IMF Advises Nigeria to Use Oil Revenues to Reduce Debt

By Aduragbemi Omiyale

The Nigerian government has been advised to take advantage of the rising prices of crude oil in the global market to save funds to reduce the country’s debt.

At a press briefing on Wednesday, the global lender expressed dismay at the widening fiscal deficit, noting that the current crude oil market presents an opportunity for the country to lower its debt, especially as an oil-producing nation.

While answering a question yesterday, the Division Chief of the Fiscal Affairs Department at IMF, Mr Paulo Medas, observed that Nigeria’s wide fiscal deficit had been caused by paying subsidies on petroleum and low crude oil production.

Last Friday, President Muhammadu Buhari presented a budget of N20.51 trillion for the 2023 fiscal year to the National Assembly, with projected oil revenue at N1.92 trillion, non-oil taxes at N2.43 trillion, and FGN independent revenues at N2.21 trillion.

Mr Buhari also disclosed that the government plans to finance the budget deficit mainly by new borrowings of N8.80 trillion, N206.18 billion from Privatization Proceeds and N1.77 trillion drawdowns on bilateral and multilateral loans secured for specific development projects and programmes.

At the press conference on Wednesday, Mr Medas said with inflation at double digits in Nigeria, it would be difficult to achieve economic growth if efforts are not made to attain price stability.

“Countries like Nigeria, especially those including oil exporters, can take advantage of rising commodity revenues to address some of these needs and to reduce debt.

“In Nigeria, which has benefited from higher oil revenues, we have not seen an improvement in the deficits, as we would hope, part because of the large energy subsidies, but also other issues with the production of oil and other pressures on the budget.

“So, our recommendation is to try to save some of these oil revenues to reduce debt but also to use them to address these emergency needs,” Mr Medas said.

Speaking further, he said Nigeria’s low tax revenues are undermining the capacity of governments to react to these types of shocks and to provide key services.

“So, I would say in the case of Nigeria, where the priorities are domestic revenue mobilisation, you need to increase the state capacity to address the country’s needs. This will also help make fiscal policy more consistent with other efforts to ensure economic stability.”