Managing Director of the International Monetary Fund (IMF), Ms. Christine Lagarde, came calling recently with the message that Nigeria faces hard choices in her strive to move forward economically. Contrary to public expectations, she said her visit had nothing to do with negotiating loans for Nigeria, but to review her economy and its impact on neighbouring countries. Nigeria, the IMF boss stated, had managed to create a large and diversified economy that had been growing by about seven per cent annually over the last decade, a remarkable achievement and testament to her immense potential. But she said the outlook had become weak, with growth in 2015 estimated at about 3.2 per cent, the slowest since 1999, while a modest recovery is expected this year.
“For a country with a rapidly increasing population, this means almost no real economic growth in per capita terms. Low fiscal savings and reserves restrict the ability to manage shocks. And the weakening oil sector could stress balance sheets and put pressure on the banking system”, Lagarde said. Among the options she recommended to policy makers as ways of navigating through the economic grim include stepping up revenue mobilization through the broadening of the nation’s tax base; reducing leakages by improving compliance and enhancing collection efficiency, as well as further bolstering of the current five per cent Value Added Tax (VAT) rate, which she described as among the lowest in ECOWAS member-states and the rest of the world. She cautioned against borrowing, saying debt weighs heavily on the public purse, as already, about 35 kobo of every naira collected by the Federal Government is used to service outstanding public debt.
In addition, Lagarde said the quality and efficiency of every naira meant for capital expenditure could be best guaranteed by investing in high-impact and high value-added projects, adding that streamlining recurrent expenditure via improvement on the cost of running government and efficiency of public service delivery across the federal and state governments were of critical importance, among others.
President Muhammadu Buhari, who hosted Lagarde in Abuja, said his government was looking inwards in addressing Nigeria’s economic problems. In a statement through his Special Adviser on Media and Publicity, Mr. Femi Adesina, Buhari said his administration would enforce greater discipline, probity and accountability in all revenue generating agencies of the FG; and that all heads of Ministries, Departments and Agencies (MDAs) of government would fully account for all funds that got into their coffers. His words: “We have just come out of budget discussions after many weeks of taking into consideration the many needs of the country, and the down turn of the economy with falling oil prices and the negative economic forecasts. We are working very hard; and with the budget as our way forward, we will do our best to ensure that our country survives the current economic downturn”.
Besides, Buhari had related his understanding of the Nigerian economic dilemma in a report published in a recent special edition of ‘The Economist’ magazine: “In 2014…the then government rebased our country’s GDP. Now, by internationally recognised metrics, we possess the largest economy in Africa. While this should be a source of pride for Nigerians, it goes no way to addressing the deep structural challenges our economy faces; nor does it put more money in the pockets or more food on the table of millions of our citizens who go without, every day. To achieve dynamic and sustainable economic growth; and to eradicate poverty, we need as a nation to undertake serious economic reforms. Some will be painful, but all are necessary. I am determined that if my government stands for anything, it is the complete breaking of the cycle of gross corruption and theft that have caused investors to look first anywhere but Nigeria when considering business opportunities in Africa”.
It does seem the FG, IMF, organised private sector (OPS), the Nigerian public and other stakeholders are on the same page concerning the nation’s economic woes and the major causes and are now agitated about how best to achieve genuine recovery and remaining on the path of economic progress. All project rough times ahead; and many have strongly recommended the plugging of all revenue leakages and ensuring accountability to the greatest possible extent. Consequently, looking inward and enforcing a radical tax regime should be the watchword. But going for a higher VAT rate at present seems inauspicious and can be counter-productive until all loopholes, leakages, barefaced frauds and ineptitude in the collection chain of existing taxes, including VAT, and the remittance of other government revenues, are sufficiently dealt with.
