The International Monetary Fund (IMF) has advised the Nigerian government to implement a more effective tax collection system to expand its revenue base. This recommendation was made by Mr. Davide Furceri, the Division Chief of the Fiscal Affairs Department at the IMF, during a recent Fiscal Monitor press briefing at the IMF/World Bank Annual Meetings in Washington, D.C. Furceri highlighted the concern over Nigeria’s high debt service-to-revenue ratio, which currently stands at about 60 percent, indicating that a significant portion of the country’s revenue is allocated to servicing its debts.
Despite a reduction in the debt service-to-GDP ratio from nearly 100 percent to 60 percent, Furceri emphasized the need for policymakers to focus on revenue generation. He noted that the current high ratio limits resources available for investment in essential programs and projects that could foster socio-economic growth in Nigeria. The IMF’s recommendation centers on enhancing revenue mobilization efforts, which would ultimately help lower the percentage of revenue spent on debt servicing.
The Nigerian federal government has reported a debt service-to-revenue ratio of 68 percent, a decrease from the 97 percent inherited by the current administration. The IMF’s call for a broader tax base and a transparent, efficient tax collection mechanism aims to support the government in collecting more revenue and reducing the burden of debt servicing, thereby promoting economic development.
