Economy
Nigeria, other emerging market, low-income economies need $3tn annually to finance development goals—IMF
International monetary Fund, IMF, has said that emerging markets and developing economies need $3trillion annually through 2030 to finance their development goals and the climate transition. That amounts to about 7 percent of these countries’ combined 2022 gross domestic product and poses a formidable challenge, particularly for low-income countries. Our new research finds that many countries have the potential to increase their tax-to-GDP ratios—enabling them to provide critical government services—by as much as 9 percentage points through better tax design and stronger public institutions. Making use of this potential would also contribute to financial development and private sector entrepreneurship. Easier financing, in turn, together with efficient and well-targeted spending, including to strengthen social safety nets, would go a long way toward delivering sustainable development. The average tax-to-GDP ratio in emerging market and developing economies has increased by about 3.5 percentage points to 5 percentage points since the early 1990s, driven primarily by taxes on consumption such as value-added and excise taxes.
Some countries have been remarkably successful in raising revenue, such as Albania, Argentina, Armenia, Brazil, Colombia, and Georgia—all of which mobilized more than 5 percentage points of GDP. Much of this increase occurred before the 2008 global financial crisis, however, suggesting that progress has been difficult and fragile in the face of recent shocks.
Moreover, progress on raising revenue since the early 1990s has varied widely across countries. Half of emerging market economies and two-thirds of low-income countries had a tax-to-GDP ratio in 2020 that was lower than 15 percent— a tipping point above which growth has been found to accelerate. And resource-rich countries have typically generated less tax revenue, as some governments reduced taxes as a result of higher revenue from natural resources. Countries have considerable room to collect more revenue based on their tax potential—the maximum a country can collect given its economic structure and institutions. We find that low-income countries could raise their tax-to-GDP ratio by as much as 6.7 percentage points on average. Improving public institutions, including reducing corruption, to the level of those in emerging market economies would result in an additional 2.3-point increase. The total revenue-raising potential, at 9 percentage points of GDP—a staggering two-thirds increase relative to their tax-to-GDP ratio in 2020—would go a long way toward enabling the state to play its crucial role in development.
Similarly, emerging market economies can raise their tax-to-GDP ratio by 5 percentage points on average, while improving their institutions to the average of advanced economies could raise an additional 2 to 3 points. Some policymakers hope for additional revenue from the ongoing international collaboration on taxing profits of large multinational corporations. But the direct revenue impact of this initiative is likely to represent only a tiny fraction of the overall revenue needs, as shown in a February policy paper. To build tax capacity, governments will need to take a holistic and institution-based approach that focuses on leveraging core domestic tax policies. We offer the following concrete advice: improve the design and administration of core domestic taxes—value-added taxes, excises, personal income taxes, and corporate income taxes.
VAT revenue in low-income countries, for instance, could be doubled by limiting preferential treatments and improving compliance without increasing standard tax rates. And the widespread adoption of digital technologies would result in higher revenue collection and narrow compliance gaps; implement bold reform plans and focus on tax base broadening through the rationalisation of tax expenditures, more neutral taxation of capital income, and better use of property taxes. Headline tax rates are generally not the main concern. Excise taxes—particularly fuel excises and forms of carbon pricing—can mitigate domestic health and climate-related costs. This multi-pronged approach, over the long term, can balance equity and efficiency considerations—the Achilles’ heel of managing the political economy of tax reforms.
Improve the institutions that govern the tax system and manage tax reform. The political economy of tax reform has proven to be hard. Policymakers need evidence to convince the public of the gains and show progress in policy implementation over time. This requires adequate staffing to forecast and analyze the impact of tax policies on the economy, greater professionalization of public officials working on tax design and implementation, better use of digital technologies to strengthen compliance, and transparency and certainty in how policy and administration are translated into legislation. Carefully prioritise and coordinate reforms across government agencies, because the broader institutional context matters. This creates a virtuous circle by which enhanced institutions improve state capacity, which in turn increases the quality of tax design and its acceptance by citizens. This is in a nutshell the IMF’s approach to supporting countries in tax system reform and raising domestic revenue.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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