IMF urges stronger tax, smarter spending, hails Nigeria’s fiscal reforms

The International Monetary Fund (IMF) has commended Nigeria’s fiscal reforms, and urged the country adopt smarter spending and stronger tax systems. The Division Chief, Fiscal Affairs Department IMF, Davide Furceri, made the statement during a news conference on fiscal monitor, in Washington on Wednesday on the sidelines of the Annual Meetings of the IMF/WorldBank Group. Furceri said that Nigeria’s ongoing fiscal and structural reforms were neutral and well aligned with monetary policies designed to curb inflation and stabilise the economy. He said that the fund’s latest assessment of fiscal policy across developing economies, especially the Nigeria’s policy direction, was consistent with efforts to strike a balance between revenue mobilisation and efficient expenditure management. “Currently, what we are projecting for Nigeria is a neutral fiscal stance, which we believe is consistent with monetary policies aimed at reducing inflation,” he said. Please Read: The ShopRite Empty Shelves Video: A Critical Economic Analysis He advised Nigeria to focus on revenue and expenditure sides of public finance. “Nigeria has made significant progress in recent years. Several laws have been passed to streamline the tax code, reduce tax expenditures and ease the compliance burden for businesses and coerce. “These are steps in the right direction,” he said. Furceri called for greater efficiency in public spending to ensure better outcomes for citizens. He said that optimising on how resources are allocated and spent could deliver substantial economic and social gains. “In addition, it is important to increase social spending, particularly to support vulnerable households and ensure inclusive growth,” he said. He urged Nigeria to continues to implement key fiscal and monetary reforms under its medium-term economic framework, fiscal discipline, improved revenue generation and enhanced transparency in public finance management. He said that IMF’s endorsement reflected growing confidence in Nigeria’s reform trajectory, even as the government pushes for policies aimed at boosting growth, reducing inequality and sustaining macroeconomic stability. The News Agency of Nigeria (NAN) reports the fiscal monitor explores how governments can improve economic growth prospects by enhancing the efficiency and composition of public spending.

People, privations and public policy priorities (3)

By UGO ONUOHA LAST week, here, we said that we probably have been down the path that the regime of Nigeria’s president, Alhaji Bola Ahmed Tinubu, has been taking us to in the last 27 months through his economic reform agenda. We wrote that the current economic reform bore a striking resemblance to military president, Gen. Ibrahim Badamasi Babangida’s [IBB’s] structural adjustment programme [SAP] of the mid-1980s. Subsequently we dubbed Tinubu’s programme SAP 2.0. The major planks of the Babangida economic recovery agenda which he introduced in 1986 were economic diversification to reduce Nigeria’s over dependence on crude oil revenues; the development of the non-oil sectors like agriculture, manufacturing, and services; to restore fiscal discipline by implementing austerity measures, curbing government expenditures, and controlling inflation; devaluation of the Naira to make exports more competitive, encourage foreign investments, and reduce trade imbalances; liberalise the market by reducing government intervention and control in designated sectors to promote a more market-driven economic system; to privatize state-owned enterprises so that the private sector would be encouraged to drive economic development which was expected to promote efficiency and productivity; to stimulate economic growth by improving resource allocation and utilisation; improve the standard of living of Nigerians through poverty reduction; to improve government revenue by expanding and widening the tax base; and, to enhance resource allocation and utilisation for sustainable economic development. Does the above economic policy direction sound familiar to the adults in the house? Is this déjà vu? A quick reminder: it will be 40 years, next year, since Babangida introduced and implemented his own economic reform agenda. What were the benefits? How did it end? How much pain did it inflict on Nigerians? If it worked, why are we still where we are today? The answers to the questions are obvious. And we will explore some of them in the wake of the current gamble. As we said earlier, Tinubu’s economic reform agenda is SAP 2.0. SAP 1.0 failed, and the reasons why Babangida failed may yet afflict Tinubu’s SAP, though he cleverly dodged calling it by its proper name for fear of a backlash and a pushback by Nigerians. So why did Babangida, a military ruler who sat atop his command and control military/government structure for about nine years, fail with his own SAP after putting Nigerians through so much pain 39 years ago? Could it be because his SAP had no buy-in from citizens? Yes, that’s partly the reason. It also suffered from poor implementation. There was no doubt that it was externally imposed shortly after a charade called a national debate on whether to adopt the programme or not was conducted. It was neither well planned nor intentionally and faithfully executed. Unintended consequences which should have been foreseen and provisions made to alleviate them took a huge toll on the programme. It should be concerning that the ongoing economic programme is grappling with the same problems of unintended consequences, lack of buy-in, and poor implementation. SAP objectives also failed to materialize because of the country’s poor and weak infrastructure. In 1986 Nigeria’s infrastructure was not developed enough to support the goals of the programme. Is there evidence today that the country’s public facilities are strong and robust enough to support the ongoing drastic and indeed reckless surgical procedures on the fragile and largely informal economy of the country? Can what is happening be likened to using a chainsaw for brain surgery? Corruption hobbled Babangida’s SAP, and hindered its effectiveness. Has this monster been tamed? Is it capable of dealing a death blow on Nigeria? With succeeding administrations corruption became more pervasive. It has been suggested in some quarters that the extant regime is a haven for corrupt politicians and public servants and their collaborators. It’s a well known fact that some of the leaders of this government were suspects in multi-billion Naira fraud cases before their files were conveniently forgotten and allowed to gather dust on the shelves of the so-called anti-graft agencies, the Economic and Financial Crimes Commission [EFCC] and the Independent Corrupt Practices and Other Related Offences Commission [ICPC], the moment they assumed political offices through nepotistic appointments or rigged elections. Ahead of the 2019 election, a former national chairman of the ruling APC who is currently a senator of the federal republic had reportedly said in public that the sins, including looting of the treasury by office holders and opposition politicians, would be forgotten and forgiven once they joined the ruling party. Seven years after, that offer still remains on the table, and suspected and confirmed corrupt politicians have been enjoying the ‘amnesty’ to the detriment of Nigerians. It is now so bad that state governors, state and national assembly lawmakers are hawking and trading mandates given to them on the platforms of opposition parties to seek favours and protection from the APC. It sounds like what obtains in the mafia world. And this could be one of the reasons why a court in Canada was recently reported to have likened Nigeria’s dominant political parties – APC and PDP – to terrorist organisations. These parties thrive in holding Nigerians as hostages, intimidating citizens, extracting oaths of allegiance and fealty to their leaderships, violence and bloodletting. PDP used to have a cult leader or Capone while it was in power at the centre. APC still does probably because it now controls the federal government. Meanwhile, like Babangida’s SAP, Tinubu’s SAP 2.0 is primarily focused on economic austerity measures without publicly saying so. At Inception of the economic programme no heed was paid to cushioning the harsh and inevitable painful fallouts from the agenda. Not much has been done in this regard since 2023, bar the student loan scheme. Other palliatives such as the conditional cash transfers to the poorest of the poor households and individuals, and access to funding for small scale enterprises have suffered from credibility problems. In fact, their implementations have been dogged by allegations of political partisanship and the challenge of verification. Even the

Borrowers’ Ability To Repay Loans Dwindling Due To High Interest Rates – IMF

The International Monetary Fund (IMF) has posited that the ability of individuals and business borrowers to service their debts is diminishing due to higher for longer interest rates. According to the Fund in its Global Financial Stability Report making debt more expensive is an intended consequence of tightening monetary policy to contain inflation. “The risk, however, is that borrowers might already be in precarious positions financially, and the higher interest rates could amplify these fragilities, leading to a surge of defaults,” it said. The Bretton Woods Institute noted that many businesses suffered closures during the pandemic, and others emerged with healthy cash buffers thanks in part to fiscal support in many countries. However, the lender pointed out that many firms were able to protect their profit margins even though inflation had picked up saying that in a higher-for-longer world, however, many firms are drawing down cash buffers as earnings moderate and debt servicing costs rise. “Indeed, the GFSR shows increasing shares of small and mid-sized firms in both advanced and emerging market economies with barely enough cash to pay their interest expenses. And defaults are on the rise in the leveraged loan market, where financially weaker firms borrow. These troubles are likely going to worsen in the coming year as more than $5.5 trillion of corporate debt comes due. “Households too have been drawing down their buffers. Excess savings in advanced economies have steadily declined from peak levels early last year that were equal to 4 percent to 8 percent of gross domestic product. There are also signs of rising delinquencies in credit cards and auto loans. “Headwinds also confront real estate. Home mortgages, typically the largest category of household borrowing, now carry much higher interest rates than just a year ago, eroding savings and weighing on housing markets. Countries with predominantly floating rate mortgages have generally experienced larger home price declines as higher interest rates translate more quickly into mortgage payment difficulties. Commercial real estate faces similar strains as higher interest rates have resulted in funding sources drying up, transactions slowing, and defaults rising,” the Fund said.