Kill Subsidy, Cut CBN Loans, Raise ‘Sin’ Taxes… World Bank Tells Buhari

source: thecable
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Kill subsidy, cut CBN loans, raise ‘sin’ taxes… 7 things World Bank wants Buhari to do in 2022 The World Bank on Tuesday released its November 2021 Nigeria Development Update, which showed — among other things — that eight million Nigerians fell into poverty in less than two years as a result of inflation shocks. The report also revealed that Nigeria no longer benefits from high oil prices, with record low revenues, and exorbitant fuel subsidies, which makes Nigeria the only country in the world granting universal price petrol subsidies. Also, the report reiterated that Nigeria has the worst revenue-to-GDP ratio among 115 countries monitored by the World Bank. Worse than Haiti. To address the grim picture of Nigeria’s economy going into the future, the World Bank has recommended a number of policy decisions for the Muhammadu Buhari administration and the Central Bank of Nigeria (CBN) starting from the year 2022. TheCable brings you a summary of the policy recommendations from the 112-paged Nigeria Development Update. The World Bank recommended that the government raises taxes on what it referred to as “sinful goods,” including cigarette, alcohol, sugary drinks. The bank said FG has “accelerated efforts to diversify its revenue stream; however, risks to the implementation of these reforms remain high”. “These reforms include improving tax administration, especially for VAT, while also undertaking some significant policy reforms, such as implementing a levy on electronic money transfers, and additional excise taxes on alcohol and tobacco “While these reform efforts are expected to generate additional revenues of over ₦ 3 trillion a year, they may be challenging to politically implement in the run up to the national elections, planned for 2023.” Despite the perceived difficulties, the bank advised that FG increase these taxes in order to generate adequate revenue. Fuel subsidy removal has been a recurrent recommendation in World Bank/IMF policy briefs for Nigeria for more than a decade, but little has been done about this. In this report, the World Bank has asked the government to remove subsidies, again. The bank argues that the poorest Nigerians do not benefit much from the subsidy regime. “Nigeria is the only country in the world with a universal price subsidy that applies exclusively to PMS. Universal price subsidies for liquid fuels are almost always regressive, as the rich consume far more fuel than the poor,” the report read. “PMS subsidies are especially regressive because PMS is used primarily in light- and medium-duty motor vehicles, which are rarely owned by the poor. Since raising PMS prices tends to have minimal adverse effects on poor households, governments worldwide have typically prioritized eliminating PMS subsidies over those that apply to other fuels. “However, Nigeria has done the opposite—eliminating all subsidies for liquid fuels other than PMS. Moreover, the Nigerian PMS subsidy is exceptionally generous, and in October 2021 the PMS pump price was the seventh-lowest among 168 economies surveyed at just ₦495 per liter” The bank said the poorest 40 percent of Nigerians consume less than 3 percent of the total PMS consumption in Nigeria.

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