IMF to Nigeria: Focus More on Policies to Safeguard Vulnerable Persons

•Urges country to end CBN’s budget financing

•Says waivers costing country, others 5% tax to GDP

Obinna Chima, Eromosele Abiodun and Nume Ekeghe in Marakech

The International Monetary Fund (IMF) yesterday advised policymakers in Nigeria to focus on designing policies to safeguard vulnerable persons in the country.

The Washington-based institution also emphasised the need for Nigeria to discontinue the practice of funding part of it’s national budget with financing from the Central Bank of Nigeria (CBN).

Also yesterday, the President of the World Bank Group, Ajay Banga,  reaffirmed the bank’s commitment to promoting increased intra-Africa trade, highlighting its role as a catalyst for fostering inclusive growth across the African continent.

Banga, who was recently appointed President of the multilateral institution, also said his tenure would be focused on impactful projects across the globe.

Both the IMF officials and the World Bank chief made these remarks at the ongoing Annual Meetings of both institutions in Marakech, Morocco.

Speaking with THISDAY, at the end of a media briefing during the launch of it’s ‘Fiscal Monitor,’ the Fiscal Assistant Director of the Fiscal Affairs Department at the IMF, Era Dabla-Norris said: “Our research shows that countries like Nigeria have a large untapped tax potential. This is not something that can be done magically overnight, but definitely over the medium-term by expanding the tax base and by reducing exemptions in value-added tax.

“Reducing tax expenditures, rationalising other types of taxes and strengthening the quality of your tax institutions are all steps that can be taken to effectively mobilise revenues in a progressive manner.

“And then channel that for priority spending by having appropriate monetary policies in place, doing away with any kind of central bank financing of the budget, and ensuring that policies are working in the same direction. To bring inflation down is needed.”

According to her, across the world, the IMF had observed that fuel subsidies tend to benefit middle- or higher-income groups.

“So we need to protect the most vulnerable from the cost-of-living impacts. And there’s a number of targeted programs that can be ramped up and the poor, the really vulnerable populations protected by a number of other macroeconomic policies needed to durably bring inflation down.

“In the case of Nigeria, the revenue-to-GDP ratio is quite low relative to other emerging markets and developing countries. So, efforts will need to be made to do to increase revenue collections and to mobilise revenue collections in an inefficient manner,” he added.

Earlier, during the press briefing  on Fiscal Monitor IMF Director, Fiscal Affairs Department, Vitor Gaspar, noted that tax waivers were hampering revenue shortfalls in Nigeria and other African countries.

He said: “We find that many countries have huge number of tax concessions, they have an income tax, they have VAT but they provide so many tax concessions exemptions for certain industries, certain qualities and the revenue foregone from these measures is between two and five per cent of GDP.

“There are studies on tax evasion, as relates to the failure to register, failure to remit tax, underreporting on income and false claims for refunds. All these issues together add up to two to four per cent of GDP,” he added.

Also, speaking at the World Bank opening press conference, Banga expressed concern about the challenges in facilitating intra-Africa trade.

He said: “It is cheaper to take something from an African country to a completely distant offshore port and bring it back to an African country than it is to move the produce or that product from one African country to the other.

“That has everything to do with logistics. Not just that, but also to do with the simplicity of documentation across borders.

“There is so much work to be done. There is the African Free Trade Commission that the bank is an active supporter of. I have said this to African finance ministers, I believe this topic deserves much more attention.

“You cannot solve it for the continent as a whole, but you can solve it by starting with smaller regions looking at how you could promote intra-regional trade in Africa.”

Banga, who assumed the role of President of the World Bank Group in June, this year, laid out his vision for the bank, stating that his aim was to construct a larger, forward-looking institution that is focused on development.

He said: “I am trying to move the bank from being evaluated on dollars on projects funded to being evaluated on output, on impact; meaning how many went to school because of the schools we built, how many people got a better job than earlier because of the skilling institute that they were able to attend because the corporation we put in.

“How many carbon emissions were awarded because the work we did, how many private sector dollars got crowded for every dollar we put in as compared to how many projects and how many dollars we put in. Kind of move to an output rather than input and that will be really important for Africa.”

“There are other issues to do from the basics of education and healthcare, including skilling institutes as the children grow so they get a chance to be skilled appropriately for the kind of jobs that could be created in that country.

“That is another thing to be done. In the middle of all these is the challenge of climate and pandemics.

“It is not just the access to vaccines that we all unfortunately saw firsthand during the Covid situation, I believe the correct long term answer for access to medication and devices in Africa, is for making those things in Africa for Africa.

“You need the technology and the partnerships of manufacturers and other pharma companies to come in here.”