Marrakech, Morocco – The International Monetary Fund (IMF) has called on the Nigerian government to intensify its efforts in collecting more taxes to support the national budget and address the mounting public debt. This recommendation comes in the wake of Nigeria’s recent policy changes, including the removal of fuel subsidies and the unification of the foreign exchange market.
Speaking at a press briefing during the ongoing World Bank Group/IMF Meeting in Marrakech, IMF Africa Department Director, Abebe Selassie, emphasized the necessity of complementary policies to ease Nigeria’s economic challenges resulting from these recent changes.
Selassie stated, “The exchange rate reforms that the government did were very, very welcome, trying to unify the rate, similarly the fuel subsidy. But that will not help and will not stick unless you also are tightening monetary policy; unless you’re also doing something to mobilize more tax revenues. So, a holistic package of reforms is what’s needed.”
Nigeria’s removal of fuel subsidies led to a significant increase in petrol prices, causing hardships for its citizens. Additionally, efforts to unify official and parallel market rates have contributed to rising prices of goods and services. Despite initial savings from the fuel subsidy removal, over 90% of government revenue continues to be allocated to debt servicing, limiting funds for economic growth and development projects.
The IMF underscored that Nigeria’s historic overreliance on oil revenue, combined with the inefficiencies of the subsidy regime, has hindered tax revenue collection and fueled inflation. Abebe Selassie expressed hope for the government’s new leadership at the Central Bank of Nigeria and the Ministry of Finance but emphasized the importance of time to address these challenges effectively.
Regarding Nigeria’s mounting debt, the IMF director clarified that there have been no discussions concerning debt cancellation or forgiveness, highlighting the urgent need for generating additional revenue to service the debt.
Foreign Exchange Ban Lifted, IMF Encourages Domestic Funding
The IMF has supported the Central Bank of Nigeria’s decision to remove the eight-year foreign exchange ban on 43 items. IMF Director Selassie stated that restrictions on trade in modern economies tend to create distortions and noted that the CBN’s move is a positive one.
Furthermore, the IMF has advised Nigeria and other sub-Saharan African nations to explore domestic funding sources due to the growing scarcity and costliness of foreign loans. The IMF’s regional outlook report highlights the challenges African countries face in sustaining per capita spending on key priorities like health, education, and infrastructure.
The report underscores the importance of domestic resource mobilization and the need for expanding the pool of private savings. It emphasizes that strengthening policy frameworks and reducing reliance on external revenue are essential for sustainable development.
Chinese Loans Declining: African Nations Urged to Adapt
The IMF has cautioned Nigeria and other sub-Saharan African countries about their relations with China. The report, titled ‘At crossroads: Sub-Saharan Africa relations with China,’ notes that China has started to reduce its involvement on the continent.
The IMF advises African nations to adapt to China’s changing economic engagements. It suggests fostering economic diversification and reducing dependence on Chinese demand, particularly for oil-exporting countries. Furthermore, the report recommends seizing opportunities in renewable energy development and adopting best practices in mining laws to optimize economic benefits.
In conclusion, the IMF’s recommendations highlight the importance of holistic reforms, domestic revenue mobilization, and adaptation to changing global economic dynamics to promote sustainable growth and development in Nigeria and across sub-Saharan Africa.