₦airaland Forum

The IMF on Friday raised doubts on the reported volumes of fuel consumed in Nigeria, calling for a proper audit of the financials of the state-owned oil company – the Nigerian National Petroleum Company (NNPC) Limited.

In its latest 2022 Article 1V mission in Nigeria, the IMF raised concerns of a double whammy of very poor revenue mobilization amid huge subsidies and therefore warned that fiscal transparency remained critical for a sound fiscal policy for the Africa’s largest economy.

Apart from the IMF, there have been similar doubts around NNPC latest figures which show that Nigeria consumes as much as 66.8 million litres of petrol daily, with the attendant revenue – gulping monthly subsidies which have denied government remittances from oil sale in the past 9 months, at least.

In the statement, the IMF acknowledged efforts by the authorities to published the annual financial reports of the state-owned Nigerian National Petroleum Company (NNPC) since 2019, but worry that uncertainties remain regarding the nature of tax write offs and fuel consumption volumes.

“The mission recommended a closer look at the nature of NNPC’s financial commitments to the government and the costing details of the fuel subsidy, including through a financial audit.

“Stronger cash management and better coordination among key public institutions is needed to increase the realism of budgetary forecasts and reduce reliance on central bank overdrafts.”

The Fund is further worried that the NNPC financial opaqueness was coming at a time when Public finance has been under stress with elevated fiscal deficits.

The federal government fiscal deficit is projected to widen to 6.2 percent of GDP in 2022, mainly due to fuel subsidy costs, despite higher non-oil revenues relative to 2021.

And without bolder revenue mobilization efforts, the IMF projects that costly fuel subsidies and rising debt servicing costs will keep overall fiscal deficits above 6 percent of GDP in the medium term, raising public debt to as high as 43 percent of GDP by 2027.

According to data from the Debt Management Office, Nigeria’s debt to GDP hovers around 20.3%, and according to authorities, this is sustainable..

But according to the IMF, “While still deemed sustainable, such a level of debt is projected to take up nearly half of General Government () revenues in interest payments, making the fiscal position highly vulnerable to real interest rate shocks.

“It also leaves little fiscal room for vital social spending on education and health, where Nigeria fares poorly compared to peer countries in sub-Saharan Africa (SSA).”

In addition to scrutinizing NNPC financial operations, the IMF strongly believes that for Nigeria to tackle its current economic challenges, urgent revenue mobilization and fuel subsidy reforms are critical to create much needed fiscal space.

It therefore recommended a package of measures, which are estimated to create fiscal savings of close to 6 percentage points of GDP during 2023-27 while also making room for higher social spending.

As a near-term priority, it highlighted the urgent need to remove fuel subsidies fully and permanently, which, it said, disproportionately benefit the well-off, by mid-2023 as planned.

The government should also prioritize addressing oil thefts and governance issues in the oil sector to restore production to pre-pandemic levels.

There is also the need to step up implementation of tax administration reforms. Evenothough, it welcomed the steady implementation of the tax automation system (TaxPro Max), it said this is not enough, and therefore recommended stepping up efforts to further expand coverage under a well-designed roadmap and strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs).

The IMF further advised that in the medium-term, the authorities should develop a compliance improvement program and comprehensive customs modernization program, improve the effectiveness of the State Internal Revenue Service’s administration of the Pay-As-You-Earn (PAYE) system, and strengthen inter-agency coordination and data sharing.

In the report, the IMF also advised Nigerian authorities to consider adjusting tax rates to levels comparable to the average in Economic Community of West African States (ECOWAS) as compliance improves.

“This includes further increasing the VAT rate to 15 percent by 2027 in steps while streamlining numerous VAT exemptions based on systemic reviews, increasing excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews.”

To mitigate food insecurity and cushion the impact of high inflation and fuel subsidy removal on the poor, it also recommended increasing social spending by up to 1.7 percentage points of GDP during 2023-27 in well-targeted programs in coordination with the World Bank and other development partners.

Alabaintprice:
Watch how agbado and atikursed will stay away from this thread

Gucciblog:
Who is drinking the fuel. That's what Peter Obi asked.!!

Peter Obi really has to be our President.

God please

Golan007:
No where in the article is this stated from the IMF report.