The International Monetary Fund (IMF) has raised concerns about Nigeria’s inadequate revenue, revealing that the country’s nine percent revenue to Gross Domestic Product (GDP) ratio is insufficient to meet its developmental needs. Julie Kozak, the Director of the IMF’s Communications Department, conveyed this information during a press briefing on Thursday.
Addressing the press, Kozak stated, “Raising revenue from the very current low revenue to GDP ratio of nine percent is essential to create fiscal space for social and development spending. Nine percent of GDP is a very low revenue to GDP ratio, and it is really not high enough to be able to support strong social safety nets and development spending.”
She highlighted the importance of the 2024 budget in prioritizing spending on both social and development fronts to address the fiscal deficit and enhance Nigeria’s fiscal viability.
In response to the low revenue situation, the Minister of Budget and Economic Planning, Abubakar Bagudu, recently emphasized the government’s commitment to improving the revenue to GDP ratio. The aim is to increase the ratio from less than 10 percent to 18 percent within the current term of the administration by focusing on improving tax administration and collection efficiency.
The IMF, during the press briefing, also addressed the high inflation rate in Nigeria, which crossed the 27 percent mark in October. Kozak revealed that the IMF expects the Central Bank of Nigeria (CBN) to raise interest rates further at its next Monetary Policy Committee (MPC) meeting.
She explained, “The Central bank, under its new leadership, has started to withdraw excess liquidity that was in the system and contributing to high inflation. The next Monetary Policy Committee meeting should further raise the policy interest rate. So, the Central bank is taking action to try to address the high inflation problem.”
However, the stance of the CBN governor on interest rates remains uncertain. While there are expectations of rate hikes, Olayemi Cardoso, at the Chartered Institute of Bankers of Nigeria’s annual dinner, emphasized the monetary policies’ goal to achieve price stability, foster sustainable economic growth, stabilize the exchange rate, and reduce interest rates to facilitate borrowing and investments.
Moody’s, a global rating agency, also expressed concerns about the impact of high inflation in Nigeria, noting that it raises the risk of social unrest. The agency highlighted the pressure on government spending and the unclear fiscal relief from the removal of the oil subsidy, emphasizing the potential consequences of the inflationary trend in the country.
