012 Article IV consultation with Nigeria.

According to the Executive Board of the IMF, in 2013, growth is expected to recover to above 7.0%. “Inflation is projected to decline below 10 percent, supported by the tight monetary policy stance and ongoing fiscal consolidation” the IMF said.

However, the IMF said Annual inflation increased from 10.3% (end-of-period) in 2011 to 12.3% in 2012, owing mainly to the adjustment of administrative prices of fuel and electricity; large increases in import tariffs on rice and wheat; and the impact of floods in Q3.

The Executive Board of the IMF in their Report said Nigeria’s external position has strengthened and international reserves rose from US$32.6 billion at end-2011 to US$44 billion at end-2012 (5½ months of prospective imports), driven by sustained high oil prices, stricter administration of the gasoline subsidy regime, and strong portfolio inflows.

Similarly, the IMF said Macroeconomic performance has been broadly positive over the past year and Real Gross Domestic Product (GDP) growth is projected to have decelerated slightly to 6.3%, reflecting the effects of the nationwide strike in early 2012, floods in the fourth quarter of 2012, and continued security problems in the North of the Country.

The IMF Board affirmed that the key downside risks are a large drop in world oil prices; and slow progress in building consensus around key fiscal reforms.

On fiscal policy stance, the IMF said that of Nigeria was tightened in 2012; while fiscal buffers are being rebuilt. “The non-oil primary deficit of the consolidated government is estimated to have narrowed from about 36% of non-oil GDP in 2011 to 30.5% in 2012, mainly due to expenditure restraint” the IMF said.

The IMF further affirmed that Monetary Policy remained tight in 2012 in response to inflationary pressures; as the Nigeria’s Central Bank kept its policy rate unchanged during the year; but raised the Cash Reserve Requirement  (CRR) for Banks from 8.0% to 12% and lowered allowable open foreign exchange position for Banks. “Financial soundness indicators point to continued improvements in the health of the banking system” the IMF said.

On the Executive Board Assessment, the IMF Directors supported the Nigerian Authorities strategy of consolidating the fiscal position while opening up policy space for needed investment in infrastructure and human capital.

They also encouraged the Authorities to reduce poorly-targeted fuel subsidies, adopt a rule to set the reference oil price in the budget, and fully operationalise the Sovereign Wealth Fund as soon as possible.

The Directors welcomed the reforms that is underway in the Energy Sector, while looking forward to an early passage of the Petroleum Industry Bill which would boost Investment, Government Revenue, and Fiscal Transparency.

Apart from these, the Nigerian Authorities were advised to promote market-based access to credit for Small- and Medium-Sized Enterprises (SMEs).

The IMF Directors commended the Nigerian Authorities success in restoring financial stability after the 2009 banking crisis.

Following this, they recommended winding down the operations of the Asset Management Company of Nigeria (AMCON) to curb moral hazard and fiscal risks.