Take advantage of rising commodity revenues to reduce debt - IMF tells Nigerian govt

The International Monetary Fund (IMF) has said that countries like Nigeria can take advantage of rising commodity revenues to address some of its developmental needs and reduce debt.

The IMF’s division chief, fiscal affairs department, Paulo Medas, made this known on Wednesday in Washington DC, United States.

Mr Medas, who noted that governments are facing a very difficult environment in many countries across the world with double‑digit inflation, explained that poor revenue mobilization affects service delivery in Africa’s largest economy.

“In this respect, fiscal policy needs to help monetary policy, working together to ensure price stability,” he said.

“This is absolutely critical for stable growth and for some public finances in the countries. Countries like Nigeria, especially those including oil exporters, can take advantage of rising commodity revenues to address some of these needs and to reduce debt.”

The IMF chief noted that there has been no improvement in the nation’s budget deficits because of the large energy subsidies, but also other issues with production of oil and other pressures on the budget.

“So our recommendation is to try to save some of these oil revenues to reduce debt but also to use them to address these emergency needs,” the official said.

The Nigerian government recently announced plans to borrow N8.80 trillion to finance its budget deficit in 2023 in a move that is yet again a breach of the Fiscal Responsibility Act.

President Muhammadu Buhari made this disclosure while presenting the 2023 budget to the national assembly last Friday in Abuja. The president said the new borrowing will be 4.78% of estimated Gross Domestic Product (GDP),higher than the 3 percent prescribed by the Fiscal Responsibility Act.

Poor Tax RevenueMeanwhile, the IMF official also lamented Nigeria’s tax revenue, which he considered rather poor. He urged the government to mobilise resources and improve tax collection in order to improve capacity to address fiscal shocks.

He said: “Another aspect I would say, as I mentioned before, and Nigeria is one case where tax revenues are really low. This really undermines the capacity of governments to react to these types of shocks and to provide key services.

“So I would say in the case of Niger where the priorities are really domestic revenue mobilization, you need to increase the state capacity to address the needs of the country. This will also help make fiscal policy more consistent with other efforts to ensure economic stability.”