The International Monetary Fund (IMF) has advised the Federal Government on how it can raise more revenues to ensure a more sustainable fiscal position.
This is as the Bretton wood organization has said that Nigeria has one of the lowest revenue levels as a share of GDP globally.
This disclosure is contained in IMF’s latest economic assessment of Nigeria, Africa’s largest economy, in which it recommended exchange rate reforms and improved efforts to increase government revenues.
The IMF in its assessment observed that a large share of government revenues is spent on the country’s public debt service payments, leaving insufficient fiscal space for critical social and infrastructure spending and to cushion an economic downturn.
The international multilateral organization pointed out that mobilizing revenues through efficiency-enhancing and progressive measures is a top near-term priority. It said that the country has to revisit tax exemptions and customs duty waivers, increase and broaden the base for excise taxes, develop a high-integrity taxpayer register, enhance digital infrastructure, and improve on on-time filing and payment.
It noted that once the economic recovery takes root, Nigeria will need to increase the value-added tax (VAT) rate to at least 10% by 2022 and 15% by 2025, which is the average in countries belonging to the Economic Community of West African States. This is to help create an effective fiscal space.
What you should know
- The outbreak of the Covid-19 pandemic has had a devastating impact on Nigeria’s revenue and economy, placing the country at a critical juncture. The country entered the crisis with falling per capita income, high inflation, and governance challenges.
- IMF said that Nigeria’s recovery is expected to be weak and gradual under current policies. Real GDP growth in 2021 is expected to turn positive at 1.5% and is expected to recover to its pre-pandemic level only in 2022.
- However, it stated that the near-term outlook is subject to downside risks from pandemic-related developments with Nigeria experiencing a second wave. It also said that non-oil growth is also expected to remain sluggish, reflecting inward-looking policies and regulatory uncertainties