*Reforms In Nigeria Under Tinubu Not Working, Inflation Still In Double Digits – IMF Report.
"The IMF report released on Friday, categorically stated that Nigeria's reforms are failing to meet desired results.
The International Monetary Fund (IMF), in its latest outlook report for sub-Saharan Africa has indicated that the broad-based economic reforms embarked upon by the President Bola Tinubu-led Nigerian government, are still struggling for a positive impact, 18 months after commencement.
The IMF report released on Friday, categorically stated that Nigeria's reforms are failing to meet desired results.
While the global body's report acknowledged a few countries that have recorded little success in reforms, it projected the average economic growth rate in the region to remain at 3.6 per cent for the full year 2024, but Nigeria’s growth rate, put at 3.19 per cent, is below this average.
Presenting the report, IMF Deputy Director, Catherine Patillo, who presented the report at the Lagos Business School, LBS, according to Vanguard, stated that macroeconomic imbalances in the region had started reducing with notable improvements in some countries, but she excluded Nigeria in the good news.
She said, ‘‘More than two-thirds of countries have undertaken fiscal consolidation. With the median primary balance is expected to narrow by 0.7 percentage points alone in 2024. And these have included notable improvements in Cote d’Ivoire, Ghana, and Zambia, among others.
"On the imbalance side, median inflation has declined in many countries. And it’s already within or below the target band in about half the countries," she stated.
She added, ‘‘Inflation is still in double digits in almost one-third of countries, including Angola, Ethiopia, and Nigeria, and above target in almost half of the region, particularly where monetary policy is not anchored by exchange rate pegs’’.
Patillo further said that exchange rate was improving across most countries in the region.
She stated: ‘‘Looking further at exchange rates, we do see that foreign exchange pressures have largely abated since the end of 2023’’.
But Nigeria has recorded the worst exchange rate instability and local currency depreciation so far this year.
The IMF report also highlighted the impact of debt burden on fiscal stability listing Nigeria amongst the suffering countries.
It stated: ‘‘Debt service capacity remains low by historical standards. In almost one-quarter of countries, interest payments exceed 20 percent of revenues, a threshold statistically associated with a high probability of fiscal stress. And rising debt service burdens are already having a significant impact on the resources available for development spending.
The median ratio of interest payments to revenues (excluding grants) currently stands at 12 percent. Some three-quarters have already witnessed an increase in interest payments (relative to revenue) since the early 2010s (comparing the 2010–14 average with the 2019–24 average). In Angola, Ghana, Nigeria, and Zambia, this increase in interest payments alone absorbed a massive 15 percent of total revenue.
Looking at the future, she said, ‘‘Resource-intensive countries (RICs) continue to grow at about half the rate of the rest of the region, with oil exporters struggling the most.
Second, both domestic and external financing conditions remain tight. Third, the region has recently witnessed several episodes of political fragility and social unrest. Political and social pressures are making it increasingly challenging to implement policy adjustments and reforms.
While removing Nigeria from the list of good news the IMF report stated: ”Significant increases are anticipated in Ghana, as it continues reestablishing macroeconomic stability; Botswana and Senegal, reflecting rising resource exports (diamonds, oil, and gas); and Malawi, Zambia, and Zimbabwe, as they recover from drought. Growth is also expected to improve in South Africa, given positive post-election sentiment and a reduction in power outages.
While listing Nigeria amongst those countries with what it called ‘‘adjustment fatigue’’, the IMF report made some recommendations for addressing the challenges, stating: ‘‘In the face of popular frustration, there is also an opportunity to work to mobilize support for large, deep reforms, of the sort that, for instance, Ethiopia, Ghana, Kenya, and Nigeria are pursuing.
‘‘Realizing this opportunity requires rethinking reform strategies, to build and maintain pro-growth coalitions among constituent leaders and the general public. This will require greater attention to communication and engagement strategies, reform design, compensatory measures, and rebuilding trust in public institutions’’.
Source: 'saharareporters.com
November 16, 2024
*Increased Burden on Consumers:
The proposed VAT increase from 7.5% to 10% in 2025 may lead to higher costs of living for consumers, particularly low-income households especially in Northern Nigeria.
*Impact on Northern States:
The tax reform may disproportionately affect Northern States with less diversified economies, potentially exacerbating regional economic disparities.
*Compliance Costs for Medium-Sized Enterprises:
The new tax regime may lead to higher compliance costs for medium-sized enterprises, which could hinder their growth and competitiveness.
Lack of Transparency and Accountability: The tax reform process has been criticized for lacking transparency and accountability, with some stakeholders arguing that the government has not adequately consulted with them.
*Potential for Corruption:
The new tax system may be vulnerable to corruption, particularly if the government fails to establish robust safeguards and oversight mechanisms.
*Inequitable Distribution of Tax Revenues:
The tax reform may perpetuate inequities in the distribution of tax revenues, with some states or regions receiving disproportionately more funding than others.
The suggestion for withdrawal of tax reforms from the National Assembly came from Northern Governors, traditional rulers and during the 144 NEC's meeting, led by Vice President Kashim Shettima. But it seemed that the Presidency didn't want what the political and economic stakeholders called upon. In a democratic setting, the core principle is that elected representatives, including state governors and other stakeholders, serve as the voice of the people. Their primary responsibility is to fulfill the desires and needs of their constituents (meaning the voters).
This fundamental concept is crucial in evaluating President Tunubu's economic reforms. Democratic system is about doing what the voters want, not necessarily what the leader wants.
The World Bank and IMF have been advocating for economic reforms, but it's essential to consider the unique contexts and experiences of various nations. Countries like China, India, UAE, Saudi Arabia, Pakistan, Turkey and other emerging markets have successfully adapted and implemented reforms over the past 40 years, providing valuable lessons. President Tunubu's government should learn from the other global Southern Hemisphere as mentioned above. Nigeria currently has joined 20 global economic emerging nations and an attachment to BRICS; must learn from 20 economic emerging nations on how they succeeded economically.
*Key Considerations for Effective Economic Reforms and Development:
1. Fiscal Discipline:
Implementing sustainable fiscal policies to promote economic stability
2. Investment in Human Capital:
Prioritizing education, healthcare, and skill development
3. Strategic Diversification Encouraging economic diversification to reduce dependence on a single sector
4. Inclusive Growth:
Fostering equitable economic growth and social development.
By embracing these principles and learning from international best practices, President Tunubu's economic reforms can cater to the needs and aspirations of the Nigerian people. This requires a delicate balance between economic growth, social welfare, and political stability.
The International Monetary Fund (IMF) emphasizes the importance of structural reforms to boost long-term growth prospects, particularly in the context of global economic challenges.
By understanding the social acceptability of these reforms and engaging in open dialogue with stakeholders, President Tunubu can ensure that his economic agenda resonates with the people.
Ultimately, the success of President Tunubu's economic reforms hinges on their alignment with the people's desires and Nigeria's unique development needs. Remember that the election year 2027 is around the corner. If care is not taken the APC's success can't be ascertained. Economic precarity, aridity and hardship is still trending in Nigeria.
Conclusively, this writing states that President Bola Ahmed Tunubu's government should try to make sure that the current negative economic situation in the country has been solved as urgently as possible.
Dr. Abbati Bako,political strategy and communication consultant, IPRC Nigeria, formally State Electoral Commissioner @Kansiec, Special Adviser to the former Governor in Kano State and Researcher in International Politics/Globalization Policy @Skyline-UN and currently Treasurer @Kano Chamber of Commerce
References: *BusinessDay. (2024, November 23).
Gsm: +2349077889959
Tags
Opinion