The International Monetary Fund said Nigeria’s revenues are still not where they should be, noting that the country collects the least revenue at around 7-8% of GDP among all emerging economies.
Ari Aisen, IMF country representative in Nigeria, said this at the American Business Council’s economic update, where experts explored the opportunities and imperatives for businesses in the country. According to him, for a country like Nigeria which has an income to GDP ratio of less than 12%, it is very difficult to tackle such economic indicators and it is difficult to achieve improvement in social indicators with low income relative to GDP. report.
He therefore recommended that strengthening tax administration, increasing the supply of tax compliance through digitalization, broadening the tax base, are key to raising the rate to near-average levels. region, which are useful strategies to reduce smuggling that is seen across porous borders. .
Read: IMF expects Nigeria to spend 92% of its revenue on interest payments in 2022
What the IMF says
Aisen suggested that policy reforms that are more geared towards creating an enabling environment for the private sector are very important, such as better access to credit, better access to foreign exchange, more predictable and achievable horizon for stability. macroeconomic and with less volatility can contribute a lot with the benefits of the AfCFTA which results in different trade policies, more tariffs, less protectionist and betting on the ability of the private sector to take advantage of the huge economies of scale in Africa .
Speaking on the policy framework of the IMF and the Federal Government of Nigeria, Aisen pointed out that the two sides share the same view in some areas and also have different views in other areas. He said, “We share the objectives with the authorities in terms of road generation, job creation but in terms of instruments to achieve it, we do not have the same instrument that we would use to achieve them.”
On the point of difference, he said: “For example, the foreign exchange market, we see that the main agent of growth is the private sector and the accessibility of foreign currencies for importation by the private sector is fundamental in restricting access to foreign currencies in the face of shortage with the regime current exchange rate, we believe this constraint will likely discourage this.
Read: IMF urges Nigeria to abandon official exchange rate and fuel subsidies
What you should know
- According to the OECD report, the tax to GDP ratio in Nigeria decreased by 0.3 percentage point from 6.3% in 2018 to 6.0% in 2019.
- In comparison, the average of the 30 African countries has increased by 0.3 percentage points over the same period and was 16.6% in 2019. Since 2010, the average of the 30 African countries has increased by 1.8 points percentage, going from 14.8% in 2010 to 16.6%. in 2019. Over the same period, the tax-to-GDP ratio in Nigeria decreased by 1.3 percentage points, from 7.3% to 6.0%.
- The highest tax to GDP ratio in Nigeria was 9.6% in 2011, the lowest being 5.3% in 2016.