The International Monetary Fund has revealed that Nigeria does not generate enough revenue to meet its needs for development.
The Punch reported that the IMF claimed that the country’s 9% revenue to GDP ratio is extremely low and insufficient to fund development expenditures, social safety nets, and the protection of its most vulnerable households.
This was disclosed during a press briefing on Thursday by the Director of the IMF’s Communications Department, Julie Kozak.
Answering a question about Nigeria during the briefing, she stated, “We noted in our Article IV Consultation, which was held in February 2023, that increasing revenue from the extremely low revenue to GDP ratio of 9% is essential to create fiscal space for social and development spending.”
“Spending on development and strong social safety nets to protect vulnerable households and meet Nigeria’s development needs is just not feasible with 9% of GDP, which is a very low revenue to GDP ratio.”
She did point out, though, that Nigeria intends to prioritise priority spending in both the social and development sectors in its 2024 budget.
“The goal of the 2024 budget is to decrease the fiscal deficit and make room for these priority expenditures, both in the social and development sectors,” she said.
Nigeria’s Federal Government recently took steps to increase its revenue to GDP ratio because the country’s low revenue has become a cause for concern.
The minister of budget and economic planning, Abubakar Bagudu, stated during the 2024 budget presentation that revenue generation is still Nigeria’s main fiscal constraint. To improve revenue generation, the government is reviewing its current fiscal and tax policies.
Within the current term of this Administration, the goal is to raise the revenue to GDP ratio from less than 10 percent to 18 percent. Nonetheless, the goal will be to increase the effectiveness of tax administration and collection.
During the October World Bank/IMF Annual Meetings in Marrakesh, Morocco, the Assistant Director of the IMF’s Fiscal Affairs Department, Era Dabla-Norris, stated that Nigeria’s GDP-to-revenue ratio is relatively low in comparison to other developing and emerging markets.
The minister of budget and economic planning, Abubakar Bagudu, stated during the 2024 budget presentation that revenue generation is still Nigeria’s main fiscal constraint. To improve revenue generation, the government is reviewing its current fiscal and tax policies.
At the press conference, Kozak, the director of the IMF’s communications department, added more remarks about Nigeria, pointing out that the country’s inflation rate is extremely high and surpassed 27 percent in October.
At the next MPC meeting, she said that the IMF anticipates that the CBN will raise rates even further.
“Under its new leadership, the Central bank has started to withdraw excess liquidity that was in the system and contributing to high inflation. The policy interest rate should be raised even further at the following meeting of the Monetary Policy Committee. Thus, the central bank is attempting to address the issue of excessive inflation,” she declared.
Nevertheless, given its governor’s views on interest rates, it is unclear if the CBN will raise its rates.
“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,” stated Olayemi Cardoso at the Chartered Institute of Bankers of Nigeria’s annual dinner, which was recently held in Lagos.
With Cardoso saying, “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 h…
