The International Monetary Fund (IMF) has once more advised Nigeria’s federal government to increase Value Added Tax (VAT), calls for the removal of fuel subsidy in the country, while also offering other fiscal measures that the country could adopt to stimulate economic growth.
The International lender noted, however, that the outlook remains subject to significant risks, including from the pandemic trajectory, oil price uncertainty, and security challenges. Looking ahead, emphasizing the need for major reforms in the fiscal, exchange rate, trade, and governance areas to lift long-term, inclusive growth.
The institution stated these in its 2021 Article IV Consultation with Nigeria released yesterday where it also proffered monetary policies that could also support sustainable growth.
However, the IMF commended the Nigeria’s government over measures that were taken that averted the devastating impact of the COVID-19.
It stated: “Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities’ proactive management of the COVID-19 pandemic and its economic impacts.
Directors highlighted the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks. In this regard, they called for significant domestic revenue mobilisation, including by further increasing the value-added tax rate, improving tax compliance and rationalising tax incentives.”
Furthermore, it stated: “Directors also urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources. They stressed the importance of further strengthening social safety nets.”
It also recommended the removal of the official exchange rate and recommended further measures towards a unified and market-clearing exchange rate to help strengthen Nigeria’s external position, taking advantage of the current favorable conditions.
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