•Explains why country keeps borrowing
•Advises CBN to deepen forex market
Nigeria needs a new policy on taxation in view of its very low level of revenue mobilization capabilities, the International Monetary Fund’s (IMF’s) Director of African Department Abebe Selassie said yesterday
He told reporters at the ongoing IMF/World Bank Annual Meetings in Washington, D.C, that the Fund is already providing tax guidance to the country.
Whatever decision the federal government eventually takes on tax reforms, he said, will have to be backed by the National Assembly.
He said the Ministry of Finance has already identified certain steps to be taken by way of tax administration, improving tax administration, and ensuring that people are paying appropriate taxes.
“Whatever decision the Federal Government takes on adjusting the tax policy, it has to consult the National Assembly. The IMF has been providing a lot of support, technical assistance support and policy advice in this area,” he said.
“But our guess is that there also is going to be need for tax policy changes for Nigeria, which has a very, very low level of revenue mobilization to improve that.
“These resources are needed to help strengthen the infrastructure environment in Nigeria, to help invest in the many, many schools, that have to be built and improving health delivery.” Continuing, Abebe said: “Now, in terms of designing tax policy changes there is a way to do it, and indeed we advise countries and provide technical assistance on how to do this in a way that is progressive.
“So, you know, the taxes are collected on people that are rich, the richer segments of society rather than the poor. So, there is a lot of technical work that can be done to do that.
“And again, I cannot stress, the key remains that Nigeria, we feel, needs to do a lot more investments both in infrastructure, and in human capital investment.”
Abebe said that developing plans and models or reform strategies that are specific to Nigeria’s specific needs at this venture are important.
He added:”on agriculture, given how big the size of the Nigerian economy is and given the potential that it has including an agriculture as it’s used to in the past, it is a sector that should be doing much better.
“On the macro side, I think what is needed in Nigeria at this moment are mobilizing more revenues. I think that is important to help the government invest more in health and education and building infrastructure that is going to be important for other sectors like agriculture, manufacturing to take off.”
According to him, without energy, it’s difficult to have higher productivity activities to take place including in agriculture.
“Addressing the energy issue requires a lot more public investment and so, the revenue mobilization angle being important.
“But on the fiscal side, there is also a need to further improve the allocation of foreign exchange systems, there has been a strong improvement in that. I think just creating liquid and deep foreign exchange markets, financing the reforms that have been taking place in the last couple of months is going to be important.”
Selassie said that with the gap between the foreign exchange market rate, the bank rate and the parallel market rate was very wide earlier in the year with many businesses complaining about shortage of foreign exchange, not having enough access to foreign exchange.
“I think that has reduced over the last four, five months, so that’s what we are encouraged by,” he stressed.
He said the external financing environment facing the Sub-Saharan region has been supportive.
Also speaking on Nigeria’s borrowing plans, he said the first public debt has risen in many countries in the region and that the medium level of debt in sub-Saharan Africa has increased from 34 per cent in 2013 to 48 percent of Gross Domestic Product in 2016.
“Most of the pronounced increase in debt has happened in oil-exporting countries following the deterioration in their economic conditions, of course. But we’ve seen debt levels increasing also in countries that have been sustaining high growth.
“The main drivers behind this rapid debt accumulation have been the elevated level of fiscal deficits, growing interest bills, and valuation effects associated with exchange rate depreciation,” he said.