The International Monetary Fund (IMF) has asked Nigeria to be intentional in making changes to cut borrowing.
IMF made this call in its latest Fiscal Monitor titled ‘On the path to Policy Normalisation’ released Wednesday.
The global institution specifically called on the Nigerian government to raise its incomes from taxes, particularly through ensuring compliance and expanding the tax net in order to generate more revenues and cut burgeoning debt.
It would be recalled that the Debt Management Office (DMO) reported in March that the country’s debt stock as of December 2022, had reached N46.25 trillion.
Experts have also projected that by May 2023, the next administration will meet N77 trillion borrowing.
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IMF noted that Nigeria’s debt was projected to keep rising and that necessary steps must be taken to generate needed revenues.
“In general, what we are saying about Nigeria is the need for a medium-term plan to reduce debt vulnerabilities over time and is because Nigeria has very low tax revenues. So, that makes it more vulnerable to these types of shocks and tightening global conditions,” Division Chief, Fiscal Affairs Department, IMF, Paulo Medas said.
“What we advocate is raising taxes which is going to create space not only to manage debt but also to spend on other priorities. And the other part of what we say is that Nigeria has not benefited as much from the windfall of the oil prices in the past because a lot of it has been spent on these untargeted energy subsidies.
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“By shifting to more targeted subsidies, you can reduce the fiscal deficit, and you can use that resources on other priorities that actually can promote higher growth in the future such as education, and health, and reduce the deficit. So having more targeted energy subsidies actually can be very beneficial both for fiscal, debt dynamics, and growth.
“Nigeria should broaden the tax space, improving tax compliance so Nigeria has one of the lowest tax revenues in the world as a share of GDP. So, there’s a lot of room for increasing the tax base and improving tax compliance.”