Continuing the move already begun by the government in the 2016 budget to eliminate resources allocated to fuel subsidies would allow more targeted spending. – IMF
IMF’s Christine Lagarde with Buhari and the economic team
Only rich people in developing countries (Nigeria inclusive) are benefiting from fuel subsidies said Managing Director of International Monetary Fund (IMF), Christine Lagarde.
This is just as the Senate President, Senator Bukola Saraki assured that the 8th National Assembly would provide the legislative leadership in ensuring a conducive environment for business to thrive.
IMF boss who made this known during a meeting with leadership of Senate added that Nigeria masses are not benefiting from fuel subsidies adding that it is difficult to justify fuel subsidies.
Lagarde who called for the increase in Nigeria’s VAT also said that Nigerians paid lowest VAT in the Africa continent.
She also said that crude oil prices would continue to go down for longer period of time.
In her words, on recurrent expenditure, efforts should be made to streamline the cost of government and improve efficiency of public service delivery across the federal and sub-national governments. Transfers and tax expenditures should also be addressed.
For example, continuing the move already begun by the government in the 2016 budget to eliminate resources allocated to fuel subsidies would allow more targeted spending, including on innovative social programs for the most needy.
“Indeed, fuel subsidies are hard to defend. Not only do they harm the planet, but they rarely help the poor. IMF research shows that more than 40 per cent of fuel price subsidies in developing countries accrue to the richest 20 per cent of households, while only 7 per cent of the benefits go to the poorest 20 per cent.
“Moreover, the experience here in Nigeria of administering fuel subsidies suggests that it is time for a change—think of the regular accusations of corruption, and think of the many Nigerians who spend hours in queues trying to get gas so that they can go about their everyday business.
“At the same time, we should not forget the huge challenges facing Nigeria’s state and local governments. These sub-national governments—which account for the bulk of social spending—have only limited tools to manage the impact of declining oil revenues. My message here is to manage better the smaller purse, while building capacity to increase internally generated revenue.
“The IMF can help in that regard by providing technical assistance on public financial management. We did so for the Kaduna State Government. We can explore how to support states’ efforts to undertake budget reform.
“The essential fact is that, given the structure of the economy, the massive fall in oil prices—which is expected to continue—has changed the medium term foundations for economic resilience. To be clear, the goal of achieving external competitiveness requires a package of policies including business-friendly monetary, flexible exchange rate and disciplined fiscal policies, as well as implementing structural reforms. Additional exchange rate flexibility—both up or down—can help soften the impact of external shocks, make output and employment less volatile, and help build external reserves.
“It can also help avoid the need for costly foreign exchange restrictions – which should, in any case, remain temporary. And going forward, improved competitiveness from improved exchange rate flexibility and other reforms will facilitate the needed diversification of the exports base and, ultimately, growth.
”At the same time, the external environment has changed. Oil prices have fallen sharply; global financial conditions have tightened; growth in emerging and developing economies has slowed; and geopolitical tensions have increased.
“All this has come at a time when Nigeria is facing an urgent need to address a massive infrastructure deficit and high levels of poverty and inequality.
“So, Nigeria faces some tough choices going forward. Nigerians, however, are well known for their resilience and strong belief in their ability to improve their nation and lead others by example. I firmly believe that Nigeria will rise to the challenge and make the decisions that will propel the country to greater prosperity.”
On crude oil, she said,”At the same time, the external environment has changed. Oil prices have fallen sharply; global financial conditions have tightened; growth in emerging and developing economies has slowed; and geopolitical tensions have increased.
“All this has come at a time when Nigeria is facing an urgent need to address a massive infrastructure deficit and high levels of poverty and inequality.
In his early remark, the Senate President said,”The 8th National Assembly will provide the legislative leadership in ensuring a conducive environment for business to thrive.
“The Nigerian legislature strongly believes that having a collaborative working relationship with the Executive Branch of government brings development closer to the people. Since the advent of the new administration, we have worked closely to stabilize the economy and steady the fiscal environment.
“This, we have indeed demonstrated by the speedy passage of the Medium Term Expenditure Frame Work (MTEF) and recently in the postponement of our recess in order to receive President Muhammadu Buhari to present the 2016 Appropriation Bill. We have also set in motion activities towards reforming our oil and gas industry through legislative initiatives in order to meet international best practices.”
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