The International Monetary Fund (IMF) on Thursday insisted that Nigeria should remove its fuel subsidy, which it said has accumulated to the tune of $5.2 trillion since 2015.
The Washington-based Fund recommended the creation of a social protection safety net so that the most exposed in the population do not take the brunt of the removal of the subsidy.
“We believe that removing fossil fuel subsidies is the right way to go. If you look at our numbers from 2015, it is no less than about $5.2 trillion that is spent on fuel subsidies and the consequences thereof,” Christine Lagarde, IMF managing director, said during a press conference at the ongoing 2019 World Bank/IMF Spring meetings in Washington DC.
If the subsidy removal happens, she said there would be more public spending available to build hospitals, roads, schools, and to support education and health for the people.
She said the Fiscal Affairs Department has actually identified how much would have been saved fiscally but also in terms of human life if there had been the right price on carbon emission as of 2015.
“The numbers are quite staggering,” she added.
Lagarde advised the Nigerian government to make real effort to maintain a good public finance situation for the country in order to direct investment towards health, education, and infrastructure.
“I would add as a footnote as far as Nigeria is concerned that, with the low revenue mobilisation that exists in the country in terms of tax to GDP, Nigeria is amongst the lowest,” she said.
On the global scene, Lagarde said the global economy is currently quite uncertain and that as at a year ago, 75 percent of the global economy was going through the phase of synchronised growth.
“As you heard a couple of days ago, we are now talking about a synchronised slowdown by 70 percent of the global economy. So our forecast for growth this year is 3.3 percent, going back up we hope in 2020, based on our forecast, to 3.6 percent,” she said.
This expected rebound from 3.3 percent in 2019 to 3.6 percent in 2020, she said, is precarious and subject to downside risks, ranging from unresolved trade tensions, yet high debt in some sectors and countries, both public and corporate, to the risk of weaker-than-expected growth in some stressed economies.
In terms of policy recommendations, about this moment of uncertainty and precarious possible pickup, Lagarde suggested not a single policy but multiple policies because it will have to be country-specific as there is no one-size-fits-all.
“But we certainly would recommend two key principles. One is, do no harm. Second, do the right thing. So do no harm. The key is to avoid the wrong policies, and this is especially the case for trade,” the IMF managing director said.
The Fund urged countries to create more room in order to resist the next crisis when the downturn comes and that means enhancing resilience by making smarter use of fiscal policy and by strengthening financial sector policies and discipline.
“And in all of these efforts, we need stronger international cooperation. We need those policymakers that I would call the women and the men for all seasons in order to resist that uncertainty that we have at the moment,” she said.
Regarding the Africa and China debt issue, Lagarde said the World Bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there.
“We are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles that have been approved by the G20 and that we have endorsed internally and developed ourselves.
“It is clear that any debt restructuring programmes going forward in the years to come will be more complicated than debt restructuring programmes that were conducted 10 years ago simply because of the multiplicity of lenders and the fact that not all public debt is offered by members of the Paris Club, for instance, which does not mean to say that any debt from a lender outside the Paris Club is an issue as long as the principal principles are adhered to,” Lagarde said.
Hope Moses-Ashike & Onyinye Nwachukwu in Washington, D.C.
