NIGERIA TO FAST TRACK NPN-OIL EARNINGS

International Monetary Fund IMF, has said that for Nigeria to fast track its development the priority should be a comprehensive reform to durably increase non‑oil tax revenue saying that Nigeria uses two-third of its revenue to service debt. Speaking at the ongoing IMF/World Bank Annual Meetings in Washington DC, Mr Vitor Gaspar, Director, Fiscal Affairs Department, Cathy Pattillo, Assistant Director, Fiscal Affairs Department and Paolo Mauro, Deputy Director, Fiscal Affairs Department said that “there are a number of reasons” for Nigeria to focus on non oil tax drive. The IMF officials said “Of course, this will contribute to providing the space for important spending on infrastructure and on human development spending, social spending. And for Nigeria, that is very important. One, because right now, interest payments as a share of tax are very, very high, around a third for overall and two‑thirds for the Federal Government revenue. And that is not because interest payments are particularly high. It is because the denominator is incredibly low.

“Nigeria has one of the lowest tax ratios in the world. And it is not because Nigeria does not have big development problems, development challenges. Nigeria also will have a lot of needs then for education and health spending. It has some very low indicators in that area. And with the demographic projections, Nigeria is actually projected to be, by 2050, the third most populous country in the world. So addressing those challenges is really important.

For Ghana, similarly, the priority is sustained fiscal adjustment and transparent financing to reduce large financing needs and anchor the debt dynamics. So right now, Ghana is in the process of getting ready for the 2020 budget. And we welcome then that they are committed to the budget deficit of 5 percent. This is going to be an election year in Ghana. So meeting that budget target in 2020 will really send a strong signal to all, including investors, of the government’s commitment to fiscal discipline. For Ethiopia, Ethiopia has challenges relating to debt sustainability, but they have just released a new homegrown economic reform program that we very much welcome. And we are looking forward to working with the authorities on that reform program that will, again, then provide the space for social spending and maintaining good quality infrastructure spending.

Finally, on South Africa. In South Africa, there is really a need to move beyond business as usual to boost growth. So there is a need for urgent reforms to stop the decline in per capita GDP and to build jobs. There is also a need to overhaul the power utility ESCOM. And there, really a gradual but sizable consolidation is needed to stabilise debt at lower levels. This would reduce financing costs. In South Africa, the public debt has doubled over the last decade, and it is set to increase over the next 20 years or so on business as usual. So this gradual fiscal consolidation should really prioritise growth‑friendly and inclusive measures.

“ African continent is very exposed to the effects of climate change. On the other hand, it is not yet a contributor. When you look at some of the numbers in the Fiscal Monitor, the emissions are not really coming much from Africa. That may be the case later on in this century but not yet.

IMF said that “Fiscal policy is at the centre of economic policy debates today. In fact, fiscal policy plays a central role in, for example, managing the synchronised slowdown in the global economy, preparing for downside risks, contributing to financial stability, financing the 2030 Sustainable Development Goals, and, finally, in addressing climate change, which is the topic of the Fiscal Monitor this time. Major economies should be prepared for coordinated action in case of a downturn. Moreover, inflation and inflation expectations are drifting below target, and interest rates are negative in many advanced economies. Hence, the time is now for countries with budgetary room to use it to support aggregate demand.

https://moneyreport.com.ng/nigeria-to-fast-track-npn-oil-earnings/

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