IMF faults Nigeria's monetary policies, highlights 4 ways to create fiscal savings

In its report tagged ‘How Fiscal Restraint Can Help Fight Inflation,’ the group urged the CBN to take a break from its plan to increase the monetary policy rate.

In another document, titled Staff Concluding Statement of the 2022 Article IV Mission on Nigeria released recently, recommendations were made which are estimated to create fiscal savings of close to six percentage points of GDP during the 2023-27 financial year while also making room for higher social spending.

Fuel Subsidy

The body advised the complete removal of fuel subsidy by mid-2023 as planned and also, to address the issue of oil theft which has grossly reduced the country's oil production capacity.

Implementation of tax administration reforms

There is also a recommendation for the FG to step up the steady implementation of the tax automation system (TaxPro Max) which would, in the long run, strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs).

Adopt tax policy reforms

The IMF also advised that as compliance improves, there should be plans to consider adjusting tax rates to be at par with what is obtainable in the Economic Community of West African States (ECOWAS).

Increase well-targeted social assistance

The mission also advised on the need to increase the percentage points of GDP to 1.7 from 2023-27, as a well-calculated plan to mitigate the effect of the impact of fuel subsidy removal which would usher in food insecurity and high inflation.

According to the IMF, “While monetary policy has the tools to subdue inflation, fiscal policy can put the economy on a sounder long-term footing through investment in infrastructure, health care, and education; fair distribution of incomes and opportunities through an equitable tax and transfer system; and provision of basic public services”.

It advised the FG to embark on massive investments in critical sectors of the economy to tighten up its fiscal policy thus putting the economy on a better path in the long term.