The International Monetary Fund (IMF) has raised doubts on the reported volumes of fuel consumed in Nigeria, calling for a proper audit of the financials of the state-owned oil company – the Nigerian National Petroleum Company (NNPC) Limited.
In its latest 2022 Article-4 Mission in Nigeria yesterday, the IMF raised concerns of very poor revenue mobilisation amid huge subsidies, and therefore warned that fiscal transparency remained critical for a sound fiscal policy for Africa’s largest economy.
Apart from the IMF, there have been similar doubts around NNPCL’s latest figures which shows that Nigeria consumes as much as 66.8 million litres of petrol daily, with the attendant revenue – gulping monthly subsidies which have denied government remittances from oil sale in the past 9 months, at least.
In the statement, the IMF acknowledged efforts by the authorities to publish the annual financial reports of the state-owned Nigerian National Petroleum Company Limited (NNPCL) since 2019, but expressed its worry that uncertainties remain regarding the nature of tax write-offs and fuel consumption volumes.
According to data from the Debt Management Office, (DMO), Nigeria’s debt-to-GDP hovers around 20.3%, and according to the authorities, this is sustainable.
But according to the IMF, “While still deemed sustainable, such a level of debt is projected to take up nearly half of General Government (GG) revenues in interest payments, making the fiscal position highly vulnerable to real interest rate shocks.
“It also leaves little fiscal room for vital social spending on education and health, where Nigeria fares poorly compared to itspeer countries in sub-Saharan Africa”.
As a near-term priority, it highlighted the urgent need to remove fuel subsidies fully and permanently, which, it said, disproportionately benefit the well-off, by mid-2023 as planned.
The IMF further advised that in the medium-term, the authorities should develop a compliance improvement program and comprehensive customs modernization program, improve the effectiveness of the State Internal Revenue Service’s administration of the Pay-As-You-Earn (PAYE) system, and strengthen inter-agency coordination and data sharing.
In the report, the IMF also advised Nigerian authorities to consider adjusting tax rates to levels comparable to the average in the Economic Community of West African States (ECOWAS) as compliance improves.
