The executive board of the International Monetary Fund (IMF) has advised Nigeria to consider increasing the value added tax and monetary policy rate (MPR) in an attempt to strengthen the economy.
The call came in the IMF’s Article IV Consultation, an annual appraisal of a country’s economy, which was released on Wednesday in Washington DC, United States.
Nigeria’s economy, which slipped into its worst recession in 25 years, exited with a 0.83 GDP growth in 2017.
The recession was largely linked to low crude prices and militant attacks on oil facilities.
The monetary policy committee of the Central Bank of Nigeria (CBN) has kept MPR, which determines the interest rate, at 14 percent since 2016 to help the economy combat inflation.
“Directors commended the central bank’s tightening bias in 2017, which should continue until inflation is within the single-digit target range,” The IMF executive board assessment report read.
“They recommended the continued strengthening of the monetary policy framework and its transparency, with a number of directors urging consideration of a higher monetary policy rate, asymmetric application of reserve requirements, and no direct central bank financing of the economy.
“A few directors urged confirmation of the appointments of the central bank’s board of directors and members of the monetary policy committee.
“Directors commended the recent foreign exchange measures and recent efforts to strengthen external buffers to mitigate risks from capital flow reversals. They welcomed the authorities’ commitment to unify the exchange rate and urged additional actions to remove remaining restrictions and multiple exchange rate practices.”
A value-added tax is an indirect tax paid on goods. It is paid by the manufacturer who then passes it on to the customer by including it in the price of the item.