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Increase VAT, remove fuel subsidy now, IMF tells Nigeria

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The International Monetary Fund (IMF) has called on the Nigerian government to urgently consolidate its fiscal policies to create space and reduce debt sustainability risks.

It specifically urged the government to increase Value Added Tax (VAT) from the current 7.5 percent and remove fuel subsidy without further delay in order to enhance long-term, inclusive growth.

This is contained in the 2021 IMF Executive Board Article IV Consultation with Nigeria, which was concluded on January 31, 2022, and released Tuesday.

The IMF’s report said: “Nigerian economy is recovering from a historic downturn benefitting from government policy support, rising oil prices and international financial assistance” but noted that there is a need for “major reforms in the fiscal, exchange rate, trade, and governance areas to lift long-term, inclusive growth.”

Highlighting the urgency of fiscal consolidation to create policy space and reduce debt sustainability risks, the IMF Executive Board “called for significant domestic revenue mobilisation, including by further increasing the value-added tax rate, improving tax compliance, and rationalising tax incentives.”


Similarly, the “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.”

While commending the authorities’ proactive management of the COVID-19 pandemic and its economic impacts, they noted, however, that the outlook remains subject to significant risks, including from the pandemic trajectory, oil price uncertainty, and security challenges.

It observed that in spite of the recovery in oil prices, the general government fiscal deficit is projected to widen in 2021 to 5.9 percent of GDP, reflecting implicit fuel subsidies and higher security spending, and projected at 3 percent for 2021.

“Moreover, the consolidated government revenue-to-GDP ratio at 7.5 percent remains among the lowest in the world”, said the IMF.

It further pointed out that “Notwithstanding the authorities’ proactive approach to contain COVID-19 infection rates and fatalities and the recent growth improvement, socio-economic conditions remain a challenge. Levels of food insecurity have risen and the poverty rate is estimated to have risen during the pandemic.”

On the outlook, the report says it faces balanced risks as “on the downside, low vaccination rates expose Nigeria to future pandemic waves and new variants, including the ongoing Omicron variant, while higher debt service to government revenues (through higher US interest rates and/or increased borrowing) pose risks for fiscal sustainability.”

It warned that a worsening of violence and insecurity could also derail the recovery.

On the upside, the IMF observed that the “non-oil sector could be stronger, benefitting from its recent growth momentum, supportive credit policies, and higher production from the new Dangote refinery.

“Nigeria’s ratification of the African Continental Free Trade Agreement could also yield a positive boost to the non-oil sector while oil production could rebound, supported by the more generous terms of the Petroleum Industry Act.”

The IMF Directors 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 favourable conditions.

They noted that 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”.
They considered it appropriate to maintain a supportive monetary policy in the near term, with continued vigilance against inflation and balance of payments risks and encouraged the authorities to stand ready to adjust the monetary stance if inflationary pressures increase.

Also, the Directors recommended “strengthening 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”, and welcomed the “resilience of the banking sector and the planned expiration of pandemic-related support measures”.

They agreed that while the newly launched eNaira could help foster financial inclusion and improve the delivery of social assistance, close monitoring of associated risks will be important, and also encouraged “further efforts to address deficiencies in the AML/CFT framework.”

The Directors emphasised the need for bold reforms in the trade regime and agricultural sector, as well as investments, to promote diversification and job-rich growth and harness the gains from the African Continental Free Trade Agreement. “Improvement in transparency and governance are also crucial for strengthening business confidence and public trust,” the report added.

Again, the Directors called for “stronger efforts to improve the transparency of COVID-19 emergency spending”, noting that “Nigeria’s capacity to repay the Fund is adequate.”

They encouraged addressing data gaps to allow timely and clear assessments of reserve adequacy.


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2023: Buhari may meet Osinbajo, Tinubu, Amaechi, others

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President Muhammadu Buhari would this week meet with all the preidential aspirants of the ruling All Progressives Congress (APC).

The meeting was called with a view to reducing the number of presidential hopefuls and also ensuring that all of them pledge to accept the outcome of the primary as was done during the APC presidential primary in 2014.

“The President will meet with the aspirants a few days to the primary with a view to ensuring that there is unity and harmony. He will also meet with the governors separately. The date is not fixed yet, but it should be this week if INEC doesn’t extend the deadline for the primary as we are all hoping,” said an APC chieftain who wished to remain anonymous.

“The President has a candidate. How to present the idea to the likes of Tinubu will be the challenge,” he added.

Buhari’s most senior spokesman, Mr Femi Adesina, had said last week that the President indeed had a preferred candidate.

He stated, “In a previous interview when the President was asked whether he had a favourite candidate, he answered yes; but he will not mention him because mischief may happen to that person.

“That shows you that the President himself is interested in the process and he has a preferred candidate; but whether he will impose his candidate is what you cannot determine at the moment.”

When contacted on the telephone, the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, said he was not aware of any meeting the President would be having with the aspirants.

“I am not aware of any meeting as of now,” he said.

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Gunmen behead abducted Anambra lawmaker from Governor Soludo’s constituency, hang head in motor park

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Gunmen who abducted a member of the Anambra State House of Assembly, Okey Okoye, have beheaded him.

After beheading him, his head was reportedly displayed at a motor park in Nnobi, Idemili South Local Government Area of the state.

The incident, which happened on Saturday, created panic in the community, which had been witnessing a series of violent killings since last year.

Sources added that his body was not there and indications were that the killers removed the body.

“The Anambra lawmaker representing Soludo’s constituency, Okechukwu Okoye who was earlier kidnapped, has been beheaded by gunmen; the late lawmaker’s head was mounted at Chisco Park in Amichi community,” a military source said on Saturday.

Gunmen had last Sunday abducted the lawmaker who was representing Aguata II state constituency in Aguata alongside Cyril Chiegboka, his campaign director.

Governor Charles Soludo had said during the week that efforts were ongoing to rescue the Anambra lawmaker from his abductors.

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MC Oluomo allegedly demands N100million to support re-election of Oshodi Rep member

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Chairman of the Lagos State Parks Management Committee, Musiliu Akinsanya, popularly called MC Oluomo, is allegedly demanding N100 million to support the re-election of the member representing Oshodi Federal Constituency 1 in the House of Representatives, Hon. Bashiru Dawodu.

Dawodu, a medical doctor, rode on the back of MC Oluomo to win the election in 2019 after series of attempts in the past.

Dawodu presenting his Certificate of Return to MC Oluomo

Both, however, fell apart few months after Dawodu was elected due to irreconcilable differences .

MC Oluomo is said to be angry with Dawodu for not honouring agreements he (Dawodu) had with him prior to his victory in 2019.

MC Oluomo, who is seen as de-facto leader of the All Progressives Congress (APC) in Oshodi was said to have vowed to work against Dawodu’s re-election in 2023.

He is believed to be working for the emergence of a former Chairman of Oshodi/Isolo Local Government, Afeez Ipesa Balogun to emerge as the APC’s candidate for the House of Representatives election in the constituency.

However, party leaders in the local government including the Chairman of the council, Kehinde Oloyede Almoof had appealed to MC Oluomo to tone down his opposition to Dawodu and support his re-election.

It was gathered that MC Oluomo did not turn down the fence-mending approach because he said he did the same with Oloyede who was his former arch-enemy.

It was further gathered that MC Oluomo demanded N100 million from Dawodu before he gets his support.

The money according to MC Oluomo is to settle his aides and loyalists, who supported Dawodu in 2019 but were abandoned by the Rep member.

According to sources at the various fence-mending meeting, appeals to MC Oluomo to reduce the amount were rebuffed.

Another dimension has, however, been added to the involvement of Oloyede in the matter.

The sources revealed that the council chairman, Oloyede is supporting Dawood because of his own interest.

Oloyede has been eyeing the Rep seat before his election as the council chairman.

Oloyede’s calculation according to the sources is that should Dawood gets the second term, it would be easy for him (Oloyede) to contest for the seat in 2027.

One of the sources who does not want his name in print because of backlash said : “Oloyede is supporting Dawood because of his own personal interest. He believes supporting Dawood may work for him in 2027.

Continuing, the source noted that Oloyede would rather support Dawodu over any other candidates because others eyeing the seat are first timers, who may want to seek for re-election in 2027.

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