Another hoax by IMF

In the mid-1980s, the International Monetary Fund proclaimed the hoax that before Nigeria’s economy could improve, it must adopt a marketplace economic policy, liberalise the importation of consumer goods and devalue its currency against the American dollar through regular auctions.

The then military President Ibrahim Babangida bought the hoax that ended in the most harrowing experience for Nigerians. From about 60 kobo the naira plunged to a recent low of about N360 to the dollar in the parallel market.

The same IMF is now making fiscal interventions to increase the tax burden of Nigerians, yet it famously fails to give macroeconomic suggestions to halt Nigeria’s compulsive importation of consumer goods.

Anyway, IMF’s primary purpose is to “ensure the stability of the… system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.” That is doublespeak for a guarantee that countries like Nigeria will pay for their imports from the West.

The conniving IMF recently welcomed (Nigeria’s) “tax reform plan to increase non-oil revenue… through tax policy and administration measures… (and) stressed… strengthening domestic revenue mobilisation… through additional excises; a comprehensive VAT reform and elimination of tax incentives.”

IMF argues that the tax reforms should generate revenue for government, as it broadens income and consumption taxes, closes loopholes created by corporate tax holidays and expands the internally generated revenue of sub-national tiers of government, otherwise known as state and local governments.

IMF is confident that “Nigeria’s economy is recovering. Real GDP increased by 1.9 per cent in 2018, up from 0.8 per cent in 2017, on the back of improvements in manufacturing and services, supported by spillovers from higher oil prices, ongoing convergence in exchange rates and strides to improve the business environment.”

This claim of improvements in manufacturing is false. Even IMF’s sister organisation, the World Bank, has cut its growth forecast for Sub-Saharan Africa this year to 2.8 per cent from an initial 3.3 per cent.

While recognising that Nigerians currently have weak disposable incomes, Victor Chiazor, of FSL Securities Limited, argues that If this increase (in taxation) is implemented, it will “boost government revenue and help reduce the need for government borrow.”

The Manufacturers Association of Nigeria rejects the call for increase in taxation at this time that the economy is fragile, saying that “businesses are providing for themselves many of the services that should be provided from taxes already paid, (viz), power, water and roads.”

 MAN also thinks that an increase in the Value Added Tax will not be “a right move at this time.”

Those who say VAT must be the same throughout ECOWAS must be reminded of Article 30 of the ECOWAS Directive on Harmonisation of Member States’ Legislations on Value Added Tax, which only provides that each member state, “shall have the liberty to fix the (VAT) rate applicable to taxable operations within a bracket ranging between 5 and 20 per cent.”

The Lagos Chamber of Commerce and Industry argues, “It will be “insensitive to contemplate an increase in VAT rate at this time… Admittedly, we have a major revenue challenge as a country, which is why the debt stock had been increasing, and the sustainability of debt is becoming a major cause for concern.”

The Debt Management Office recently announced that Nigeria’s debt profile stood at N24.39 trillion by December 2018 ending. The debts were acquired to fund infrastructural projects, budget deficit and maturing obligations. The DMO should clarify that the debts were applied to salaries, overheads and avoidable wastage.

But, in spite of government’s need to borrow because of decreasing revenue from oil sales, the Federal Government appears to agree with MAN, LCCI, and Organised Private Sector groups, who will bear the burden of increased taxation.

The Minister for Finance, Zainab Ahmed, rejected calls for increased taxation. She said, “To change the taxes means we will review the tax laws. That may be a process we will address in the future. (But) right now, we don’t have any plan to review (the taxes upward) in Nigeria.”

She revealed government’s option to “identify people who are supposed to pay tax, but they are not paying.” She also gave the assurance that “a lot of effort is put to expand the tax base, as well as improving  the tax collecting processes, and it is yielding results.”

An American senator argues that increased taxation will discourage Foreign Direct Investment. Even the National Leader of the ruling All Progressives Congress, Bola Tinubu, thinks that an increase in VAT at this time could be counterproductive.

So, why is the IMF so intent on increasing the tax burden of Nigerians? Maybe the gains of the West from the Structural Adjustment Programme of the mid-1980s are not enough. Now they want to use the feminine wiles of Madam Christine Lagarde to con Nigeria into adopting policies that will be disastrous to her economy once again.

Instead of encouraging Nigerian state actors to weed out the sources of waste in public finance, the IMF wants the government to kill off the few businesses that are surviving, despite the extremely unfriendly economic environment.

The IMF is not coming to Nigeria with viable macroeconomic policies to increase domestic productivity and thus, enhance the capacity of Nigerians and their businesses to pay tax. It’s not enough to just sloganeer that a people that pay tax get to own their government; they must first make the money.

Despite admitting, just two  weeks ago, that Greece that took the title of ‘Sick Man of Europe’ from Portugal and that it remains a country confronted by “elevated vulnerabilities and weak payment discipline,” the IMF merely recommended that Greece should find ways to “help employers more easily adjust to changing market conditions… and lower tax rates, (while) still boost revenue!”

Obviously what is good for the Western Greek goose is not good for the South’s Nigerian gander. With friends like the IMF, Nigeria will have no further need for enemies. It looks like the IMF wants to permanently sink Nigeria into the Misery Index compiled by Johns Hopkins University’s Steve Hanke, who rates Nigerians the sixth most miserable people in the world.

For those who don’t know, the Misery Index is “the sum of the unemployment, inflation and bank lending rates, minus the percentage change in the real (Gross Domestic Product) per capita.” Hanke notes that higher readings on the first three elements are “bad” and they make people more miserable.

In her many interferences into the economy of Nigeria, Madam Lagarde never offered whatever the IMF could do to help revive Nigeria’s moribund real sector. The service sectors, like telecommunications, where the West has profitable investments, are doing just okay anyway.

As a mark of goodwill, the IMF could assemble the world’s electricity infrastructure experts and give them a mandate to help Nigeria in the generation, transmission, distribution and metering of electricity for the more than “90 million (Nigerians)” that Minister for Power, Works and Housing, Babatunde Fashola, and the World Bank agree “are living without electricity supply.”

The experts could help to “upgrade… (Nigeria’s) renewable energy and conventional power plants,” and address “deficiencies in transmission of electricity generated, to be able to make available to the consumers,” the 2,000 megawatts that is lost from the 8,100 megawatts that Vice President Yemi Osinbajo claims the electricity  generating companies have achieved.

(Lekan Sote , The Punch)