By Olakunle Olafioye
The International Monetary Fund, IMF, has again thrown most Nigerians into panic by its fresh recommendation to the Federal Government on how to boost the nation’s economy.
The body said that Nigeria would have to complement the decision to remove fuel subsidy and its foreign exchange unification initiative with the collection of more taxes to fund the national budget and service its debts if the recent policies were to yield the desired results.
IMF Africa Department Director, Abebe Selassie, made the disclosure at a press briefing on the sub-Saharan Africa Regional Economic Outlook on October 13, during the World Bank Group/International Monetary Fund Meeting held in Marrakech, Morocco.
The President Bola Tinubu-led administration had announced the removal of fuel subsidy, which was largely considered as a major drain on the nation’s revenue, upon his inauguration on May 29. The government had also announced the unification of the exchange rate to create a more stable economic environment and reduce uncertainties for businesses, both domestic and foreign, by providing a clear and consistent exchange rate for transactions.
Curiously, however, the country’s fiscal challenge had persisted, with Nigerians groaning over the economic hardship that has trailed the policies.
But giving further prescriptions on the way forward for the nation, the IMF director said that the Nigerian government must back the fuel subsidy removal and the naira unification initiative with an effective policy to ramp up revenue.
“The exchange rate reforms that the government did were very, very welcome, trying to unify the rate, similarly the fuel subsidy.
“But that will not help and will not stick unless you also tighten monetary policy and do something to mobilise more tax revenues. So, a holistic package of reforms is what’s needed.
“So, you have a medley of things mainly rooted in the fiscal challenges that Nigeria has faced, not having tax revenues.
“At the same time, this country has incredible potential, and we have seen reforms moving in the right direction in recent months.
“What is needed, we feel, is making the reforms holistic and help reinforce each other. Just as things were not reinforcing each other in the past, I think there is scope to make the reforms reinforce each other,” Selassie said.
To most Nigerians, the international agency is gradually acquiring the unenviable sobriquet of the harbinger of doom as many viewed the latest recommendation by the agency as an indirect invitation to additional misery on the economically battered citizens who are still battling the attendant pangs of the recent economic policies of the new administration as advised by the global institution.
A former President, Chartered Institute of Bankers of Nigeria, CIBN, Okechukwu Unegbu, urged the Federal Government to ignore IMF’s latest suggestion, saying that raising taxes will be counter-productive.
His words: “I am one of those who believe that the IMF is a criminal organisation because when you talk about increasing tax on a highly taxed environment like Nigeria it will be counter-productive. My suggestion is that the government should not listen to IMF. Even the $1.5 billion they are giving to support the budget should be rejected because in this country we have resources that can sustain us and make our economy work.
“I have been advocating that the only way you can raise tax in an economy is by cutting tax because if you cut down the tax rate you will be able to bring more people into the tax net. But once you start raising taxes people will either do two things: one, either to avoid paying tax totally, which is illegal or by resorting to what I will call financial engineering. But once the tax rate is low people will be willing to pay and you will be able to capture more people into the tax net and you get more money to meet your obligations.
“So, IMF is a wicked organisation and that is what they are practising in Nigeria. I don’t think IMF should be listened to. Anyone that is listening to IMF is an enemy of this country. IMF is only interested in exploiting our resources through European nations so that anything we have that come from the ground, they will take it for free and come back to lend us from the money. This is wickedness of highest order.”.
The Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, while reacting to the issue opined that IMF’s suggestion on subsidy removal, as well as the unification of the foreign exchange rate was in order.
He, however, urged the managers of the nation’s economy to be circumspect with the recommendations given by the global body.
According to him, “IMF has its own template of how an economy should be managed. But sometimes, some of their prescriptions do not fit into our own conditions. So, it is the responsibility of those who are managing the economy to take a very good look at those prescriptions and see which of them will work for us and which won’t work for us because we need to localize economic policies. What works in the US, or in the UK or other countries may not work here; so localization of policies is very important. For you to be able to properly localize policies, you must understand your peculiarities.”
On the suggestion by IMF that Nigeria should increase its revenue through taxes, the CPPE boss said: “It is not a bad idea to suggest that Nigeria should raise its revenue. Increasing revenues does not necessarily mean to increase taxes. It could also means that you need to make your tax administration more efficient: to expand the net; to minimize tax evasion , tax avoidance, leakages and bring in those revenues that were not properly brought into the treasury. So, it is not all about increasing the tax, but it is more of making tax administration more efficient.”
Also reacting, a lecturer in the Department of Economics, Lagos State University, LASU, Dr Adebisi Afolabi, blamed the criticisms that often trail IMF’s recommendations to the country from Nigerians on insincerity on the part of the managers of the nation’s economy whom he accused of not being truthful with the task of growing the nation’s economy.
Adebisi said: “In this country we have been moving some things underground which we refer to as underground economy. With this we are not being truthful with what we are doing to grow our economy. Personally, the removal of fuel subsidy should not generate any uproar. We need to know that so many countries do not have subsidy on fuel, but the difference is that they are very sincere and trustworthy. However, in Nigeria, what we have is the opposite. Our problem is that our economic managers are not sincere. So, IMF is not imposing anything negative on us. The suggestion by IMF is in the interest of the nation and we can only appreciate them if those managing our economy are ready to do what is right.
“A lot of people, especially the rich, are not even paying taxes. IMF is on the right path. IMF is not for developed economies alone. It is for the global economy. When we talk about economy, it is about the life of everybody and the resources within the system. Are we using these resources efficiently? If we are using our resources efficiently then we won’t be raising eyebrow about IMF’s recommendation. Nigeria should learn to do the right thing and follow global best practices. The only thing peculiar about Nigeria is corruption that is why most recommendations that work in other countries fail when applied in Nigeria.”