The International Monetary Fund (IMF) has said President Muhammadu Buhari must deliver stronger policies if he wants to achieve the objectives set by the Economic Recovery and Growth Plan (ERGP).
The IMF, which just concluded its Article IV consultation with Nigeria, said Buhari’s recovery plan was a welcomed development for the country.
It, however, emphasized the need to raise taxes and eliminate subsidies.
“Executive Directors recognized that the Nigerian economy has been negatively impacted by low oil prices and production,” IMF said in a statement.
“Directors commended the efforts already made by the authorities to reduce vulnerabilities and enhance resilience, including by increasing fuel prices, raising the monetary policy rate, and allowing the exchange rate to depreciate.
“However, in light of the persisting internal and external challenges, they emphasized that stronger macroeconomic policies are urgently needed to rebuild confidence and foster an economic recovery.
“Directors welcomed the authorities’ Economic Recovery and Growth Plan (ERGP), which focuses on economic diversification driven by the private sector, and government initiatives to strengthen infrastructure—including the recently adopted power sector recovery plan. However, they underlined that without stronger policies these objectives may not be achieved.
“Directors generally emphasized the need for a front-loaded, revenue-based fiscal consolidation starting in 2017, to reduce the federal government interest payments-to-revenue ratio to sustainable levels.
“They underscored that priority should be given to increasing non-oil revenue, including through raising VAT and excise rates, strengthening compliance, and closing loopholes and exemptions.
“Administering an independent fuel price-setting mechanism to eliminate fuel subsidies, strengthening public financial management, and developing a well-targeted social safety net would also support the adjustment. Directors stressed the need to contain the fiscal deficit of state and local governments, including through improved transparency and monitoring”, he said.