The World Bank has raised an alarm that Nigeria might be facing an existential threat due to its dwindling economy.
The international financial institution opines that the dwindling revenue, the continued payment of trillions of naira on fuel subsidy by the government, and the attendant economic challenges put Nigeria in an unfavorable position economically.
The Senior Public Sector Specialist, Domestic Resource Mobilisation, at the World Bank, Mr Rajul Awasthi, raised the alarm at a virtual pre-summit, with the theme ‘Critical Tax Reforms for Shared Prosperity’, organized by the Nigerian Economic Summit Group on Wednesday, August 10.
He insisted Nigeria would have to eliminate the subsidy regime eventually.
In a slide he shared during his presentation, which showed Nigeria’s Development Update, Awasthi explained that between 2015 and 2019, Nigeria’s non-oil revenues were among the lowest in the world and as a result the second lowest in spending, and that oil revenues were also falling even when oil prices were higher.
“Nigeria has the largest economy in Africa and the largest country in Africa by population, so it is critical to Africa’s progress. There is no doubt about that. But the government of Nigeria, from the public finance perspective, is really facing an existential threat. Let’s not downplay the situation. That is the actual reality,” he said.
Nigeria is 115th out of 115 countries in terms of the average revenue to Gross Domestic Product ratio. Despite the oil prices rising the way they have been, net oil and gas revenues have been coming down because of the tremendous impact of the subsidy.
“So, what is going to happen in 2022? The federation’s revenues are going to be significantly lower. They are already very low, and Nigeria is already the lowest in the world out of 115 large countries and this year, it’s really going to be lower than what it was in 2020 because of the debilitating impact of fuel subsidy.”
Speaking on how to get out of the impending threat, Awasthi stated that in the non-oil sector, Value Added Tax compliance gaps were immense and they needed to be breached as well as rationalise tax expenditures.
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