Nigeria’s Revenue-to-GDP Ratio Too Low for Economic Growth—IMF

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By Dipo Olowookere

The International Monetary Fund (IMF) has said Nigeria’s revenue–to-gross domestic product (GDP) ratio of about 9 per cent was too low to trigger the economic growth projected by President Bola Tinubu in his Renewed Hope Agenda.

Addressing journalists at its last press briefing for 2023 on Thursday, the global lender said the administration of Mr Tinubu must boost the government’s revenue to have funds to achieve his goals.

On May 29, 2023, Mr Tinubu took over from Mr Muhammadu Buhari, promising to jump-start the economy and work tirelessly to address food security, end hunger, eradicate poverty, create jobs, and help the most vulnerable members of society

To kick start, he removed the payment of subsidies for petrol and adopted a foreign exchange liberalisation policy, though the exchange rate between the official and the black markets remains wide (N843.07/$1 at NAFEM and N1,180/$1 at the black market.)

At the briefing yesterday, the IMF Director for Communications Department, Ms Julie Kozak, praised Mr Tinubu for the “two bold and important reforms shortly.”

However, she stressed that the revenue-to-GDP ratio must be improved to “create fiscal space for social and development spending.”

“Raising revenue from the very current low revenue to GDP ratio of 9 per cent is essential to create fiscal space for social and development spending.

“Nine per cent of GDP is a very low revenue-to-GDP ratio, and it is not high enough to be able to support strong social safety nets and development spending, to help protect vulnerable households and also to meet Nigeria’s development needs.

“The 2024 budget aims to reduce the fiscal deficit while also creating space for these priority spendings, both on the social side and also on the development side,” she said.

While commenting on the rising inflation in the country, Ms Kozak said the Central Bank of Nigeria (CBN) may have to raise the monetary policy rate (MPC) at its next Monetary Policy Committee (MPC) meeting.

Recall that last month, the National Bureau of Statistics (NBS) said inflation in October 2023 increased by 27.33 per cent, while the MPC at its last meeting in July pegged the benchmark interest rate at 18.75 per cent.

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