The International Monetary Fund (IMF) has advised Nigeria to explore ways of increasing its revenue outside its traditional base of oil proceeds.
The IMF’s Deputy Director, Fiscal Affairs Department, Paulo Mauro, who made the call at a press briefing at the on-going 2018 IMF/World Bank Meetings in Bali, Indonesia, admitted that there is an issue of how to increase Nigeria’s revenue base, pointing out that the matter was not only crucial, but of utmost priority.
Mauro, who was responding to a question on what strategy Nigeria should adopt to increase its revenue profile, said increasing the nation’s non-oil revenue was crucial, adding that way, more resources will be generated to fix infrastructure and attend to social spending.
”Indeed, we do see this – increasing non-oil revenues — as a crucial priority for the country. If one looks at the ratio of interest payments-to-revenues for Nigeria, that is quite high. And certainly, increasing revenues is the way in which one creates the space to do social spending, infrastructure, and other types of spending that benefit economic growth. So clearly, that is a priority.”
Stressing the need for increased revenue, Mauro also offered tips on how Nigeria could achieve the goal, saying the IMF has been discussing with the country some of the issues.
He said: “We have been discussing over the years with the government, and we see the priorities in tax administration, but there are also aspects of tax policy that would help. So, certainly, in the tax administration, to increase the compliance rate, something that could be done is to increase tax audits and to use e filing to a greater extent. There are data matching exercises that can be conducted.”
He called for strategies to curtail tax evasion and reduction in corrupt tendencies. ”So generally trying to reduce tax evasion and possibly corruption as well, those would be priorities on the tax administration side,” Mauro pointed out.
The IMF official said the Fund had earlier prompted the government to tinker with Excise taxes on tobacco and alcohol, a policy the government rolled out earlier, but which is under review.
“Stamp duties is something that can be looked at again,” Mauro said.
He said while efforts are on to increase revenue, attention should also be focused on how the proceeds are deployed. His words: “I think it is not just the revenue side; it is also the spending side. Clearly, improving the choices that one makes on which infrastructure projects, how does one go about selecting the ones that are really going to boost growth. So, I think, definitely, it is a priority to increase revenues, but also to be careful about the ways in which we can make spending more efficient,” he stated.
The Federal Government has stepped up its revenue generation through taxation.
The 2018 half year revenue performance report of the Federal Inland Revenue Service (FIRS) shows that tax revenue improved by 42 per cent.
The FIRS also said it had raised the tax-to-GDP contribution by 20 per cent.
On debts, the IMF’s Senior Communications Officer, in the Communication’s Department, Andreas Adrian, said there has been an increase in countries that issue debts in the international capital markets, including Sub-Saharan countries, a development he said was good for infrastructural financing, but nevertheless cautioned that it has its attendant consequences.
He said: “It is good for development to be able to participate in international capital markets to fund things like infrastructure projects and to sustain investment in countries.”
To Adrian, however, “international borrowing has to be balanced with stability objectives, and so countries have to make sure that the level of borrowing is sustainable in the long run so that the country can pay back the debt and the interest rates on the debt even if times get worse at some point”.
He said in the case of Nigeria, the rise in oil prices is sustaining economic activity, but oil exporter,” pointing out that oil prices could decline at some point, and so it is important to have some constraint on how much debt is issued.
“As a matter of fact, when you look at debt issuance of Sub-Saharan African countries, we do see a sharp slowdown in issuance in recent months. As financial conditions for emerging markets have tightened, financial conditions also have tightened for Sub-Saharan African countries, and there is some slowdown in the debt, and so it might be that we see less issuance going forward.
“Of course, there is going to be quite a bit of need for rollover of debt in 2020 through 2022 in particular. There is quite a bit of debt that is going to come due, so there will be rollover, and hopefully international capital markets will allow that rollover in a smooth fashion,” Adrian said.