Elimination of fuel subsidies, recovery in crude oil prices and an increase in the Value Added Tax (VAT) rate to 7.5 per cent will ease fiscal pressures on Nigeria economy, according to the Director General, Nigeria Country Office of African Development Bank (AfDB), Mr Lamin Barrow.
Barrow said this while representing the AfDB President, Dr Akinwumi Adesina, during an investors’ webinar to showcase the investment opportunities in Nigeria’s privatisation and economic reform programme.
The DG stated that the country was facing high fiscal risks due to reliance on oil, low non-oil revenues and high debt service payments.
He identified other risks to medium-term growth for the country as high food inflation, insecurity, and high unemployment.
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“Fiscal risks are likely to remain elevated in the medium-term due to high dependence on oil receipts, weaknesses in non-oil revenues (less than four per cent of GDP) and high debt service payments (exceeding 60 per cent of federally retained revenues) amidst spending pressures,” Barrow said.
He added, “Besides the uncertainties associated with the pandemic, other downside risks to the medium-term growth outlook include fiscal pressures – (fiscal and current account deficits and financing); persistent (food) inflation; insecurity and high levels of unemployment, which has increased to 33.28 per cent (and especially youth unemployment – estimates range from 38 to 42.5 per cent).”
The DG stressed that the Nigerian government’s plan to lift 100 million Nigerians out of poverty by 2030 is being threatened by the high rate of unemployment and income inequality in the country.
“Poverty headcount has increased, with approximately five million more Nigerians likely to have been pushed into poverty in 2020. High unemployment and income inequality (35.1 per cent in 2020) pose significant challenges to government’s objective to lift 100 million people out of poverty by 2030,” he added.
