Nigeria has been warned by the International Monetary Fund (IMF) against implementing new tax measures in order to increase revenue. The IMF said now is not the time for countries to increase their tax push, but rather, initiate supportive policies that will help affected households and sectors impacted by the economic downturn caused by the COVID-19 pandemic.
This was said by the Director of the IMF Africa Department, Abebe Aemro Selassie while presenting the latest regional economic outlook for Sub-Saharan Africa to the media. According to him, policies needed now are those that will confront the financial burden of businesses, as most have recorded a significant loss to COVID-19 pandemic and the measures adopted to curb further spread of the coronavirus.
While speaking about the situation of Nigeria, Selassie said, “Nigeria is an oil-exporting country so the impact of the pandemic is being compounded by the sharp decline in oil prices. We are projecting that GDP growth would contract around 5.4 percent this year so it’s a very significant hit to incomes,” the director said while presenting the latest regional economic outlook for Sub-Saharan Africa.
“It will be very important to have very nimble policy response to ensure that the hits to the economy are not compounded by policy challenges." Selassie said, adding that, "This is not the time to be aggressively introducing new tax measures but there is a long-standing challenge, on the fiscal side, of needing to have sufficient resources generated by the government from non-oil sources to provide investments in health, education, infrastructure so there is that long-term agenda that needs to be addressed. Right now, fiscal policy can be supportive and needs to be supportive.”
Though the COVID-19 cases are increasing daily in Nigeria, the country has to prepare for post-COVID-19, and one of the measures expected to be taken after the virus has been curbed is to ensure that Nigeria continues with the supportive policies which will be affordable for businesses still recovering post-COVID-19.
Although, Selassie admitted that it won't be easy due to the scale of the crisis and the consequences of the pandemic, the country can seek support from development partners, “As the region starts to recover, authorities should gradually shift from broad fiscal support to more affordable, targeted policies; concentrating in particular on the poorest households and those sectors hit hardest by the crisis.
“Looking even further forward, and once the crisis has waned, countries should refocus their attention on transforming their economies, creating jobs, and boosting living standards—clawing back some of the ground lost during the current crisis.
“None of this will be easy, particularly in light of the scale of the crisis and its longer-term consequences. The region cannot tackle these challenges alone, and a coordinated effort by all development partners will be key.”
The supportive policies are essential as the country is expected to be pushed into a recession by the pandemic, and if businesses are to survive the period and not make the recession worse than projected, the government will need to work towards the suggestion of the IMF - with special focus on micro and small businesses, as they account for the most jobs in Nigeria.
Already, the World Bank, IMF, and credit rating agency, Fitch, have all projected that Nigeria's economy can not escape recession - although, most countries are expected to fall into recession, but the extent of the recession is different for each country, and the World Bank said that of Nigeria will be the worst in the last 40 years.
AllNews recalls that in the last forty years, Nigeria has entered recession thrice, two under President Muhammadu Buhari, with the last being his first term. The recession lasted for a year.
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