IMF (The International Monetary Fund) officials warned that Nigeria’s revenue-to-GDP ratio is only 10 per cent and that this is threatening the economy.
With 74 per cent of federal revenue spent on debt servicing, Davide Furceri urged the government to broaden its tax base.
Can Nigeria secure a stable future as global public debt nears $100 trillion?
At the IMF/World Bank meetings in Washington DC, the IMF raised concerns over Nigeria’s low revenue-to-GDP ratio, which stands at just 10 per cent.
As a result, this, according to the IMF, is insufficient to drive the necessary changes in the economy.
Davide Furceri, is the division chief of the IMF’s Fiscal Affairs Department, pointed out that Nigeria’s debt servicing consumes a significant portion of its revenue, similar to other low-income countries where the ratio averages 15 per cent.
Nigeria’s Debt And Revenue Struggles
Moreover, Furceri explained that much of Nigeria’s revenue growth is immediately used to pay off debt, leaving little room for investment.
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He emphasised the need for Nigeria to broaden its tax base and improve revenue mobilisation to achieve fiscal stability.
In addition to these fiscal challenges, Furceri noted the impact of rising food prices and droughts on the Nigerian economy.
He called for more transparent mechanisms to ensure government resources reach the most vulnerable and highlighted the need to balance revenue growth with social safety nets.
Furthermore, the Central Bank of Nigeria had said that debt servicing consumed 74 per cent of federal revenue in the first quarter of 2024, totalling ₦1.31 trillion out of ₦1.76 trillion.
This is the lowest level in five years, as naira devaluation and the removal of petrol subsidies drove the decrease.
Also, it is the lowest level in five years and this time it is driven by naira devaluation and the removal of petrol subsidies.
On a global scale, the IMF’s Director of Fiscal Affairs, Vitor Gaspar, warned that public debt was projected to reach $100 trillion by year’s end, with debt-to-GDP ratios rising in many major economies, including China, the US, and the UK.
Therefore, for Nigeria, increasing revenue and reducing debt are essential for stabilising the economy.
