The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, disclosed that the federal government is considering a strategy of lowering interest rates to attract investments and stimulate economic growth.
This announcement was made on the sidelines of the World Bank-IMF spring meeting in Washington D.C, United States. He emphasized the government’s objective to broaden its revenue base, highlighting oil revenues and taxes as key areas for potential expansion. Specifically, he mentioned the intention to enhance tax collection efficiency rather than raising tax rates.
Mr. Edun underscored the importance of increasing overall government revenue, citing a substantial projected increase of 60% to 70% in the 2024 budget. This strategy aims to reduce the need for borrowing and prioritize domestic resource mobilization, particularly through taxes and oil revenues. He emphasized the government’s focus on improving tax administration and collection efficiency to boost revenue without raising tax rates.
Furthermore, Mr. Edun highlighted collaborative efforts between government authorities to stabilize the Nigerian economy, lower inflation, stabilize the exchange rate, and ultimately reduce interest rates. This initiative seeks to make borrowing for businesses and individuals more affordable, thereby encouraging investment.
However, the Central Bank of Nigeria (CBN) has implemented a hawkish monetary policy stance in recent months, notably increasing interest rates by 400 basis points in February and a further 200 basis points in subsequent months, leading to a record-high Monetary Policy Rate (MPR) of 24.75%.
The CBN has justified these measures as necessary to combat inflation and stabilize the foreign exchange market. Nevertheless, analysts and stakeholders have criticized these decisions, warning of potential adverse effects on the real economy.
