The International Monetary Fund (IMF) has called on the federal government to implement a more efficient tax collection system to broaden its revenue base and address the country’s high debt service-to-revenue ratio.
The call was made by Davide Furceri, Division Chief of the IMF’s Fiscal Affairs Department, during the Fiscal Monitor press briefing at the IMF/World Bank Annual Meetings in Washington, D.C., on Wednesday.
Furceri said Nigeria’s current debt service-to-revenue ratio, which stands at around 60%, is still too high, limiting the resources available for critical investments in socio-economic development.
“There is need to grow the revenue/GDP ratio. For a country Like Nigeria, the Debt service /Revenue is about 60 percent. What that means is that a larger part of the revenue of the country goes into debt servicing,” Furceri said.
This means that a portion of the country’s revenue is being used to pay down debt, leaving little room for infrastructure and social programmes that could stimulate economic growth.
To address this issue, Furceri recommends that the Nigerian government focus on improving its revenue generation capabilities, saying, “What we recommend for countries like Nigeria- if they can improve their revenue mobilization, they will be able to reduce the portion of the revenue that goes into debt servicing.”
He noted that “it is important to broaden the tax base in order to have more revenue and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.”
Meanwhile, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated that Nigeria would continue to prioritise local resource mobilisation, even as the government is committed to achieving a 23 to 25 per cent revenue-to-output level.
Edun said that the government has asked manufacturers and businesses to invoice in naira instead of dollars as part of proactive measures to reduce the demand for dollars.
“We are asking people to invoice in naira rather than dollars, thereby reducing the demand for dollars. We have moved to free-market pricing in petrol, jet fuel, and kerosene, and this is the first time in 40 years that we are doing that,” he said.
The minister also dismissed the insinuation that the administration of President Bola Tinubu mimics the IMF and World Bank’s economic ideology, swallowing their advisories hook, line, and sinker. He insisted that he and his colleagues are fully responsible for the decisions the government has taken.
For instance, he noted, the IMF advised against the issuance of local dollar bonds, which were eventually oversubscribed.
He highlighted efforts to ensure a sustained rise in oil production, saying the government was on course to meet its two-million-barrel-per-day (bpd) target.
Essentially, he said the subsidy was removed on October 2, hence, “it is now that we will assess the gains of the subsidy removal, which will be a huge dividend to the people.”
Edun said the NNPCL had started the process of clearing the outstanding “payable.”
