The World Bank has raised an alarm that Nigeria might be facing an existential threat due to its dwindling economy, calling for the removal of the subsidy regime.
The international financial institution opines that dwindling revenue, the continued payment of trillions of naira on fuel subsidy by the government, and the attendant economic challenges put Nigeria in an unfavourable economic position.
The Senior Public Sector Specialist, Domestic Resource Mobilisation, World Bank, Rajul Awasthi, raised the alarm on Wednesday at a virtual pre-summit, themed: ‘Critical Tax Reforms for Shared Prosperity’, organized by the Nigerian Economic Summit Group (NESG)
In a slide he shared during his presentation, which showed Nigeria’s Development Update, Awasthi noted 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, while oil revenues are also falling amid higher prices.
“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 (GDP) ratio. Despite oil prices rising the way they have been net oil and gas revenues have been falling because of the tremendous impact of the subsidy.
!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 noted that value added tax (VAT) compliance gaps were immense in the non-oil sector, and needed to be breached as well as rationalise tax expenditures.
Nigeria is 115th out of 115 countries in terms of the average revenue to Gross Domestic Product (GDP) ratio. Despite oil prices rising the way they have been net oil and gas revenues have been falling because of the tremendous impact of the subsidy.
