The Managing Director, International Monetary Fund (IMF), Mrs. Christine Lagarde, has advised the Nigerian government to jettison spending on fuel subsidy and instead expend such money on health, education and infrastructural development.
“If that was to happen, then there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people. Now, how this is done is the more complicated path because there has to be a social protection safety net that is in place so that the most exposed in the population do not take the brunt of those removal of subsidies principle. So that is our position,” Lagarde said Thursday in Washington DC
Lagarde, who made the call at the Global Policy Agenda press briefing at the ongoing World Bank Spring Meeting, said subsidy spending was infringing on other critical areas of capital development, including health, education and infrastructure, hence the need for the government to refocus. The IMF chief said it is the monetary institution’s general principle to discourage fossil fuel subsidies because of its consequences on other areas of life and development.
She said: “As far as Nigeria is concerned, with the low revenue mobilization that exists in the country; in terms of tax to GDP, Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country; in order to direct investment towards health, education, and infrastructural development.”
Highlighting some of the negative impacts of fuel subsidy, Lagarde said: “If you look at our numbers from 2015, it is no less than about 5.2 trillion dollars that are spent on fuel subsidies and the consequences thereof. And the Fiscal Affairs Department has actually identified how much would have been saved fiscally but also in terms of human life, if there had been the right price on carbon emission as of 2015. Numbers are quite staggering.”
In another development, the World Bank Group revealed that the level of poverty in Nigeria and other Sub Saharan African countries is getting worse despite other regions making progress on shared prosperity. It also said illicit transfer of funds from the region to the developed world had become a huge challenge that must be tackled appropriately.
Stating this during the World Bank press briefing Thursday at the ongoing Spring Meeting, the President of the World Bank, David Malpass, said if the regional challenge was not tackled urgently before year 2030, it may slip the nations into extreme poverty with the citizens most affected. He said: “By 2030, nearly nine in 10 poor people will be from Africa, while progresses are predicted to be made in other regions. This is troubling and we must collaborate to address this. The World Bank Group is financially strong, but we have started meeting member countries to ensure this is addressed.
Malpass, who has only spent three days as the president of the institution, also stated that Nigeria and 16 other countries were at risk of debt financial distress. “Debt helps economies grow but if not done in a transparent way it can drag down such economies. That is why we need transparent disclosures of debts as they are created,” he said.
