The International Monetary Fund, IMF yesterday said that the ongoing economic reforms in Nigeria must be holistic to produce the right impact in terms of curbing inflation and improving welfare.
The IMF also commended the decision of the Central Bank of Nigeria, CBN, to remove the foreign exchange restrictions on 43 items, saying such restrictions create ‘unhelpful distortions’
Director, Africa Department, IMF, Abebe Selassie, stated this at the Africa Regional Economic Outlook press briefing in the ongoing World Bank/IMF Annual Meetings in Marrakesh, Morocco.
While commending the recent decisions of the Federal Government to remove fuel subsidy and the unification of official exchange rates, Selassie averred that these measures must be complemented with tight monetary and fiscal policies.
Abebe also said that Nigeria’s debt stock was manageable generally, and there was no debt discussions that are going on, debt profiling or debt restructuring on Nigeria,
He however stressed that the most important cause of the pressures was the fact that the government does not generate enough tax revenue for all the services it needs to provide and hence debt service as the ratio of revenue is high and does not allow much room to spend on other issues.
He said: “In Nigeria the most important cause of the pressures is the fact that the government does not generate enough tax revenue for all the services it needs to provide. Interest payment as a share of revenue is very high and not leaving much room to spend on other issues, that is the key issue that needs to be worked on.
“While there is not enough tax revenue, I think in the past reliance on oil when prices were high and second is the subsidy regime which also implies and entails lots of government resources being directed where they should not be. “These are all interlinked issues including causing some of the inflation that you see because given the difficulty to tap the international capital market, the government has had to rely more on domestic financing,which of course has crowded out the private sector and put constraints on monetary injections which has weakened the exchange rate.
“You have a medley of things rooted in the fiscal challenges that Nigeria is facing in not having tax revenue. At the same time, the country has incredible potential and we have seen reforms moving in the right direction in recent months.
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