Take advantage of rising commodity revenues to pay down debt, IMF tells Nigerian government

The International Monetary Fund (IMF) said countries like Nigeria can take advantage of rising commodity incomes to meet some of their development needs and reduce debt.

IMF Division Chief, Fiscal Affairs Department, Paulo Medas, made this known on Wednesday in Washington DC, United States.

Mr. Medas, who noted that governments are facing a very difficult environment in many countries around the world with double-digit inflation, explained that low revenue mobilization is affecting service delivery in the largest economy. from Africa.

“In this regard, fiscal policy must help monetary policy, working together to ensure price stability,” he said.

“It is absolutely essential for stable growth and for certain public finances in the countries. Countries like Nigeria, especially those that include oil exporters, can take advantage of rising commodity revenues to meet some of these needs and reduce debt.

The IMF chief noted that there has been no improvement in the country’s budget deficits due to large energy subsidies, but also other problems related to oil production and other pressures on the budget. .

“So we recommend trying to save some of that oil revenue to reduce the debt but also using it to meet those emergency needs,” the official said.

The Nigerian government recently announced its intention to borrow 8.8 trillion naira to fund its budget deficit in 2023, again in violation of the Fiscal Responsibility Act.

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President Muhammadu Buhari made the revelation during the presentation of the 2023 budget to the National Assembly last Friday in Abuja. The president said the new borrowing will be 4.78% of estimated gross domestic product (GDP), higher than the 3% mandated by the Fiscal Responsibility Act.

Poor tax revenue

Meanwhile, the IMF official also lamented Nigeria’s tax revenue, which he considered rather low. He urged the government to mobilize resources and improve tax collection to improve the ability to deal with fiscal shocks.

He said, “I would say another aspect, as I mentioned before, and Nigeria is a case where tax revenue is really low. This really undermines the ability of governments to respond to these types of shocks and deliver essential services.

“So I would say in the case of Niger, where the priorities are really domestic revenue mobilization, you need to increase the capacity of the state to respond to the needs of the country. It will also help to make fiscal policy more consistent with other efforts to ensure economic stability.