Capital market operators and economic experts have urged the Federal Government to be cautious in implementing the International Monetary Fund’s (IMF) policy recommendations, warning against expensive foreign loans and a Value Added Tax (VAT) increase.

Managing Director/Chief Executive Officer of Arthur Stevens Asset Management and former President of the Chartered Institute of Stockbrokers (CIS), Olatunde Amolegbe, said: “The IMF’s concern regarding the collateralisation of the proposed facility is understandable. Borrowing against strategic national assets or future revenue streams at a high collateral ratio could increase fiscal vulnerabilities and limit future financial flexibility.”

According to him, “The assessment should depend on the terms of the facility, the cost of funds, tenor and expected economic returns from the projects to be financed.”

On VAT, Amolegbe said: “Raising VAT at a time when households and businesses are still adjusting to subsidy removal, exchange-rate reforms and elevated living costs could further weaken consumption and economic activity.”

He advised the government to “broaden the tax base, improve compliance and reduce leakages before considering higher rates.”

On monetary policy, he noted that “while inflation remains a major challenge and the CBN’s tightening measures have helped stabilise the exchange rate, excessive tightening may constrain credit growth and private-sector investment.”

Amolegbe also supported the IMF’s warning on reliance on foreign portfolio inflows, stressing that sustainable growth requires stronger foreign direct investment, export diversification and increased domestic production.

Similarly, investment banker and Chartered Stockbroker, Tajudeen Olayinka, urged the government to “move away from expensive loans that can become problematic to the government’s revenue-generation capacity in future.”

He added: “The IMF concern is valid, as the government has taken too many expensive loans in recent years. That should worry anyone interested in the progress of Nigeria and its economy.”

According to him, “Nigeria should leverage cheaper financing from multilateral institutions to accelerate growth and reduce poverty.”

On VAT, Olayinka said there was no need for an increase while businesses and households were still grappling with the effects of ongoing reforms.

He also backed the current monetary policy stance, saying the CBN should maintain it “until such a time that stability is assured around the macroeconomic environment.”

Commenting on portfolio inflows, he warned that sudden reversals could be devastating and called on the government to strengthen the productive sectors of the economy.

Also speaking, economic analyst and communications expert, Clifford Egbomeade, said: “The IMF is right to highlight the risks associated with Nigeria’s proposed $5 billion Total Return Swap with First Abu Dhabi Bank.”

He explained: “With collateral at 133.3 per cent of the loan, Nigeria pledges more than it borrows, and any naira depreciation or rise in interest rates could trigger margin calls that undermine the CBN’s policy independence.”

On VAT, Egbomeade argued that “a VAT hike now is a tax on hardship, not consumption.”

He added that “hot money inflates reserve numbers without adding productive value to the economy,” warning against excessive dependence on portfolio inflows.

While supporting expanded cash transfers, he cautioned that “without fixing targeting failures in the social register, additional funding will only lead to leakages.”