Policy actions or economic reforms must be predicated on inclusion, transparency and accountability, it said.
An Abuja-based policy think tank, Agora Policy, said the incoming administration needs to undertake fast, coordinated macroeconomic policy reforms on fiscal, monetary and trade fronts to revamp the economy.
A maiden report by the policy think-tank titled "Urgent Policy Actions on Fiscal, Monetary and Trade Fronts" said as Nigeria prepares to usher in a new administration, the state of the economy remains a key point of interest.
According to the report, a critical issue that the incoming administration has to grapple with is how to revamp the economy quickly.
The think tank also said these policy actions or economic reforms must be predicated on inclusion, transparency and accountability.
The report explained that since the 1970s, Nigeria's fiscal profile has been tied to the oil sector.
It said despite the high oil prices in the aftermath of the COVID-19 pandemic, Nigeria's oil production has been very low.
For immediate fiscal reforms, Agora Policy said the government needs to take decisive action on boosting oil revenue by ending oil theft and removal of the petrol subsidy.
The report noted that the drastic fall in oil revenue has been a result of the double whammy of lower oil production and petrol subsidy. It added that addressing the drastic fall in oil production requires urgent action to end oil theft in the oil-producing areas.
"This would require strong determination from the government and crucially, cooperation from host communities and the security agencies.
"The government needs to review the security architecture in the oil-producing areas and give clear instructions about ending oil theft," it said.
In addition, the report said both the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and Nigeria National Petroleum Corporation (NNPC) Limited should be given clear oil production and exporting targets, and be held accountable when these are not met.
The policy think tank said the use of a strategic communication team to engage the public and other critical stakeholders on the benefits and costs of removing the subsidy would be required for the public to buy into the policy measure.
At the same time, it said detailed plans of how funds are saved from subsidy removal need to be extensively discussed and disseminated to the general public to increase trust as social capital.
"The savings from the fuel subsidy could be used to scale up short-term direct cash transfers to the poorest and most vulnerable groups in the country. Prices of petroleum products should be market-determined rather than regulated by the government," it said.
Tax
The report noted that there is a need to address the nation's dismal tax revenue to GDP ratio.
It said the FIRS has done well in recent times by increasing revenue generated from N6.4 trillion in 2021 to N10.1 trillion in 2022, thereby crossing N10 trillion in revenue for the first time.
However, the group said for the size of the economy, government revenue and expenditure are grossly inadequate to effectively drive policy, enhance economic growth, lower poverty, and achieve the Sustainable Development Goals (SDGs).
This, it said would require two critical actions on boosting non-oil revenue, namely tax reforms and domestic revenue mobilisation.
The report said there is an urgent need to broaden the tax net to capture the formal and informal sectors not in the existing tax net. For the formal sector, it added that a first step would be to properly capture and tax high-net-worth individuals and large corporations.
Also, the report said FIRS needs to work closely with the NBS to identify small and medium-scale enterprises (SMEs) and ensure they pay taxes appropriately.
"Some simple incentives and an amnesty period, following which appropriate sanctions will be meted out, can be given to ensure quick compliance. It would be crucial to continuously communicate the issue of tax reforms to the citizens to gain public confidence in the system. In addition, leakages from taxes collected by non-state actors need to be eliminated," it said.
It added that the fiscal responsibility law should be amended to set strict penalties for agencies that fail to remit their stipulated operating surpluses. Also, there is a need to stop funding revenue-generating agencies from the federal budget.
"There is an urgent need to end "drip-feeding" which has inhibited the completion of critical capital projects and perpetuated the "ongoing project" syndrome.
"Increased budgetary provisions should be given to capital expenditure. There is also the need to increase the percentage of the budget that goes to capital expenditure and the necessity of trimming recurrent expenditure," it said.
Monetary Policy
On monetary reforms, the think tank said the government should enhance the coordination of fiscal and monetary policy to reduce frictions and counteractive policy goals.
"The government should strengthen the Fiscal-Monetary Coordination Committee to ensure that the monetary authority (CBN) and the fiscal authority (Federal Ministry of Finance, Budget and National Planning) optimally coordinate policies to ensure the gains from fiscal and monetary reforms are maximized.
"Restore monetary policy focus back to its price stability mandate, taming inflationary pressure and strengthening the monetary transmission.
"The CBN should focus on its core mandate of maintaining price stability. The CBN should set clear and realistic targets for inflation, and a timeline for achieving these targets," it said.
The CBN will have to restore the credibility of the MPR such that bond yields and lending rates are reflective of the monetary policy rate (MPR), the report said, adding that the removal of the current multiple exchange rate windows being operated by the CBN should be considered.
"This would make the exchange rate market-determined and mitigate speculative pressures that fuel arbitrage conditions in the market. This would further inspire confidence from domestic and foreign investors and put an end to ways and means financing of FGN expenditure.
"This would curtail the growth of the money supply and thus curtail inflationary pressure. Part of this will involve the CBN helping the FG to properly forecast its revenue as well as helping the FG, on a technical level, identify potential sources of revenue. A strategy will also need to be developed to manage the current stock of FG's debt at the CBN," it said.
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Infrastructure
According to the report, one of the major issues that have impeded trade performance and thus diversification in Nigeria is the weak trade-related infrastructure.
The report explained that having inefficient or inadequate systems of transportation, logistics, and trade-related infrastructure can severely impede a country's ability to compete on a global scale.
"The lopsided structure of Nigeria's trade performance over time is linked to low trade diversity," it said.
Agora Policy urged the government to reopen all closed borders and remove all food trade restrictions.
"The government needs to prioritise the development of a goods and services export strategy in collaboration with the subnational governments.
"Such a strategy should focus on labour-intensive sectors, and should clearly identify priority sectors and potential markets by leveraging Nigeria's global network of diaspora and consulates," it said.
The report said the government should provide incentives for export-oriented firms, especially in the non-oil sectors.
"In order to leverage on the enormous market opportunities created by the African Continental Free Trade Area (AfCFTA) agreement, there should be a gradual reduction of import tariffs on intermediate products used by domestic firms that export or plan to do so.
"At the same time, the discretionary import duty waiver allocation system needs to be replaced with a clearly defined industry-wide incentive system that supports export-oriented firms," it said.
