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By Oluwakemi Abimbola

The International Monetary Fund has said that Nigeria needs to diversify its economy to meet its developmental needs.

This was disclosed by the Director of the African Department, International Monetary Fund, Abebe Aemro Selassie, during the African Department April 2024 Press Briefing held on Friday.

Selassie, who unveiled the Sub-Saharan Africa report titled ‘Tepid and Pricey Recovery’, said, “I think Nigeria first and foremost needs to diversify its economy. Second, this also applies to the resources that the government relies on, which are excessively dependent on oil and not enough on non-oil revenue.”

He added that the low tax revenue-to-GDP ratio of the country was of serious concern.

Selassie noted, “For a country like Nigeria, Africa’s most populous country, with all of those development spending needs, we think it is problematic that tax revenue to GDP is only 8-9 per cent when it should be a lot higher so that more resources can be spent on building universities, on building infrastructure.

“And then lastly, on the monetary and exchange rate area, it is also, we think, important to have a system that is broadly reflective of supply and demand conditions, and I think that is the direction in which the government has moved.”

The African Department director went on to express support for the policy direction of the Tinubu government.

“This government came in last year, inherited very difficult macroeconomic conditions, huge imbalances that were being masked by a lot of controls that were not effective either. And they have been pursuing policies that we think are broadly in the right direction.

“First and foremost, this is for the people of Nigeria, the government of Nigeria, to choose. We have provided advice in terms of what the ideal mix of policies would be. And just to be clear, we have many reports on this, “ he stated.

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Speaking further on fuel subsidy removal, the IMF pointed out that poor Nigerians suffered under the subsidy regime.

“On subsidies in Nigeria, you said who pays? At the end of the day, these subsidies are about resource allocation internally within Nigeria. So, Nigerians pay, and the people of Nigeria pay for these subsidies. And the reason why we counsel against such generalised subsidies is very simple. It tends to be highly, highly regressive, meaning the benefits of such fuel subsidies tend to accrue to richer segments, to richer people than the poorer people.

“So, it is people who are driving these large cars with big houses when they receive subsidised fuel, they are the ones benefiting relative to the poor and vulnerable in Nigeria.

“The resources could instead, of course, be used to improve conditions for poorer people instead of accruing to richer people. That is why subsidy reform is important.”

He lauded the steps the government had taken to reduce the extent of subsidies.

“I think as oil prices have become volatile, the level of subsidy has also moved up and down. But I think the direction of travel— to remove these subsidies and use the resources to provide social protection for the most vulnerable households is, we think, the right one on balance, including from a climate perspective.

“But first and foremost, simply because it is regressive, and it is robbing poor Nigerians to support richer segments of society,” Selassie affirmed.

President Bola Tinubu announced the end of petrol subsidies during his inaugural speech in May 2023.