The International Monetary Fund (IMF) has called on Nigeria’s policymakers to develop measures to drive domestic revenue mobilisation in order to reduce fiscal vulnerabilities and create policy space. IMF Resident Representative for Nigeria, Mr. Ari Aisen, said this at the weekend in Lagos, in a keynote address at the Financial Markets Dealers Association (FMDA) quarterly meeting.
The forum, which had the theme, “Nigeria Macroeconomic Developments and Outlook: IMF View,” was hosted by First Bank of Nigeria Limited.
Aisen reiterated the need for Nigeria to permanently remove fuel subsidy in line with the Petroleum Industry Act, and in order to boost revenue.
The IMF chief’s advice came amid indications that the National Assembly might amend the Finance Act once more to address the N11.03 trillion deficit being proposed in the 2023 Appropriation Bill and the country’s increasing debt service cost over revenue. The total budget size is N19.76 trillion.
Chairman, Senate Committee on General Services, Senator Sani Musa (APC Niger East), hinted the possible amendment of the Finance Act yesterday in Abuja while speaking with journalists.
Nigeria is currently facing a severe revenue crisis as it continues to underperform in terms of crude oil production, which is its main source of revenue. THISDAY had reported that with an estimated average oil price of $100 per barrel for the month, the country lost as much as $756 million to shut-ins in July, according to an analysis of data from the Nigerian National Petroleum Company Limited (NNPCL).
Aside the Forcados terminal, which curtailed supply to the tune of 258,000 barrels as a result of the closure of the facility, following reports of a “sheen” in the vicinity of the facility, a number of other facilities had also been negatively impacted. The Nigerian oil sector continued its struggle in the month of August, even as Nigeria played second fiddle again to Angola as Africa’s largest crude producer.
The country is also projecting to spend over N6 trillion of petrol subsidy next year, which had been widely described as a drain on the economy.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had said the government might borrow about N11.3 trillion to fund expenditure in the 2023 budget, as the deficit was projected to be, at most, over N12.41 trillion next year or at least N11.3 trillion, which is over 100 per cent of the N7.35trn deficit for the 2022 fiscal year.
The minister had also sounded the alarm bells, as she revealed that the country’s debt service cost in the first quarter (Q1) 2022 was N1.94 trillion, N310 billion higher than the actual revenue received during the period.
Owing to these fiscal challenges, Aisen advised the government to implement a stronger operational framework, adding that the Central Bank of Nigeria (CBN) should ensure price stability in order to combat inflation in Nigeria. He explained that there was need to broaden growth and ensure private sector recovery.
The IMF chief revealed that Nigeria’s Purchasing Managers’ Index (PMI) stood at 52.3 in August, which was a slight moderation from the 53.2 recorded in July. This, he said, signalled expansion in business conditions in Nigeria’s private sector.
Aisen said with the planned commencement of operations of Dangote Refinery in 2023, the effective implementation of the Finance Act 2021, and the Strategic Revenue Growth Initiative, there would be positive growth in the economy. He stated that in 2022, the economy suffered setbacks, such as high food and energy prices hikes, spending pressure within narrow fiscal space, persisting insecurity, particularly banditry and kidnapping, and monetary tightening in advanced economies.
The IMF resident representative advised the CBN to establish a unified and market-clearing exchange rate to strengthen the country’s external position, saying, “There should be complementary macroeconomic and structural policies to preserve competitiveness gains from any exchange rate adjustment.”
He noted that to safeguard financial stability, there was need for regulatory vigilance, timely actions against undercapitalised banks, and introduction of additional macro-prudential instruments.