The International Monetary Fund (IMF) has expressed the need for Nigeria to carry out major reforms in the fiscal, exchange rate, trade, and governance areas to lift long-term, inclusive growth. The Fund in its latest report on the board conclusion of 2021 Article IV Consultation with Nigeria, recommeded some rash reforms which include hike in the Value Added Tax (VAT), fuel subsidy withdrawal and rationalising tax incentives.
The Fund highlighted the urgency of fiscal consolidation to create policy space and reduce debt substainability risks. "In this regard, they called for significant domestic revenue mobilization, including by further increasing the value-added tax rate, improving tax compliance, and rationalizing tax incentives. "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," the IMF 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." The IMF welcomed 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. According to the Fund, exchange rate reforms should be accompanied by macroeconomic policies to contain inflation, structural reforms to improve transparency and governance, and clear communications regarding exchange rate policy. It recommended the strengthening of the monetary operational framework over the medium term—focusing on the primacy of price stability—and scaling back the central bank's quasi-fiscal operations. "Improvement in transparency and governance are also crucial for strengthening business confidence and public trust. Directors called for stronger efforts to improve transparency of COVID-19 emergency spending.
From global Financial Digest
