IMF urges Nigeria to expand tax base, streamline currency policy

 

Nigeria should widen its tax revenue base to finance growth-enhancing upgrades to the nation’s infrastructure and social programs, said a senior International Monetary Fund official.
While the administration of Muhammadu Buhari has made progress in addressing issues such as corruption, the West African country needs to pick up its reform efforts if it wants to boost economic growth, said Abebe Aemro Selassie, director of the Africa department at the Washington-based fund.
“To address the education, health, road, electricity and other infrastructure needs they have, they have to have a much higher revenue base than they do now,” said Selassie. “There is tremendous scope to broaden tax bases,” he said, citing property tax as an example.
Nigeria should also move to a single unified foreign-exchange rate, Selassie said in an interview in Washington. In addition to the official exchange rate for the naira, Nigeria offers several different foreign-exchange windows, including one for investors and exporters.
“They have reduced the gap between the parallel market and the official market significantly, so that’s a movement in the right direction, but there are still several foreign-exchange rates,” he said. “Even though the gap is narrower, the country would strongly benefit from having a unified and liquid single foreign-exchange market.”
Nigeria was one of several African oil exporters hit hard when crude prices crashed in 2014.
Now with oil prices rebounding, Nigeria’s recovery is helping drive a “modest” upswing in sub-Saharan Africa, the fund said Tuesday in its latest economic outlook for the region. But turning the recovery into a prolonged period of strong expansion requires bolder steps to support private investment and lift potential growth, the IMF said.
The fund projects Nigeria’s economy will grow 2.1 percent this year and 1.9 percent in 2019. The government has been battling an Islamic insurgency in the country’s northeast since 2009 that’s diverted resources to security from public programs.

Bloomberg