Recently, the International Monetary Fund (IMF) advised the government to consider the removal of subsidy on petroleum products as a remedy to the low revenue mobilization problem in the country, and as a source of funds to other productive purposes.
The minister of finance, in reaction to the deregulation, advise from IMF, disclosed the government’s cautious stance towards fuel subsidy removal, considering that there are no buffers to protect the economically vulnerable members of the population. On another note, we believe that there are strategic alternative policies that can be explored by the government to shore up its revenue base.
Nigeria’s tax-to-GDP ratio remains one of the lowest in the world – clearly the lowest in Sub Saharan Africa, the government needs to be more aggressive and innovative with its tax collection system and tap into huge opportunities in the country’s large informal and neglected sectors of the economy.
Notably, an estimated $1.0bn worth revenue from illegal gold mining smuggled out of Nigeria was lost between 2016 & 2018, according to the Minister of Mining. This alongside a more focused usage of debt financing, channelled towards fixing the structural challenges in the real sector, could go a long way in improving government funding need.
United Capital Plc Research (UCR)
