KEY POINTS

• Experts urge the FG to avoid expensive foreign loans and a VAT increase amid IMF advice.
• They warn that high-collateral borrowing raises fiscal risk and threatens CBN policy independence.
• They say the government should broaden the tax base before raising VAT rates.

Capital market operators and economic experts have urged the Federal Government to tread carefully as it weighs the International Monetary Fund’s policy recommendations, warning against expensive foreign loans and a Value Added Tax increase. They argued that both moves could deepen fiscal risk and household hardship.

Caution on loans and VAT

The Managing Director of Arthur Stevens Asset Management and former President of the Chartered Institute of Stockbrokers, Olatunde Amolegbe, backed the IMF’s concern over collateralizing a proposed facility. According to him, borrowing against strategic national assets or future revenue at a high collateral ratio could increase fiscal vulnerabilities and limit future flexibility. Moreover, he said the assessment should hinge on the facility’s terms, cost of funds, tenor and expected returns.

On VAT, Amolegbe warned that raising the rate now could weaken consumption while households and businesses still adjust to subsidy removal, exchange-rate reforms and high living costs. Therefore, he advised the government to broaden the tax base, improve compliance and curb leakages before considering higher rates. He also cautioned that excessive monetary tightening, though it has stabilized the exchange rate, may constrain credit and private investment.

A call for cheaper, productive financing

Similarly, investment banker Tajudeen Olayinka urged the government to move away from expensive loans that could strain future revenue. “The government has taken too many expensive loans in recent years. That should worry anyone interested in the progress of Nigeria,” he said. Consequently, he recommended that Nigeria leverage cheaper multilateral financing to accelerate growth and reduce poverty, while keeping the current monetary stance until stability firms up.

Furthermore, economic analyst Clifford Egbomeade endorsed the IMF’s caution over Nigeria’s proposed $5 billion Total Return Swap with First Abu Dhabi Bank. According to him, the deal pledges collateral at 133.3 percent of the loan, so any naira depreciation or rate rise could trigger margin calls that undermine the CBN’s policy independence.

In addition, Egbomeade described a VAT hike as “a tax on hardship, not consumption,” and he warned that hot money inflates reserves without adding productive value. Ultimately, the experts agreed that the government should strengthen the productive sectors, diversify exports and fix targeting failures in the social register, rather than lean on costly debt, higher taxes or volatile portfolio inflows.