IMF to Nigeria: Increase tax revenue for subsidy, monetary reforms to work

Abebe Selassie, the director, African department, International Monetary Fund (IMF), says Nigeria doesn’t generate enough tax revenues to fund its necessary projects.

Speaking at the ongoing IMF-World Bank annual meetings, at Marrakech, Morocco,
on Friday, Selassie said the debt pressure experienced by the country is driven by low revenue. 

With debt at N87 trillion and loan interest rates on the high side, Selassie said Nigeria is losing its revenue to debt servicing, limiting its ability to fund some of its services. 

“Why are there not enough tax revenues? I think in the past, over reliance on oil, it was when prices were high. Second, of course, also the subsidy regime, which also implies, entails, quite a lot of loss of, government resources being directed where they perhaps should not be,” he said. 

Selassie said the government is relying on domestic financing because of the difficulty of tapping international capital markets.

The domestic financing, according to Selassie, is crowding “out the private sector or of course caused the monetary injection, which again has weakened the exchange rate”. 

He lauded the reforms of President Bola Tinubu, saying that the attempt to unify the exchange rates and end the petrol subsidy was the right decision for the country. 

Selassie said: “What is needed, we feel, is making the reforms holistic and help reinforce each other. Just as things are not reinforced, were not reinforcing each other in the past, I think there is scope to make the reforms reinforce each other.”

He warned that the reforms will not yield positive results unless the country is tightening monetary policy and making an effort to mobilise more tax revenues. 

“So, a holistic package of reforms is what’s needed, and I think we have to give a bit of time to the new administration also, right? I mean, Central Bank Governor has just been appointed. Minister of Finance has only been in office a few weeks,” Selassie said. 

“So, we’re hopeful that they will move in the right direction, and we stand there to provide any policy advice the government needs.”

On debt restructuring, Selassie said he is not aware of any debt profile discussions with the Nigerian government.