Nigeria Anticipates Future With Significant Financing Needs
(Bloomberg) -- Nigeria will have significant financing needs in the future and needs to improve revenue collection, Finance Minister Zainab Ahmed said.
Revenue at 8% of gross domestic product is sub-optimal and “attests to reality of the inadequacy and inefficiency of tax collections,” Ahmed said at an event during the International Monetary Fund and World Bank’s annual meetings in Washington D.C. on Thursday. “We currently have a pervasive revenue-generation problem and that must change to successfully finance out development needs.”
The government had only collected 58% of the 2019 revenue target as of June, President Muhammadu Buhari said earlier this month. This was due to shortfalls in both oil and non-oil earnings with the government takings from crude sales 49% below target. Nigeria has missed annual earnings projections every year since 2016, according to the budget office. Nearly 60% of Nigerians don’t pay taxes, a survey of 10,000 adults carried out in 2018 by the Nigerian Economic Summit Group showed.
The government’s so-called infrastructure master plan requires as much as $3 trillion over 30 years to bridge the infrastructure deficit, Ahmed said. “To achieve this we need fiscal sufficiency, we need buoyancy, which must come through domestic revenues, for it to be sustainable,” she said.
The Nigerian Budget Office has announced a proposal to raise the value-added tax rate to 7.5% from 5% as part of efforts to boost revenue. While this may have some impact on inflation, it won’t be significant and will moderate after some time, Ahmed said.
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