Distribute Oil Benefits To Restore Nigeria' Fiscal Credibility, Experts Advise FG

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okonjo-faceFor Nigeria to come out of its current economic crisis caused by the drop in crude oil prices, PricewaterhouseCoopers (PwC) has urged policy makers to restore fiscal credibility by widening the country’s tax base and distributing the benefits of oil and gas resources more evenly across the entire country.

In its latest report: “What next for Nigeria’s economy? Navigating the Rocky Road Ahead,” PwC noted that Nigeria currently has one of the narrowest tax bases in the African sub-region.

The report explained that in the longer-term, Nigeria’s policymakers should aim at encouraging a more resilient economic model, adding that they should also learn the lessons from this period and build an economic strategy fit to harness the country’s strong growth fundamentals, particularly that of a young, entrepreneurial and increasingly well-educated workforce.

“Nigeria was able to navigate through the last oil price crisis in 2008 by drawing down its plentiful fiscal reserves. Today’s policy makers should re-kindle this ambition to protect future generations, learning from those commodity exporters who have successfully implemented anti-cyclical fiscal policy, such as Chile. Even under an optimistic outlook, it’s certain that Nigeria’s policy makers will face difficult choices in the short-term,” the report noted.

According to PwC, the government must decide whether to borrow more to maintain expenditure levels, or cut back on commitments which may be politically sensitive, while the Central Bank of Nigeria (CBN) “must decide whether to draw down remaining foreign reserves to defend the exchange rate, impose painful capital controls or accept a weaker exchange rate with the possibility of losing control of inflation”.

In the short-term, PwC agreed that though Nigeria’s policymakers have relatively little ability to influence which scenario the country may enter, particularly relating to the oil price, they can however take actions that will help mitigate the potential impact on the economy if a crisis does materialise.

– See more at: http://bizwatchnigeria.ng/restore-nigerias-fiscal-credibility-pwc-urges-policy-makers/#sthash.JbRuV65F.dpuf