The International Monetary Fund has urged the Federal Government to deliver on its commitment to remove fuel subsidy by mid-2023.The IMF said the government needed to make bold fiscal reforms to create the needed policy space, secure public debt, and reduce vulnerabilities.
The Washington-based lender stated this on Wednesday in a report titled ‘IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria’ published on its website.
It explained that despite rising oil prices, the nation’s fiscal deficit was estimated to have widened further in 2022, mainly due to high fuel subsidy costs. It added that while the current account might have improved in 2022, foreign currency reserves declined because of capital outflow pressures.
According to the report, Nigeria has missed out on the opportunity to reap the benefits from higher global oil prices in 2022.
It said the government needs to take decisive fiscal and monetary tightening to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive, sustainable growth.
The IMF said, “Directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities.
“They urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023, and to increase well-targeted social spending. Strengthening revenue mobilization, including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority.
“In the medium term, Directors recommended modernizing customs administration, rationalising tax incentives, and raising tax rates to the levels of the Economic Community of West African States.
”The global lender further said the Nigerian economy had recouped the output losses sustained during the COVID-19 pandemic supported by favourable oil prices and buoyant consumption activities.
It added despite this, the spill over effects of the war in Ukraine, have resulted in higher domestic food prices, worsening the scarring effects of the pandemic, particularly on the most vulnerable Nigerians.This is not the first time the IMF would be advising the Federal Government to remove fuel subsidy.
In its 2022 Article IV report, it said, “Directors also urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources.
“They stressed the importance of further strengthening social safety nets.”