The International Monetary Fund (IMF) has opened up on why it advised Nigeria to remove fuel subsidies, adding that the subsidy regime was robbing the poor for the rich.
Mr. Abebe Selassie who is the Director of the African Department of the Fund, provided insights into the organization’s position, at the ongoing Spring Meetings of the IMF and World Bank in Washington DC. According to him, the Fund had provided robust content and how the poor could benefit from the policy in the provision of social safety nets.
His words: “Subsidies are about resource allocation internally within Nigeria. So Nigerians, the people of Nigeria pay for these subsidies.
“And what’s the reason why we counsel against such generalised subsidies is very simple. It tends to be highly regressive, meaning the benefits of such you know, fuel subsidies tend to accrue to the rich and segments to reach out to people and the poor people.
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“So it’s people that are driving these large cars, with big houses are wanting to see subsidised fuel. They’re the ones benefiting relative to the poor and vulnerable in Nigeria.
“So you know, not only people paying for the subsidies Nigeria, it’s the poorest segments of society that actually are losing out and resources could instead, of course, be used to improve conditions for poorer people instead of accruing to rich people.
“That’s why subsidy reform is important. We applaud the government for the steps government took to reduce the extent of subsidies. I think as oil prices have become volatile, the level of subsidy has also moved up and down. “But I think you know, the direction of travel, I think, to remove the subsidies and use the resources to provide social protection for the most vulnerable households.”
Mr. Selassie revealed that the IMF has provided the sum of $58 billion to African countries since the outbreak of the COVID-19 pandemic and pledged it would do more.
The IMF chief cautioned African countries against commercial loans for the purposes of refinancing because of the current rate hike in most economies.
He advised that instead, countries South of the Sahara that have debt service challenges should look inward for domestic resource mobilization, which would be easier to deal with. The Director criticized the practice of discriminatory tax exemption to some companies and not extended to others.
These special favours to some companies, he observed reduce the effectiveness of governments to optimize tax revenue.