The International Monetary Fund (IMF) says Nigeria must collect more taxes to fund the national budget and pay public debts if its fuel subsidy removal policy and foreign exchange unification initiative are to be optimally beneficial.

The IMF Africa Department Director, Abebe Selassie, said this at a news briefing on Friday, while speaking against the backdrop of the harsh economic conditions in Nigeria on the back of the removal of fuel subsidy and foreign exchange unification by President Bola Tinubu. He said the new subsidy regime would not translate to economic growth and stability under Nigeria’s current tax administration.

The multilateral body maintained that Nigerian policymakers must urgently complement the fuel subsidy removal with a set of policies that could ease the economic challenges facing the country.

Selassie said, “The exchange rate reforms that the government did were very, very welcome, trying to unify the rate, similarly the fuel subsidy. But that will not help and will not stick unless you also are tightening monetary policy; unless you’re also doing something to mobilise more tax revenues. So, a holistic package of reforms is what’s needed.

“So, you have a medley of things mainly rooted in the fiscal challenges that Nigeria has faced, not having tax revenues. At the same time, this is a country with incredible potential and we have seen reforms moving in the right direction in recent months. What is needed, we feel, is making the reforms holistic and help reinforce each other. Just as things were not reinforcing each other in the past, I think there is scope to make the reforms reinforce each other.”

He said, “Why are there not enough tax revenues? In the past, over-reliance on oil was when prices were high. Second, of course, is the subsidy regime, which also entails quite a lot of loss of government resources being directed where they perhaps should not be. So, I think these are all interlinked issues, including causing some of the inflation that you’re seeing, because, given the difficulty to tap international capital markets, the government has had to rely more on domestic financing, which has either crowded out the private sector or of course caused the monetary injection, which again has weakened the exchange rate.”

Petrol prices have increased from roughly N185 per litre to about N600 per litre as a result of the deregulation of the downstream oil sector, which has hurt and caused immense misery for many Nigerians.

In addition, the government’s measures intended to harmonise the official and black market exchange rates of the naira, which were made public in early June, have made the sudden increase in the cost of goods and services that followed the increase in the price of petrol at the pump even worse.

The IMF and World Bank are currently having their annual meetings in Marrakech, Morocco where some critical takes on the macroeconomy of some African countries like Zambia, Morocco, Tunisia, and Zimbabwe have already emerged from the summit.