PwC Seeks Restoration of Nigeria’s Fiscal Credibility
PricewaterhouseCoopers (PwC) has stated that for Nigeria to wriggle out of her present economic crisis caused by the drop in crude oil prices, the policy makers should 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 base in the African sub-region.
The report stated 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,” said the report.
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 pos- sibility of losing control of inflation”.
“Furthermore, the oil price and the domestic security situation are both uncertain, presenting significant downside risks to the economic, commercial and financial landscape. We believe these critical uncertainties present a strong imperative for investors, businesses and policy makers to examine how their operations and investments will be affected in the case that the economic stress deepens – or if a severe crisis takes hold. The next Section introduces three scenarios to help organisations