Managing Director, International Monetary Fund, IMF, Christine Lagarde was in Nigeria recently as part of her tour of Africa. The visit was her first this year and the second to Nigeria. She had earlier visited Nigeria in 2011 shortly after her appointment. The recent visit was symbolic in many ways, particularly as it reminded us of those things we ought to have done but refused to do to move the economy forward, in view of the current challenges facing the country following dwindling revenue from the mono-product, crude oil, and the fact that the little savings made so far have been eroded by corruption of those entrusted with the management of our nation’s resources. But do we need the IMF boss’ visit before we realize that there is fire on the mounting? Do we need her to tell us that we must fulfil our obligations to our country by paying our taxes? Or that we need to diversify the economy, broaden the revenue base, institute fiscal discipline or audit and remove fraud in the revenue generating agencies? Indeed, do we need her to travel all the way from the United States of America to Nigeria before we plug the hole in our subsidy payments? Lagarde asked Nigeria and Nigerians to brace up for harder times, following the massive fall in the price of oil globally, just as she said that the country since inception recorded the slowest pace of growth in the year 2015.She called for increase in Value Added Tax, VAT, and stressed that it has become imperative for the federal government to broaden the country’s tax base against the backdrop that Nigeria has the lowest VAT rate in the African continent. According to her, “the current VAT rate is among the lowest in the world and well below the rates in other ECOWAS members—so some increase should be considered.” But she refused to mention the fact that the issue is not that of VAT but the fact that rich men refuse to pay tax. For instance, the now (in) famous $2.1 billon Dasuki-gate; how much of it was paid as tax? How much did the beneficiaries of that largesse pay as tax to government? Nothing!
Hence, increasing VAT, good as it is, will only amount to impoverishing those at the lowest rung of the ladder and further widen the gap between the rich and the poor.
Although the IMF Managing Director was careful not to endorse the devaluation of the Naira against major international currencies, she, however, urged the federal government to adopt a flexible monetary policy that will better serve the interest of Nigerians.
The IMF boss also called on the federal government to reduce cost of governance, including removal of the contentious fuel subsidy to allow government spend on infrastructure, housing, education, health, among others. She, however, cautioned Nigeria against obtaining loans, noting that it was at the moment affecting the country, and subsequent borrowing could hurt the nation’s economy in the long run.
Indeed, fuel subsidies are hard to defend. Not only do they harm the planet, but they rarely help the poor. IMF research shows that more than 40 per cent of fuel price subsidies in developing countries accrue to the richest 20 per cent of households, while only 7 per cent of the benefits go to the poorest 20 percent. As suggested by Lagarde, government must step up revenue mobilization and reduce leakages. Her shocking revelation that every 50 kobo collected from 30 per cent of the country’s revenue goes into the servicing of local and foreign debts, should be taken seriously by the authorities. Government must focus on power, transportation and housing and cut down on cost of governance. These three areas will create wealth. No matter how we look at it, the fact remains that, for us to have real growth, the financial sector must support the real sector to contribute to the growth and development of the economy. No nation grows if her real sector is sidelined as it is the case presently.
Government alone cannot create all the needed jobs, government alone cannot provide all the needed funds, and government alone cannot provide the solution to the economy. The private sector must be given the opportunity to contribute by creating the enabling environment for private sector development and growth. Government has no business in running enterprises. It should give the private sector the necessary incentives such as provision of infrastructure, tax holidays, open and transparent system, free market system and create level playing ground for all businesses. The task of moving this country to the next level is that of all stakeholders.


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