Nigeria must raise revenue to GDP ratio by 15% in three years – IMF

Ari Aisen, the International Monetary Fund (IMF), chief rep to Nigeria, has explained how Nigeria needs to raise revenue to gross domestic product (GDP) ratio to about 15 percent from 7.5 percent in the next three years to consolidate its fiscal position.

Speaking at the ABC Economic Update: ‘The Opportunities and Imperatives for Businesses,’ organised by the American Business Council in Lagos recently, Aisen said that raising revenue to GDP ratio holds serious economic implications for Nigerian businesses as government would need to raise Value Added Tax (VAT) rates, and broaden the tax base.

For Nigeria to raise its revenue, the IMF chief rep believes the country’s tax administration must be strengthened through digitalisation.

On how Nigeria’s economy can navigate the risks, Aisen said Nigeria needs to consolidate its fiscal positions through mobilising more affected drivers by spending more on social infrastructure as spending is currently very low.

According to him, Nigeria’s fiscal position is not very good and there is a need for financing to actually meet the spending targets.

While emphasising that Nigeria’s debt position has been increasing, Aisen said the increasing debts in the midst of financing needs would lead to a time the debt position will put very strong pressure on the economy.

On the opportunities for Nigeria in 2022, he said that getting the Dangote Refinery to work as forecast, could be an upside for the Nigerian economy.

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He however added that the African Continental Free Trade Agreement (AfCFTA), less protectionist policies as well as a reduction in tariff and non-tariff trade barriers can enable Nigeria to enjoy other markets in the African region.

Dinesh Rathi, chief executive officer of Lagos Free Zone, who noted that the manufacturers of FMCGs have a strong window of opportunities to grow in 2022, said the manufacturing sector can leverage the African Continental Free Trade Agreement (AfCFTA), to not only produce for Nigerian market but to also export products into other African countries.

On the outlook for 2022, Margaret Olele, CEO/executive secretary of American Business Council, who pointed out the need for businesses to navigate the challenging business environment, said the forex and monetary policy environment would continue to pose a serious challenge on businesses.

According to her, Nigeria’s export will create huge business opportunities for FMCGs and other manufacturing sectors.

She however advised the private sector and government to work together in order to navigate the risks that would confront businesses this year.

On what businesses should do to stand tall amid economic uncertainties, Adi Bongo, a professor from Lagos Business School, said that shortage in forex supply has been a huge risk for businesses in Nigeria, and there is a need to improve the capacity for businesses to look inward for import substitution and to export more.

Noting that logistics will also pose huge limitations for businesses, Bongo, however, called on the government to solve logistics challenges by expanding the rail network to enable companies to locate their markets and raw materials supply in-country.