Another hoax by IMF | Nairalaw

Lekan Sote

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.