Remove subsidy by mid-year, IMF urges FG
The International Monetary Fund on Wednesday urged the Federal Government to remove fuel subsidy by mid-2023, adding that the government needed to make bold fiscal reforms to create the needed policy space, secure public debt, and reduce vulnerabilities.
This was contained in a report titled ‘IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria’ published on its website.
IMF stated that despite rising oil prices, the nation’s fiscal deficit was estimated to have widened further in 2022, due to high fuel subsidy costs, adding that while the current account might have improved in 2022, foreign currency reserves declined because of capital outflow pressures.
The report furthered that Nigeria has missed out on the opportunity to reap the benefits from higher global oil prices in 2022, saying the government needs to take decisive fiscal and monetary tightening in order to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive, sustainable growth.
The IMF said, “Directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities.
“They urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023, and to increase well-targeted social spending. Strengthening revenue mobilization, including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority.
“In the medium term, Directors recommended modernizing customs administration, rationalising tax incentives, and raising tax rates to the levels of the Economic Community of West African States.”
The global lender reiterated that the Nigerian economy had recouped the output losses sustained during the COVID-19 pandemic supported by favourable oil prices and buoyant consumption activities, saying despite this, the spill over effects of the war in Ukraine, have resulted in higher domestic food prices, worsening the scarring effects of the pandemic, particularly on the most vulnerable Nigerians.
“They stressed the importance of further strengthening social safety nets.”
