- Nigeria’s Central Bank Governor, Godwin Emefiele, advises the government to focus on raising revenue to continue spending plans amidst reduced global debt market access.
- The governor suggests increasing revenue through taxes and export revenue, and not relying on Ways and Means funding due to rising debt levels.
- The IMF revised down GDP growth rates for African countries due to a severe debt crisis and higher borrowing costs, leading to macroeconomic imbalances, inflation, and reduced purchasing power.
Nigeria’s Central Bank Governor, Godwin Emefiele has advised the government to focus on raising revenue if they are to continue with their spending plans.
He said this on the sidelines of the just concluded IMF Spring Meetings in Washington DC. Mr. Emefiele’s remarks are coming at a time when access to the global debt market has narrowed for sub-Saharan African countries like Nigeria.
- “For the fiscal because of the limited fiscal space, the IMF insists that countries need to reduce their spending but in my case, I say if you want to spend then raise revenue.”
He insisted that increasing revenue is even more apparent now that interest rates are high and market conditions for borrowing have increased.
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- “It is important that you must raise revenue than be constrained in an environment where there is no debt where financial market conditions are very tight and very limited and where interest rates are high and could increase a lot of burden for countries. The only option for fiscal in this case is to expand the revenue base to be able to spend.”
The central bank’s governor’s remark suggests the government needs to focus on increasing revenue by getting more aggressive with taxes and ensuring government revenue from exports continues to increase. It also suggests the central bank may not be disposed to keep funding the government via Ways and Means as debt levels continue to rise.
Lower economic growth for Africa
African countries currently face a downward review of their GDP growth rate with the IMF estimating a 3.6% growth rate down from the 3.9% projected last year. The IMF also mentioned that the region was facing a big funding squeeze.
The IMF made this remark as part of its briefing at the just concluded IMF Spring Meetings. The report highlights the challenges that sub-Saharan African countries face due to the funding squeeze.
It states that higher borrowing costs and tighter monetary policies, combined with a decline in aid budgets, have led to rising interest burdens on public debt. Most African countries are dealing with a severe debt crisis with the likes of Ghana failing to honour its foreign debt obligations.
According to the IMF, the higher interest rate environment exacerbates macroeconomic imbalances, including high levels of public debt and inflation, which are eroding household purchasing power and adding to social pressures.
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Meanwhile, the IMF retained Nigeria’s growth outlook at 3.8% gladdens our hearts. It means that we are doing certain things that are correct and that we will continue to do those things that are right.