Recently, the International Monetary Fund praised the economic reforms of the government based on the macroeconomic outcomes and suggested to the government to quickly extend the value-added tax to fuel and increase tariffs on telecom to increase its revenue base. The IMF opined that those measures would boost government revenue. In making such a suggestion, the IMF recognised that the Nigerian inflation rate was in two digits, precisely moving from 15 per cent toward 20 per cent, which is partly caused by the high cost of fuel. It also knows that the nature of fuel in terms of elasticity will make it easy for the sellers to pass on the tax to consumers, which compounds the inflation.
The increase in tariffs on telecommunications has the same negative effects on businesses and people as final consumers of the services. The high cost of production in Nigeria arises from inefficiencies in our production processes, including the power problem. The cost of power in production processes is enormous and part of what is making Nigerian products uncompetitive internationally. The IMF recommendations were said to aim at addressing Nigeria’s persistent low revenue-to-GDP ratio and expanding the tax base.
