Nigeria May End Up with IMF ‘Unwillingly’ If It Fails to Address Fiscal Challenges, Says Budget Office Boss

Nigeria’s Director General, Budget Office of the Federation (BoF), Ben Akabueze, on Tuesday expressed concerns over the rising fiscal headwinds, Akabueze, said that Nigeria may seek relief from the International Monetary Fund (IMF) if it is unable to address its problems before they escalate.

Speaking on ARISE News, Akabueze, a former Economic and Budget Planning Commissioner in Lagos, said: “Essentially, there are two ways countries end up with the IMF. One is voluntary when they ask IMF for help, or when things get to the grind where they simply have no other option.

“I don’t see Nigeria going to the IMF voluntarily. It’s a hot issue here in Nigeria. But the honest truth is that if we don’t address our fiscal challenges in a sensible and sustainable manner, we may end up unwillingly with the IMF,” he warned, but however assured that Nigeria wasn’t at that kind of desperate situation yet.

He added: “We are not there yet. But we could as much stop digging. There is a maxim that if you find yourself in a pit, you should stop digging and start climbing out.

 

“If we continue to fund regressive deficits, it is tantamount to continuing to dig. If we continue to pass on reasonable opportunities to increase revenues by introducing taxes, it is tantamount to continuing digging.

“Even though I said we should not cut expenditure in total, we need to get more efficient in our spending. If we don’t do that again, it is tantamount to continuing to dig.”

Stressing that petroleum subsidies were not sustainable, Akabueze advised that gains from the removal should be redirected to unlocking investment potential in the oil sector, adding that it was unreasonable to keep exporting crude without refining it more than 60 years after oil exploration and production began in the country.

He also spoke on the suspension of the planned 5 per cent telecoms tax, maintaining that Nigeria may have to rework its recent Medium Term Expenditure Framework (MTEF).

He said if confirmed, it would negatively impact government financial projections for next year’s budget.

According to him, while the tax had already been captured in the Finance Act 2020, any move to postpone its implementation would lead to distorting the 2023-2025 funding plan.

Akabueze stated that the MTEF document had already gone through a long process before its official endorsement, arguing that tampering with it would only negatively impact government’s future plan.

“I don’t know about the suspension. This is law now. So, beyond what I have read in the media, we haven’t been advised in terms of the suspension. For instance, recently the Federal Executive Council (FEC) passed the MTEF for 2023-2025.

“The framework that the FEC passed includes projections for this tax. That framework is currently before the National Assembly. Over the last two weeks we have been holding meetings with agencies of government on this.

“ If we are formerly advised that this is no more applicable, then we will have to rework that Medium Term Expenditure Framework.

“What that means is that the projected revenues will decline and the deficit will increase, which means that we either have to cut back on expenditure or increase debt,” he argued.

The MTEF proposal has a total of N19.76 trillion, with a proposed deficit of N12.42 trillion. “We face critical fiscal challenges which we need to address,” Akabueze maintained.

The Minister of Communication and Digital Economy, Isa Pantami had announced the suspension of the telecoms tax implementation, stressing that its execution could lead to heavy negative impact on the struggling sector.

But Akabueze insisted that the companies operating in Nigeria were not overtaxed, drawing a parallel between Nigeria and 21 other African countries, which he said pay higher taxes.

He, however, did not explain the differences in the operating environments, including in terms of availability of power, security, volatility of the local currency, among others.

According to him, the Average Effective Tax Rate (AETR) in some African countries, for the telecoms sector, which measures the per cent of the income that an individual or a corporation pays in taxes, is currently over 90 per cent. He added that the matter had been extensively deliberated upon before it was released to the public.

“This wasn’t something that the ministry of finance woke up and introduced. The Finance bill went through the FEC. It went to the National Assembly as an executive bill from Mr. President. At the end of the day, it was passed and they signed it into law.

“We were engaging with customs and the Nigerian Communications Commission (NCC) about implementation,” he said.

He further suggested that the Asset Management Corporation of Nigeria (AMCON) should increase the amount of statutory contribution made by banks, noting that the matter was of grave concern.

“There are debates and discussions over whether AMCON overpaid for the assets or not, given how toxic they were. Yes, this is a matter of serious concern to us on the fiscal side.

“If AMCON does not work down these assets and pay down the amount that was invested in securing the assets, that burden will eventually devolve on the treasury and become part of the national debt that all of us have to pay.

“By the design, the resources to work down the obligations would partly come from contributions from the bank and I think that AMCON should at this point consider raising the level of the contributions that the banks make, even on a risk asset-weighted basis, so that banks that contributed significantly to the pool of assets.

“Banks that are making mouth-watering profits nowadays should be made to contribute more significantly to working down these assets.

“It does not look equitable that the banks will dump their toxic assets on AMCON which will now become a public burden and now they are declaring great profits and declaring dividends for their shareholders,” he maintained.

The budget office chief further argued that government was not bloated as it is currently constituted, but stressed that there needs to be rebalancing of the workforce.

Ndubuisi Francis, Emmanuel Addeh in Abuja and Nume Ekeghe in Lagos

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