Nigeria Needs Innovative Revenue Strategies to Ease Debt Servicing – IMF

The International Monetary Fund has said that Nigeria allocates the majority of its revenue to debt servicing, leaving limited funds for critical development projects, calling for more effective revenue mobilisation strategies to ease this financial burden.

Division Chief of the IMF’s Fiscal Affairs Department, Davide Furceri, gave the recommendation during the Fiscal Monitor press briefing at the ongoing IMF/World Bank Annual Meetings in Washington DC.

Furceri noted that Nigeria’s debt service-to-revenue ratio stands at around 60 percent, significantly constraining the government’s ability to invest in social and economic programmes.

Although the debt service-to-GDP ratio has declined from nearly 100 percent to 60 percent, he stressed that the country must further reduce the share of its revenue allocated to debt repayments by focusing on broadening its tax base.

He said, “There is a need to grow the revenue-to-GDP ratio. For a country Like Nigeria, the Debt Service-to-Revenue is about 60 per cent. What that means is that a larger part of the revenue of the country goes into debt servicing. What we recommend for countries like Nigeria, if they can improve their revenue mobilisation, they will be able to reduce the portion of the revenue that goes into debt servicing.

“It is important to broaden the tax base in order to have more revenue and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.”

He called for the implementation of a transparent and efficient tax collection system, urging the government to improve its fiscal operations to generate more income.

Punch/Hauwa Abu