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  • IMF seeks tax policy changes for Nigeria

    IMF seeks tax policy changes for Nigeria

    •Explains why country keeps borrowing
    •Advises CBN to deepen forex market

    Nigeria needs a  new policy on taxation in view of  its very low level of revenue mobilization capabilities, the International Monetary Fund’s (IMF’s) Director of African Department Abebe Selassie said yesterday

    He told reporters  at the ongoing IMF/World Bank Annual Meetings in Washington, D.C, that  the Fund is already providing tax guidance to the country.

    Whatever decision the federal government eventually takes on tax reforms, he said, will have to be backed by the National Assembly.

    He said the Ministry of Finance has already identified certain   steps to be taken by way of tax administration, improving tax administration, and ensuring that people are paying appropriate taxes.

    “Whatever decision the Federal Government takes on adjusting the tax policy, it has to consult the National Assembly. The IMF has been providing a lot of support, technical assistance support and policy advice in this area,” he said.

    “But our guess is that there also is going to be need for tax policy changes for Nigeria, which has a very, very low level of revenue mobilization to improve that.

    “These resources are needed to help strengthen the infrastructure environment in Nigeria, to help invest in the many, many schools, that have to be built and improving health delivery.” Continuing, Abebe said: “Now, in terms of designing tax policy changes there is a way to do it, and indeed we advise countries and provide technical assistance on how to do this in a way that is progressive.

    “So, you know, the taxes are collected on people that are rich, the richer segments of society rather than the poor.  So, there is a lot of technical work that can be done to do that.

    “And again, I cannot stress, the key remains that Nigeria, we feel, needs to do a lot more investments both in infrastructure, and in human capital investment.”

    Abebe said that developing plans and models or reform strategies that are specific to Nigeria’s specific needs at this venture are important.

    He added:”on agriculture, given how big the size of the Nigerian economy is and given the potential that it has including an agriculture as it’s used to in the past, it is a sector that should be doing much better.

    “On the macro side, I think what is needed in Nigeria at this moment are mobilizing more revenues.  I think that is important to help the government invest more in health and education and building infrastructure that is going to be important for other sectors like agriculture, manufacturing to take off.”

    According to him, without energy, it’s difficult to have higher productivity activities to take place including in agriculture.

    “Addressing the energy issue requires a lot more public investment and so, the revenue mobilization angle being important.

    “But on the fiscal side, there is also a need to further improve the allocation of foreign exchange systems, there has been a strong improvement in that.  I think just creating liquid and deep foreign exchange markets, financing the reforms that have been taking place in the last couple of months is going to be important.”

    Selassie said that with the gap between the foreign exchange market rate, the bank rate and the parallel market rate was very wide earlier in the year with many businesses complaining about shortage of foreign exchange, not having enough access to foreign exchange.

    “I think that has reduced over the last four, five months, so that’s what we are encouraged by,” he stressed.

    He said the external financing environment facing the Sub-Saharan region has been supportive.

    Also speaking on Nigeria’s borrowing plans, he said the first public debt has risen in many countries in the region and that the medium level of debt in sub-Saharan Africa has increased from 34 per cent in 2013 to 48 percent of Gross Domestic Product in 2016.

    “Most of the pronounced increase in debt has happened in oil-exporting countries following the deterioration in their economic conditions, of course.  But we’ve seen debt levels increasing also in countries that have been sustaining high growth.

    “The main drivers behind this rapid debt accumulation have been the elevated level of fiscal deficits, growing interest bills, and valuation effects associated with exchange rate depreciation,” he said.

  • IMF warns Nigeria, others over rising foreign debt

    IMF warns Nigeria, others over rising foreign debt

    The International Monetary Fund (IMF) yesterday warned the Federal Government about its rising debt profile, especially of foreign loans.

    Speaking yesterday at the ongoing World Bank/IMF Annual Meetings in Washington D.C, IMF Director, Monetary and Capital Markets Department Tobias Adrian, lamented that external borrowing in emerging markets and low-income countries, which includes Nigeria, is rising.

    Adrian who unveiled the Global Financial Stability Report said such borrowing would become a challenge if resources realised from them are not put to good use.

    President Muhammadu Buhari has requested the National Assembly to approve a request to borrow $5.5 billion.

    The Federal Government has so far raised $1.5 billion through Eurobond this year and another N100 billion through Sukuk bonds already invetsed in infrastructure funding.

    Nigeria’s public debt as at June 2017 stood at $64.19 billion (N19.63 trillion) according to data from the Debt Management Office (DMO).

    Adrian said emerging market countries needed to take advantage of improved financing conditions to address imbalances, continuing to reduce private sector leverage where high, and managing external and sovereign debt exposures. He said action is required now because vulnerabilities are building and could put growth at risk in the future.

    The IMF Director said despite low interest rates, debt servicing burdens have risen in several economies. And while borrowing has helped the recovery, it has also created new financial risks.

    IMF Assistant Director in Fiscal Affairs Department, Mrs. Catherine Pattillo admitted that there are lots of positive reforms in Nigeria, including drive to bridge infrastructure gap particularly in the power sector.

    She however urged government to do more especially in mobilizing more non-oil revenues.

    On the rising debt profile, she said: “The concern in a number of oil exporters is that unless there is action now, debt which has been rising is a concern because of the interest payments. So, if you have continuing rise in debt, the interest payments would consume a large part of any revenue that you collect and you won’t be able to use that revenue for the objectives of the economic growth and recovery programme like increasing growth and employment”.

    “So for insuring that you have the ability to use those revenues for enhancing expenditure, there is a need to make sure that interest to revenue is kept at reasonable level”.

    The World Bank has said recovery is underway in Sub-Saharan Africa with the Gross Domestic Product (GDP) growth expected to strengthen to 3.2 per cent in 2018 following a sharp slowdown in the past two years.

    This is according to the Bi-Annual Africa Pulse report of the bank which focuses on the economies of African countries, released yesterday in Washington DC.

    According to the report, Sub-Saharan Africa, including Nigeria, grew by 2.4 per cent in 2017 from 1.3 per cent in 2016, slightly below the pace previously projected.

    According to the report, the rebound in the region is led by the region’s largest economies – Nigeria and South Africa.

    “In the second quarter of 2017, Nigeria exited a five-quarter recession and South Africa emerged from two successive quarters of negative growth. Economic activity has also picked up in Angola.

    “A recovery in the oil sector, partly due to a decline in militants’ attacks on oil pipelines, helped Nigeria pull out of five consecutive quarters of negative growth but the rebound was softer than expected.

    “Growth in Nigeria is projected to pickup from 1 per cent in 2017 to 2.5 per cent in 2018 and 2.8 per cent in 2019.

    The forecast for 2019 was revised up by 0.3 percentage, reflecting the expectations that oil production will remain robust and reforms in the foriegn exchange market will help boost growth in the non-oil sector,” the report showed.

    The report also shows that International Bonds and equity flows in the region, especially to Nigeria, have increased and are helping to finance the current account deficits and cushion foreign reserves.

    The report also commended the improved access to foreign exchange in Nigeria, thanks to the recent polices of the Central Bank of Nigeria, saying it had led to “pick up in equity and portfolio inflows”.

    “In April 2017, the CBN introduced a new investor and exporter window, which had helped to improve businesses’ access to foreign exchange,” it said.

    In a video conference to discuss the latest report, World Bank Chief Economist for Africa Mr Albert Zeufack, said the fiscal space narrowed significantly for most countries in the region in recent years amid rising debt burdens.

    “Most countries do not have significant wiggle room when it comes to having enough fiscal space to cope with economic volatility.

    “It is imperative that countries adopt appropriate fiscal policies and structural measures now to strengthen economic resilience, boost productivity, increase investment, and promote economic diversification,” he said.

    Also, the World Bank Lead Economist and lead author of the report, Mrs Punam Chuhan-Pole said that the outlook for the region remained challenging as economic growth remained very low.

    “Moreover, the moderate pace of growth will only yield slow gains in per capita income that will not be enough to harness broad-based prosperity and accelerate poverty reduction,” she said.

    Meanwhile the acting Country Director for World Bank Nigeria, Mr Khairy Al-Jamal reiterated the World Bank’s commitment to working with Nigeria to achieve a robust inclusive and sustainable growth.

    Al-Jamal said that the bank was committed to support the Federal Government to improve its water, roads, education and health infrastructure as well as other services to poor and vulnerable people.

    He also said the World Bank was assisting Nigeria in the aspect of domestic resource mobilisation, through the expansion of its revenue base and to improve efficiency in tax collection.

  • Nigeria demands reform of IMF, World Bank

    Nigeria demands reform of IMF, World Bank

    Nigeria has demanded the reform of the Bretton Wood Institutions to make them responsive to the needs of developing countries and also reflect the realities of the 21st century.

    The Minister of Foreign Affairs, Geoffrey Onyeama, stated this at the 41st Ministerial Meeting of the Group of 77 plus China (G77+China) on the sidelines of the United Nations General Assembly.

    The G77 is a coalition of developing nations at the UN that promotes its members’ collective economic interests and create an enhanced joint negotiating capacity in the UN.

    The Bretton Woods Institutions are the World Bank and the International Monetary Fund (IMF), established at a meeting of 43 countries in Bretton Woods, New Hampshire, United States in 1944.

    Onyeama commended the G77 for its role at shaping global discourse on the implementation of the Sustainable Development Goals (SDGs) through a collective and robust engagement.

    World Bank and IMF are seen as wielding tremendous power and influence, but exclude the voices of developing countries most adversely affected by financial and trade policies.

    Onyeama said: “Equally important in the international development strategy is the need for a reform of the governance structure of the Bretton Wood Institutions.

    “Not only should they be made more transparent, consultative and inclusive but also they should be more responsive and appreciative of the peculiar needs of developing countries.

    “In consonance with the principle of ownership, the greater infusion of developing countries in the governance structure of Bretton Wood Institutions would undoubtedly allow them to take advantage of the local knowledge that developing countries can bring to the work of the institutions.”

     

  • IMF asks Nigeria to reform tax system, protect the poor

    The International Monetary Fund (IMF) yesterday directed Nigeria to begin new tax reforms that will enable it improve revenues and wriggle out of the economic crisis triggered by crash in crude oil prices.

    Speaking during a press briefing on Sub-Saharan Africa at the ongoing IMF/World Bank Spring Meetings in Washington, IMF Director, African Department, Abebe Selassie, said the economic circumstances in Nigeria remain difficult.

    He said government has to reform its tax system but reduce the impact of such reforms on the poorest.

    Selassie said the government has to quickly decide on the particular tax handle it wants to use but must ensure the poor are protected from the impact of such policies.

    He said that without such reforms and huge investment in infrastructure, government’s objective of addressing poverty will not be achieved.

    “Government needs to build more schools, invest more in health and education. All of this requires resources.

    “So, it is imperative for government to be able to address its long-term development agenda including tax handles that will be able to generate revenues.

    “But there are ways to mitigate the impact on the poor, without which, you cannot have the development that the country seeks,” he said.

    Continuing, he said: “What Nigeria needs is broad set of policies and reforms to try and address this tremendous shock that has been affecting the economy, commodity prices and insurgency in the northeast.

    “It said that monetary policy and exchange rate policy are also important tools. Our view here is given the scarcity of reserves, it is important for exchange rates to reflect and absorb some of the shock that have resulted from lower export revenues receipts being forthcoming at the moment.”

    The IMF Director also called for policies to foster economic diversification in the coming years to move countries away from commodity dependence and strengthen social protection mechanisms.

    These, he said, will help alleviate the impact of the current slowdown on the most vulnerable groups.

    “Nigeria has moved from a period when oil prices were $100 per barrel for five or six years or more to where the prices are now.

    “It is a huge hit to the income of the country and government’s revenue,” he explained.

    Selassie said that looking ahead, the Fund sees as rebound in growth but only a modest one around two and half per cent in 2017.

    He insisted that the uptick in growth in the region is largely driven by one of the factors in the three largest economies.

    “Some recovering oil production in Nigeria, highest public in the run-up to elections in Angola and the impact of the drought which is beginning to fade, in South Africa.

    “However, there is financing constraints facing the region and domestic shocks is fairly significant, either from insecurity or of course, from some countries from draught situations,” he said.

    The IMF director said the Fund was concerned about the famine in South Sudan and the sever border security in Northeast Nigeria, which has created significant humanitarian concerns.

    He explained that in the countries hardest hit by the commodity price decline, especially oil exporters like Nigeria and Angola, the budgetary revenue losses and balance of payment pressures are continuing.

    The IMF director said delay in the much needed reforms is creating uncertainty, holding back investment and risks generating even deeper difficulties in the future.

  • Naira value: We won’t kill our people, CBN tells IMF

    Naira value: We won’t kill our people, CBN tells IMF

    The Central Bank of Nigeria (CBN) declared yesterday that it has no intention of ‘killing’ Nigerians through undesirable monetary policies.

    The CBN, in a reaction to a call by the International Monetary Fund (IMF) for Nigeria to float the naira, declared that it made no sense for the country to introduce a policy that will ‘kill’ Nigerians.

    ”Our economy has its own peculiarities, and we cannot kill our people in the name of floating the naira,” CBN Acting Director, Corporate Communications, Isaac Okorafor ,said on the sideline  of the ongoing IMF/ World Bank Spring Meetings in Washington DC.

    Okorafor insisted that Nigeria’s market is extensively liberalized  already and the call to float the naira is unnecessary.

    His words:”Yesterday, when Madame Lagarde (IMF boss) was discussing the economy of Egypt, she lamented the devastating inflation that is in that country.

    “Egypt has half of our population, Egypt receives about $12 billion in foreign aids and several billions in tourism. We are 180 million people, our infrastructure is so  poor and the productive capacity cannot be fast enough to rise to benefit from massive depreciation.

    “If you float the naira today, and given the discoveries by security agencies, you’ll discover that our case will be terrible.

    “ If Egypt today has an inflation rate of almost 31 per cent, remember Angola also has about 36 percent inflation, ours is at 17.26 per cent. If we float the naira and allow speculators and those with corruption money and all the people who create the bubbles to launch into the market, you can yourself imagine the kind of situation we will find ourselves”.

    He said that there is no country that floats its currency, by just leaving it to the dictates of the market.

    Okorafor also said that the CBN would sanction banks denying Small and Medium Enterprises (SMEs) access to foreign exchange (Forex) from the newly instituted SMEs Forex Window.

    The window which  opened about  two weeks ago  is designed  to help SMEs import eligible finished and semi-finished items not exceeding $20,000 for an enterprise per quarter.

    Appropriate sanctions are spelt out by the   CBN Act  and the  Banks and Other Financial Institutions Act (BOFIA).

    He said staff and even  chief executives of banks could be punished where necessary.

    The CBN spokesman said the apex bank has  already received series of complaints from bank customers, especially those that operate in the SMEs segment of the market that banks are frustrating their efforts at getting forex.

    Okorafor said some entrepreneurs still complain that banks are frustrating their efforts at obtaining forex for their eligible imports after the stipulated 48 hours. He said the regulator has reviewed the complaints and discovered they are not evidence-based.

    He appealed to  bank customers and the SMEs to “please give us concrete evidence against these banks so that we can hold them responsible by way of sanctions.”

    He added: “Get a photocopy of your Form Q, Form X, Form A or Form M. Give us the name of the bank, branch and send to us and we will deal with them as example to others.

    “The only way the we can make things better for Nigerians is for them to call the CBN whenever they are in trouble or whenever, or are getting frustrated by banks.

    “We have a number you can call or you send an email to our Consumer Protection Department. We want to urge everyone who is frustrated by banks to call and lay complaints. We assure you that you will get redress,” he said.

  • IMF: finance ministers discuss growth sustenance

    IMF: finance ministers discuss growth sustenance

    More than 150 Finance Minsters across different countries of the world are discussing ways to ensure that ongoing economic recovery and growth in their respective countries are sustained, International Monetary Fund (IMF) Managing Director Christine Lagarde said yesterday.

    Nigeria’s Finance Minister Mrs Kemi Adeosun is among the ministers in talks with their counterparts across the world on sustained economic growth. The IMF projected that Nigeria’s economic growth would rise by 0.8 per cent this year.

    Lagarde spoke at the opening news conference of the IMF and World Bank Spring Meetings in Washington, said there was no single country in the world with negative forecast for this year even as the world economy is projected to grow at 3.5 per cent this year.

    “We are finally seeing the global economy picking up the momentum, which will be sustained. We need to ensure that the momentum is sustained and growth shared more equitably. We’re discussing how to sustain the momentum with finance ministers. We need to reinvigorate productivity through innovation and trade,” she said.

  • Finance ministers hold talks on growth sustenance – IMF

    Finance ministers hold talks on growth sustenance – IMF

    More than 150 finance ministers across the world are discussing ways to ensure that ongoing economic recovery and growth in their respective countries are sustained, International Monetary Fund (IMF) Managing Director, Christine Lagarde, said on Thursday.

    Nigeria’s Finance Minister, Mrs. Kemi Adeosun, is among the ministers in talks with their counterparts across the world on sustained economic growth.

    The IMF projected that Nigeria’s economic growth would rise by 0.8 per cent this year.

    Lagarde, who spoke at the opening news conference of the IMF and World Bank Spring Meetings in Washington, said there was no single country in the world with negative forecast for this year even as the world economy is projected to grow at 3.5 per cent this year.

    “We are finally seeing the global economy picking up the momentum, which will be sustained. We need to ensure that the momentum is sustained and growth shared more equitably. We are discussing how to sustain the momentum with finance ministers. We need to reinvigorate productivity through innovation and trade,” she said.

    World Bank President, Jim Yong Kim, said the global body was encouraged to see stronger economic prospects after years of disappointing global growth.

    He said there are still many downside risks, however, and countries that have the fiscal space need to continue with structural reforms. “This is vital to accelerating the sustainable and inclusive economic growth needed to end extreme poverty by 2030. We are meeting at a time when we face several overlapping crises, both natural and man-made, all of which add urgency to our mission,” he said.

    Kim said there was need to find new and innovative ways to reach the poor, and make the world more secure and stable.

    “Last week at the London School of Economics, I outlined how we are working to change our approach. We have to start by asking whether the private sector can finance a project. If the conditions aren’t right, we will work with our partners to de-risk that project or, if needed, de-risk entire countries or sectors,” the World Bank chief said.

  • IMF okays Nigeria’s recovery pill

    IMF okays Nigeria’s recovery pill

    The International Monetary Fund (IMF) yesterday backed the Economic Recovery and Growth Plan (ERGP) released last month by the President Muhammadu Buhari’s administration.

    The ERGP is a blueprint for Nigeria’s economic recovery, growth and sustainable development.

    Speaking at the ongoing IMF/World Bank Spring Meetings in Washington, the Assistant Director and Head of Fiscal Policy and Surveillance Division of the IMF, Catherine Pattillo, said the plan would tackle diversification and some of the deep-seated problems related to strengthening structures and building revenues, particularly oil revenue.

    “So, we very much welcome the ERGP. As you are aware, Nigeria went into recession last year; there has been forecast recovery, but the need to address the fiscal situation is urgent. Our recommendation is for the continued fiscal consolidation. One striking statistics I think is the fact that over the past years, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria,” she said.

    According to Pattillo, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue to allow the government implement the social and growth-friendly policies that are part of the objectives of the ERGP.

  • IMF: Nigeria spends 66% of tax revenues on debt servicing

    IMF: Nigeria spends 66% of tax revenues on debt servicing

    The International Monetary Fund (IMF) says 66 percent of Nigeria’s tax revenues is spent on servicing debts, calling on the country to raise taxes.

    Speaking at the IMF Fiscal Monitor briefing in Washington on Wednesday, Vitor Gaspar, director of the fund’s Fiscal Affairs department, said he is happy the Nigerian government now sees taxation as a path to development.

    “I had the privilege of visiting Nigeria some months ago and I was very happy to understand that for the authorities in Nigeria, fiscal policies in general and tax policy in particular are part of the strategy for development,” he said.

    “That is precisely how I believe fiscal policy should be thought in developing countries as part of the development strategy.”

    Catherine Patillo, assistant director and chief of Fiscal Policy and Surveillance Division of the IMF, said Nigeria has needs strong fiscal consolidation and improved taxation, stating that revenue-to-interest ratio is on the increase.

    “The Economic recovery and growth programme (ERGP) is very welcomed,” Patillo said.

    “It focuses on diversification, private sector-led diversification and in addressing some of the deep-seated problems related to strengthening infrastructure, which is necessary for diversification, as well as building revenues, particularly non-oil revenues.

    “So, we very much welcome the ERGP. It is an opportuned time, as you are aware Nigeria went into recession last year, we’ve forecast recovery, but still very fragile this year and the need to address the fiscal situation is quite urgent.

    “Our recommendation is for the continued strong fiscal consolidation, debt has risen, the profile has weakened; one striking statistics I think is the fact that over the past year, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria.

    “So, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue. That would allow the government to implement the social and growth-friendly policies that are part of the objectives of the ERGP.”

  • IMF endorses Nigeria’s economic recovery plan

    IMF endorses Nigeria’s economic recovery plan

    The International Monetary Fund (IMF) on Wednesday backed the Economic Recovery and Growth Plan (ERGP) released last month by President Muhammadu Buhari.

    The ERGP is a blueprint for Nigeria’s economic recovery, growth and sustainable development.

    Speaking at the ongoing IMF/World Bank Spring Meetings in Washington, the Assistant Director and Head of Fiscal Policy and Surveillance Division of the IMF, Catherine Pattillo, said the ERGP is very acceptable.

    She said the plan focuses on diversification and addressing some of the deep-seated problems related to strengthening structures, economic diversification and building revenues, particularly oil revenue.

    “So, we very much welcome the ERGP. As you are aware Nigeria went into recession last year, there have been forecasted recovery, but the need to address the fiscal situation is urgent. Our recommendation is for the continued fiscal consolidation. One striking statistics I think is the fact that over the past years, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria,” she said.

    According to Pattillo, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue to allow government implement the social and growth-friendly policies that are part of the objectives of the ERGP.

    Pattillo said the types of strong fiscal institutions we have talked about are important for governments to ensure that funds flow back to their countries.

    The development of the ERGP went through a rigorous process including wide consultation and robust engagements with stakeholders from a range of relevant fields including economic experts from the public and private sectors, academia, the Organized Private Sector, civil society groups, organized labour, sub-regional governments, international development partners (including the World Bank, International Monetary Fund and African Development Bank), the National Economic Council (NEC) and the National Assembly.

    IMF’s Director, Fiscal Affairs Department, Vitor Gaspar, said he was also glad Nigeria is making major moves to strengthen its fiscal policies.

    “I had the privilege of visiting Nigeria some months ago and I was very happy to understand that for the authorities in Nigeria, fiscal policies in general and tax policy, in particular are part of the strategy for development. That is precisely how I believe fiscal policy should be thought in developing countries as part of their development strategy,” he said.