IMF Says Very Low Revenue Remains Nigeria’s Fiscal Issue

Low Revenue is Nigeria’s Issue Not 29 Percent Debt Profile

The International Monetary Fund has once again said Nigeria’s fiscal challenge is its weak revenue generation and not the nation’s rising debt profile.

The Fund said the low revenue has led to the nation’s low debt-servicing ability, weighed on funding for critical sectors and crippled development of infrastructures.

At about 29 percent debt to Gross Domestic Product, Nigeria has one of the lowest debt profile when compared with emerging and developing nations of 53 percent.

However, the economy remained behind in terms of infrastructure, standard of living, healthcare, job creation and education.

Jesmin Rahman, Chief and Senior Resident Representative for Nigeria, IMF disclosed this during a webinar hosted by the Nigerian Economic Summit Group, Fiscal Policy Roundtable and Tax Investment and Competitiveness Policy Commission.

She said, “The first vulnerability comes from having very low level of fiscal revenues. Total revenue at seven per cent of GDP is less than half of sub-Saharan Africa’s average and far lower than the average in oil exporting countries.

“It is also lower than the minimum threshold of 12 per cent, which is considered necessary for governments to provide an enabling and growth-enhancing role. Interest payments take up a large share of revenues, leaving little resources for everything else.”

“When we do our in-depth analysis, public debt is projected to reach about 37 per cent of GDP this year and remains roughly around that level in the medium term.

“We do various stress scenarios in our debt sustainability analysis and in all of those scenarios, public debt does not go beyond 50 per cent of GDP.

“So, I will not say that public debt is having a crisis or that public debt is extremely high. It is really a revenue issue; very low and volatile revenue is what poses a lot of fiscal risks and there are sizable financing risks in the next 12 months.”

Rahman urged the Federal Government to lower risk perception so that borrowing costs could drop.

She further stated that Nigeria needs to improve revenue generation to augment oil income. She suggested that policies should be made to make the number of registered voters commensurate with the percentage of active tax payers, which she described as low.

Rahman added, “Taxes are contracts between the government and citizens, where payment is in return for services. As such, the perception of public institutions, services and accountability are very important.

“Worldwide and in sub-Saharan Africa, countries that rank the highest in controlling corruption and (having) good governance are also the ones with higher tax morale and collection. Fiscal transparency and accountability are very important.”