…Says perception of corruption remains high
The International Monetary Fund, (IMF), has called for the complete removal of fuel and electricity subsidies in Nigeria early next year.
In the concluding statement of its 2021 Article IV Mission published on Friday, the Bretton Woods institution said the implementation of cost-reflective electricity tariffs as of January 2022 should not be delayed.
The IMF urged the Federal Government to implement revenue-based fiscal consolidation in the country. Nigeria, according to it, needs major reforms in fiscal, exchange rate, trade, and governance to promote sustainable growth.
The Fund also projected Nigeria’s fiscal deficit to reach 6.3% of Gross Domestic Product (GDP) this year, despite the increase in oil prices.
According to the IMF, the headline fiscal deficit is projected to worsen in the near-term and remain elevated over the medium-term. The Fund said over the medium-term, without bold revenue mobilisation efforts, fiscal deficits could stay elevated above the pre-pandemic levels with public debt increasing to 43% in 2026.
The Fund declared that Nigeria suffers low tax compliance and low buy-in of reforms because there is a high perception of corruption in the country.
The IMF, in the statement, acknowledged the Buhari administration’s ‘ongoing efforts to improve transparency and governance’ but said, ‘more is needed to build public trust to implement difficult but needed reforms’.
However, it said perception of corruption remains high regarding the civil service, leading to low tax compliance and buy-in of reforms.
Nigeria’s economy grew just over four percent in the third quarter, the National Bureau of Statistics (NBS) earlier this week, the 4th consecutive quarter of growth. However, the 3rd-quarter growth rate slowed when compared with the previous quarter.
The IMF warned that Nigeria faced ‘significant downside risks’ in the near term due to the ongoing Covid-19 pandemic as well as tenuous domestic security.
The World Trade Organisation, (WTO), has also raised concerns about how Nigeria’s foreign exchange management has been used to support manufacturing, exports and imports.
Recall that the Federal Government had on November 12 declared its intention to remove fuel subsidy in July 2022.
The Minister of Finance, Budget, and National Planning, Zainab Ahmed, who disclosed this to journalists in Abuja, said the government planned to pay transport allowance to Nigerians for six or 12 months to cushion the effect of fuel subsidy removal.
