Fuel subsidy: IMF tells Nigeria to remove it, says way to go
. We can’t remove fuel subsidy overnight – Finance Minister
The Managing Director of the International Monetary Funds (IMF), Mrs Christine Lagarde, said yesterday that the removal of fuel subsidy is the way to go for Nigeria and other countries in order to shore up revenue for public service provision.
She said why they still insist on recommending for Nigeria to remove subsidy on fuel was that there is paucity of funds for the country to take care of its infrastructure reforms and other social services.
Lagarde made the call at a press briefing at the ongoing World bank, IMF Spring Meetings in Washington DC.
She said Nigeria had among the lowest tax to GDP ratios, which signifies low revenue mobilization for the government and the only way to fill in the gap is to remove subsidy.
“I ll give you the general principle, for various reasons , as the general principle, we believed that removal of fossil fuel subsidies is the right way to go, if you look at our numbers since 2015,it is no less than $5.2 trillion that are spent on fuel subsidies and the consequences thereof,” she said.
Meanwhile, the Nigeria’s Minister of Finance, Mrs. Zainab Ahmed, has agreed to a cautious fuel subsidy removal amidst International Monetary Fund (IMF) recommendation that Nigeria should remove oil subsidies, saying it cannot be removed overnight.
The IMF had recommended that Nigeria cut out fuel subsidies to free resources to build infrastructure and support human capital development.
Speaking to newsmen on the sidelines of the IMF/World Bank Group Spring meetings in Washington DC, USA late Thursday, the finance minister said while the IMF recommendation was good, it had to be implemented in a successful and sustainable manner.
“We are not in a situation to remove subsidy overnight. We have to educate the people, we have to show Nigerian citizens what the replacement for the subsidies would be. So we have a lot of work to do,” she said.
She said there was also the need to understand that you don’t remove subsidies in one fell swoop.
“It has to be graduated and the public has to be well aware of what you want to do. The minister also placed some demands on the World Bank. She asked for some review of some of its policies, especially policies on infrastructure funding.
“We are asking the World Bank in particular to review some of the new initiatives they have put in place. An initiative that involves them looking at implementation systems when they are providing funding for infrastructure. What we have found in Nigeria is that the Environmental and Social Standards (ESS) that they have put in place is causing significant delays in the roll out of infrastructure” Mrs. Ahmed noted.
“We understand that it is well intended but they have to review how it is implemented so that we are not overtly slowed down because of the new procedures,” she added.
“To the IMF, we just came out of the article IV review. The review was both of positive one as well as we expected very good advise coming from the IMF to Nigeria. They have indicated that they are available to provide technical support, to improve our liquidity management, debt management and other fiscal measures,” she noted.