Reform your tax collection to reduce high debt burden, IMF tells FG

The International Monetary Fund (IMF) has called on the federal government to implement a more efficient tax collection system to broaden its revenue base and address the country’s high debt service-to-revenue ratio.

The call was made by Davide Furceri, Division Chief of the IMF’s Fiscal Affairs Department, during the Fiscal Monitor press briefing at the IMF/World Bank Annual Meetings in Washington, D.C., on Wednesday.

Furceri said Nigeria’s current debt service-to-revenue ratio, which stands at around 60%, is still too high, limiting the resources available for critical investments in socio-economic development.

“There is need to grow the revenue/GDP ratio. For a country Like Nigeria, the Debt service /Revenue is about 60 percent. What that means is that a larger part of the revenue of the country goes into debt servicing,” Furceri said.

This means that a portion of the country’s revenue is being used to pay down debt, leaving little room for infrastructure and social programmes that could stimulate economic growth.

To address this issue, Furceri recommends that the Nigerian government focus on improving its revenue generation capabilities, saying, “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.”

He noted that “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.”