Nigeria: IMF Urges Nigeria to Prioritize Expanding Tax Revenue

The International Monetary Fund (IMF) has called on the Nigerian government to implement a more effective tax collection system to expand its revenue base and reduce its reliance on debt servicing.

This recommendation was made by Mr. Davide Furceri, Division Chief of the Fiscal Affairs Department at the IMF, during a Fiscal Monitor press briefing held at the ongoing IMF/World Bank Annual Meetings in Washington D.C. In response to a question on addressing Nigeria’s high debt service-to-revenue ratio, Furceri emphasized the need for Nigeria to increase its revenue generation to alleviate the strain on public finances.

Furceri noted that Nigeria’s debt service-to-revenue ratio remains excessively high, limiting resources available for critical investments in infrastructure, social programs, and economic growth initiatives. He acknowledged that while Nigeria’s debt service-to-GDP ratio has improved from near 100% in the past to around 60%, policymakers must focus on further increasing revenue to reduce the proportion of the country’s income spent on debt repayments.

“There is a need to grow the revenue-to-GDP ratio,” Furceri stated. “For a country like Nigeria, with a debt service-to-revenue ratio of about 60%, a significant portion of its revenue is used to service debt. By improving revenue mobilization, Nigeria can reduce the share of its income dedicated to debt servicing and create more fiscal space for growth.”

He further stressed the importance of broadening Nigeria’s tax base and ensuring the establishment of a transparent and efficient system to enhance the government’s capacity to collect taxes. Furceri highlighted that a more streamlined tax mechanism would play a crucial role in securing sustainable fiscal policies and driving long-term development.

The Nigerian government recently reported that its debt service-to-revenue ratio has fallen to 68%, down from 97%, which it inherited from previous administrations. However, the IMF’s advice underscores the ongoing need for comprehensive reforms to boost domestic revenue and ensure fiscal stability.