Joseph Inokotong, Abuja
The International Monetary Fund (IMF) has emphasised the need for the federal government to strengthen its domestic revenue mobilisation, through additional excise duties, a comprehensive Value Added Tax (VAT) reform, and elimination of tax incentives.
The Fund also pointed out that since inflation is still above the Central Bank of Nigeria (CBN) target, it would generally be appropriate for it to consider tightening the monetary policy stance.
In this regard, the IMF encouraged the authorities to enhance transparency and communication and, improve the monetary policy framework by using more traditional methods, such as raising the monetary policy rate or cash reserve requirements.
IMF also urged CBN to end direct intervention in the economy; to allow it focus more on the Bank’s price stability mandate.
These were some of the recommendations of IMF’s Executive Board, at the conclusion of its Article IV consultation with Nigeria, released in Abuja, yesterday.
The IMF said: “Directors emphasised the need for revenue-based consolidation to lower the ratio of interest payments to revenue and make room for priority expenditure.
“They welcomed the authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures. They stressed the importance of strengthening domestic revenue mobilisation, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives.”
The IMF commended Nigeria’s ongoing economic recovery, accompanied by reduced inflation and strengthened reserve buffers. It noted, however, that the medium-term outlook remains muted, with risks tilted to the downside.
In addition, “long standing structural and policy challenges need to be tackled more decisively to reduce vulnerabilities, raise per capita growth, and bring down poverty.
“Directors, therefore, urged the authorities to redouble their reform efforts, and supported their intention to accelerate implementation of their Economic Recovery and Growth Plan.”
The IMF said securing oil revenues, through reforms of state-owned enterprises and measures to improve the governance of the oil sector would also be crucial.
The bank also recommended “establishing a credible time-bound recapitalisation plan for weak banks and a timeline for phasing out the state-backed Asset Management Corporation of Nigeria (AMCON).
It also highlighted the importance of shifting the expenditure mix towards priority areas, and, in this context, welcomed the significant increase in public investment but underlined the need for greater investment efficiency. The Fund also recommended increasing funding for health and education.