IMF insisted, Nigeria not generating enough revenue to support its developmental needs

NIGERIA, Dec. 11 – The International Monetary Fund (IMF) has revealed that Nigeria is not getting the required revenue to help the developmental needs of the citizens.

Following the statement by the IMF, the country’s 9% revenue to Gross Domestic Product (GDP) ratio is very low and not sufficient to help the country’s social safety needs, development spending, and protect the vulnerable households.

This was made known in a press briefing on Thursday by the  Director of IMF’s Communications Department, Julie Kozak. 

In her response to a question on Nigeria at the briefing, she said, “As we mentioned in our Article IV Consultation, which was held in February of 2023, raising revenue from the very current low revenue to GDP ratio of nine per cent is essential to create fiscal space for social and development spending.

“Nine per cent of GDP is a very low revenue to GDP ratio, and it is really not high enough to be able to support strong social safety nets, and development spending, to help protect vulnerable households and also to meet Nigeria’s development needs.”

Kozak, however, stressed that the country’s 2024 budget hopes to prioritize important spending, both on the social and development side.

She stated, “The 2024 budget aims to reduce the fiscal deficit while also creating space for these priority spending, both on the social side and also on the development side.”

Recently, low revenue has become a source of worry to the government, with the Federal Government making efforts to improve its revenue-to-GDP ratio.

Biztv24 Recall that at the recent budget presentation for 2024 fiscal year , the Minister of Budget and Economic Planning, Abubakar Bagudu, said, “Revenue generation remains the major fiscal constraint to Nigeria’s fiscal viability. However, government is reviewing current tax and fiscal policies with a view to improving revenue generation.

“The target is to increase the ratio of revenue to GDP from less than 10 percent currently to 18 percent within the current term of this Administration. Efforts will however focus on improving tax administration and collection efficiency.”

It is important to note that at the World Bank/IMF Annual Meetings in Marrakesh, Morocco, in October, the Assistant Director, Fiscal Affairs Department, IMF, Era Dabla-Norris, stated that Nigeria’s revenue-to-GDP ratio is quite low relative to other emerging markets and developing countries.

Kozak, Director of the IMF’s Communications Department in that same press briefing on Nigeria’s economy, noted that inflation in the country is very high, crossing the 27 % mark in October.

She declared that the IMF expects the CBN to hike rates further at its next MPC meeting.

She stated, “The Central bank, under its new leadership, has started to withdraw excess liquidity that was in the system and contributing to high inflation. The next Monetary Policy Committee meeting should further raise policy interest rate. So, the Central bank is taking action to try to address the high inflation problem.”

Nonetheless, it is yet to be seen whether the CBN will follow the recommendations of the IMF and hike its rates at the next MPC meeting considering its governor’s stance on interest rates.

The Nigerian CBN governor, Olayemi Cardoso at the Chartered Institute of Bankers of Nigeria’s annual dinner held recently in Lagos said, “Our monetary policies will aim to achieve price stability, foster sustainable economic growth, stabilize the exchange rate of the naira, and reduce interest rates to facilitate borrowing and investments in the real sector.”

It is likely that the next MPC meeting will be in 2024, with Cardoso, stating that, “For the avoidance of doubt, the Central Bank of Nigeria Act 2007 requires that the meeting of the Monetary Policy Committee of the Bank be held at least four times a year, and the Bank has satisfied this requirement for 2023. Our focus has been on ensuring these meetings are useful and effective.”

According to to a recent outlook, global rating agency, Moody declared that high inflation in Nigeria is raising the risk of social unrest.

It said, “Increasingly high inflation generates spending pressure on the government and raises social risks, while the extent of fiscal relief from the removal of the oil subsidy remains unclear at this stage.”

The Nigeria’s economy which has been battling to stand out from the impacts of different factors bedeviling it, has in recent past consistently fall to shocks from factors like, government policies, security challenges, saboteurs, corruptions and insincerity on the parts of those in authority.