Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, and Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, on Wednesday, told foreign investors that with reforms initiated by the federal government, confidence had been gradually restored in the Nigerian economy.
Similarly, on Wednesday, Cardoso disclosed that the Nigerian Inter-Bank Settlement System (NIBSS) would by December launch a Bank Verification Number (BVN) platform for Nigerians in the diaspora.
Besides, International Monetary Fund (IMF) advised Nigeria and other African countries to work towards making their tax systems more efficient, equitable, and progressive.
Cardoso and Edun spoke during an interactive session with groups of foreign investors at the ongoing IMF/World Bank Annual Meetings holding in Washington DC.
The CBN governor told his audience, who were mostly asset managers, investment bankers and investors from JP Morgan, Standard Chartered, among other global financial institutions, “Confidence has returned to the market and there is also confidence by Nigerians in their currency.
“Clearly, a situation where interest rate has gone up, we expect that there would be more interest in local currency instruments.
“Something else that is important in these whole adjustments in the Nigerian economy is the fact that Nigerians would be more inclined to produce locally because it is a lot cheaper for them to do so, rather than depend on imported goods.”
Cardoso added, “Concerning the harmonisation of rates, bear in mind that for those who are used to sending money to Nigeria, they no longer have to find other unorthodox methods of sending their monies home. I particularly refer to remittances from the diaspora. That is why we have had a major uptick in that level of inflow.
“Yesterday (Tuesday), we engaged those in the diaspora to ensure that process continues. There are also positive outcomes to Nigerians.”
Responding to a question as to whether the Monetary Policy Committee (MPC) at its last meeting took cognisance of the latest fuel price increase, Cardoso said, “The answer to that is, yes. We had to do so because we predicted that situations would get a little bit more sticky and to moderate the effects of that we decided to increase interest rate.”
Edun pointed out that there had been a commitment by the federal government to raise oil production to two million barrels a day, as part of efforts to boost revenue.
He stated, “In 2015 or so, we were at 2.3 million barrels a day. So, it’s a very reachable target, which the whole ecosystem, the government, and the oil sector, are committed to administering the process that has been improved and will allow speedier implementation of investments.
“The subsidy removal, the fact that the petrol subsidy and the related foreign exchange subsidy are removed means that you can expect, and we will see, a flow of funds into the government coffers. We know that there’s still a demand for foreign exchange.
“In terms of fiscal performance, where we met things was huge debt servicing, costing nearly 100 per cent of revenue and deficit of 6.5 per cent. We got it down so far in the first half of this year, and the debt service to around 60 per cent of revenue, which is still high, but we’re coping with it.
“And by prioritisation, and in terms of the other aspects of fiscal policy, the budget deficit is down to around 4.4 per cent of GDP as of first half of 2024. The target for the year is four per cent, and we are still hopeful of achieving that.”
He added, “It is the overall macroeconomic reset to stop the haemorrhaging and then build up the revenues and add investments. That is the overall strategy of getting Nigeria, once again on the path to rapid, sustained, and inclusive growth, which is the president’s strategy, his objective and his commitment.”
Edun also revealed, “In terms of Value Added Tax (VAT), the commitment of President Bola Tinubu is that while implementing necessary, but wide-ranging reforms, the poorest and the most vulnerable would be protected. In terms of VAT.
The bills going through the National Assembly would raise VAT for luxury goods, while at the same time seek to exempt VAT for the essentials and what the poor and vulnerable can purchase. Those items would be singled out and exempted from VAT, while hitting VAT for luxury goods.”
Earlier in a presentation, Deputy Governor, Economic Policy, CBN, Muhammad Sani Abdullahi, said the Tinubu administration hit the ground running last year with the removal of two key subsidies, which he stressed had held back the Nigerian economy for over 40 years.
Abdullahi stated that with the subsidy removal had resulted to improved revenue mobilisation.
He said, “The fiscal and monetary policies are working hand in hand to deliver a stronger and more stable Nigeria in terms of the institutional reforms. There has been a lot of focus on restoring price stability, rebuilding confidence and regaining market credibility. The stoppage of quasi-fiscal activities for the CBN and its return to orthodox monetary policy has been a cornerstone of the leadership of the bank.”
The CBN geputy governor explained that the agreement between the Ministry of Finance and CBN regarding Ways and Means was critical to ensure price stability.
He stated, “On the fiscal side, there’s been a lot of work on fortifying the public finance buffers, addressing low domestic revenue mobilisation through various measures, including much stronger tax administration and improving corporate income taxes.”
Abdullahi pointed out that the ongoing banking sector recapitalisation was aimed at strengthening the system.
He said, “The social safety net, which is one piece of work that is ongoing, and prioritising expenditure to ensure that we allocate as much funds for social protection and other priority spending that goes to take care of the vulnerable parts of our society, has been a priority.
“We are at the cusp of a structural transformation and we hope to see Nigeria emerge from an import-dependent economy to one that is export-driven. And there’s a lot of work that’s happening right now in terms of ensuring that we clean up our export processes.
“There’s a lot of work in other sectors, in agriculture, electricity, and we are really freeing the electricity markets to be able to reprice this market-based pricing and to ensure that we get investments within that. So there’s a lot of work also happening.”
Director-General of Budget Office, Mr. Tanimu Yakubu, said with the performance of the 2024 budget in terms of revenue, the country was doing well.
Yakubu stated, “In terms of revenue, we are doing a lot better. Budget performance was N13.1 trillion and actual performance was N12.6 trillion, which gave us a deficit of about N500 billion. So, the aggregate revenue target was missed by 3.6 per cent, so we are doing good.”
CBN: NIBSS Set to Launch BVN Platform for Nigerians in Diaspora by December
Cardoso disclosed that NIBSS will launch a BVN platform for Nigerians in the diaspora by December.
BVN is an 11-digit number that is unique to each individual, but the same across all banking institutions for the same individual.
Cardoso added that the platform would enable Nigerians in the diaspora to operate their local bank accounts, run their businesses and sort out Know-Your-Customer (KYC) issues with financial institutions from anywhere in the world.
He explained that the initiative was part of efforts to ensure that Nigerians, irrespective of their location anywhere in the world, could participate in the Nigerian economy.
He said, “As far as we are concerned, it is totally unacceptable that you should be out here and be having hassles in operating your accounts or doing your business in your original country.
“I want to tell you that starting in December 2024, Nigerians in the diaspora will no longer face the hurdle of travelling long distances for physical biometric verifications to access financial services. The launch of the non-resident BVN platform by NIBBS will enable enhanced KYC processes, remotely making it more convenient and cost-effective for the diaspora to engage with the Nigerian banking system.
“This initiative, in collaboration with our banks, marks a significant step toward greater financial inclusion and accessibility as we continue to roll out innovative solutions.”
IMF Urges Nigeria, Others to Make Taxation More Efficient to Boost Revenue
IMF, on Wednesday, advised Nigeria and other African countries to work towards making tax systems in their countries more efficient, equitable, and progressive.
The Washington-based institution also underscored the importance of timely fiscal reforms and leveraging technology to enhance governance in the region.
Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, and IMF’s Managing Director, Kristalina Georgieva, reaffirmed their commitment to bolstering Africa’s economic resilience amid a global landscape marked by geopolitical fragmentation, high borrowing costs, and persistent inflation.
IMF’s Fiscal Affairs Department Director, Davide Furceri, gave the advice for African countries to improve their tax systems during a media briefing to launch the updated Fiscal Monitor at the ongoing IMF/World Bank Annual Meetings in Washington DC.
Furceri emphasised the need for Nigeria and other Sub-Saharan African countries to prioritise revenue mobilisation strategies to close their widening fiscal gaps.
He pointed out that many countries, including Nigeria, suffered from extremely low revenue-to-Gross Domestic Product (GDP) ratios, with Nigeria’s just at 10 per cent. He stressed that this hampered the government’s ability to invest in development and manage debt sustainably.
Furceri explained, “Revenue mobilisation is essential, and it should focus on making the tax system more efficient, equitable, and progressive. Policies that broaden the tax base and reduce informalities can go a long way in addressing these challenges.”
Furceri also expressed concern over the increasing debt service obligations faced by many low-income countries in the region, stating that about 15 per cent of revenue in the region is being allocated to debt service. He said this reduced fiscal space for essential investments in infrastructure, education, and healthcare.
Furceri added, “The challenge is that a large part of the revenue goes to finance debt, which constrains the ability of these countries to invest in growth-enhancing initiatives. Addressing this through better revenue collection and debt management strategies is critical.”
In response to the challenges, Furceri highlighted IMF’s ongoing commitment to supporting African economies through policy advice, capacity development, and financial assistance.
He stated that over the past four years, the multilateral institution had provided $60 billion in funding to African countries, while also offering technical support to improve public finance management and climate change-related policies.
Furceri said, “The IMF, as in the past years and as always, has provided significant advice to countries from policy support, policy advice but also financing support. Just to give a number, over the past four years, about $60 billion of funding has been provided to African economies to help their challenge.
“The IMF is also providing a variety of capacity development to support, for example, increase public finance management, improve taxation, revenue mobilisation, as well as new areas that are developing that are becoming more and more important, such as climate change.”
In his remarks during the media briefing, Director of IMF’s Fiscal Affairs Department, Vitor Gaspar, emphasised that delaying necessary fiscal adjustments in the region could hinder development and escalate public debt levels.
Gaspar said, “Delaying adjustment is costly and in Sub-Saharan Africa. I would argue that building fiscal space is not only crucial to limit public debt, but in many countries in Sub-Saharan Africa, it is key to enable the state to play its full role in development, which is, of course, a priority in the regions.”
According to Gaspar, fiscal adjustments must be decisive, well-designed, and effectively communicated to maintain public trust and support.
He warned that countries must not postpone reforms, especially as many in the region continued to grapple with low revenue-to-GDP ratios and rising debt service burdens.
Gaspar reiterated that reforms were essential for long-term stability and growth, saying, “Fiscal adjustment should be timely, should be decisive, should be well-designed, and should be effectively communicated.”
He highlighted the role of technology in improving governance and transparency, a critical need for many developing nations in the region.
Gaspar emphasised the “Three Ts” framework – technology, transparency, and trust – as a blueprint for governments to enhance accountability and foster citizen engagement.
He stated that technology could simplify governance processes, improve public finance management, and even bolster tax compliance.
At the African caucus meeting, Edun and Georgieva reaffirmed their commitment to bolstering Africa’s economic resilience.
In a statement issued after a meeting between the African caucus and the IMF boss, they acknowledged the complex and volatile economic environment facing the continent. Edun, who was Chairman of the African caucus, and Georgieva, emphasised that African economies were grappling with an array of external pressures that complicated policymaking.
The pressures included rising living costs, social instability in some regions, and security challenges that not only harmed populations but also undermined economic growth.
Edun and Georgieva said, in the statement, “Together we are committed to strengthening Africa’s resilience to address the many challenges facing the continent. Policy priorities in the region are focused on securing the economic recovery, continuing to address imbalances, and creating space for much-needed development-focused investment.
“In countries where inflationary pressures are receding and inflation is near target, there is space to gradually ease towards a more neutral stance in close cooperation with other policies.
“In countries where inflation is still elevated, further tightening may be required. The exchange rate, where appropriate, should be allowed to play its shock absorber role while mitigating the second-round effects of depreciation. Fiscal policy needs to find the right balance to address debt vulnerabilities and spending pressures.
“Renewed focus on enhancing domestic resource mobilisation is critical and it should be supported by governance reforms to improve public financial management, fiscal transparency, and enhance accountability.”
They added, “We welcome the launch of the Joint Domestic Resource Mobilisation Initiative (JDRMI) by the IMF and World Bank which seeks to improve domestic revenue mobilisation, enhance spending efficiency, and develop domestic financial markets.
“We support a joint effort to channel more affordable financing for development, including for climate change adaptation and mitigation. This urgent need for scaling up concessional financing for Africa needs the support of all partners.
“The recently approved Review of the Poverty Reduction and Growth Trust (PRGT) allows the Fund to maintain adequate financial support to low-income countries, while restoring the self-sustainability of the Trust. The Review of Charges and the Surcharge Policy has substantially reduced the cost of borrowing.”
The statement added, “Under the General Resource Account (GRA). Once the reform becomes effective on November 1, 2024, eight countries will not be subject to surcharges because their credit outstanding will be below the new threshold, four of which are in Africa.
“The Resilience and Sustainability Trust (RST) is providing longer-term affordable financing to address longer-term challenges, including climate change and pandemic preparedness.
“We encourage continued support to ensure that the RST has the financing available to meet growing needs. We welcome the IMF Executive Board approval of the use of SDRs for the acquisition of hybrid capital instruments issued by prescribed holders. This will allow members to channel SDRs to Multilateral Development Banks as part of their capital.
“We welcome the conclusion of the 16th General Review of Quotas (GRQ) with the approved increase of IMF members’ quotas by 50 per cent. We encourage more work on quota realignment towards developing economies, including through a new quota formula, under the 17th GRQ. We look forward to welcoming the 25th Executive Board Chair intended for sub-Saharan Africa next month.”
Obinna Chima, Eromosele Abiodun and Nume Ekeghe
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