Africa needs to brace itself for more austerity

Lagos, Nigeria

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Nigeria’s government has approved a plan to increase the country’s VAT rate from 5% to 7.2%, part of efforts to raise revenues as Africa’s biggest economy faces a fiscal crisis.

Expected to squeeze incomes and raise prices for goods and services amid already widespread economic hardship, the move won’t go down well with Nigerians.

It’s austerity they will have to get used to.

Mounting debt and sluggish growth mean that cash-strapped Nigeria has little choice but to boost domestic revenue. The wisdom of the VAT increase is debatable, but some form of austerity is inevitable.

The country is not alone.

Across Africa, governments are cutting spending and raising taxes to stave off fiscal trouble.

From IMF-backed austerity in Tunisia and Egypt, to mining royalty hikes in Zambia and Democratic Republic of Congo, as well as unpopular new taxes on digital services in places like Uganda and Kenya, people and businesses are feeling the strain.

In places like Gabon, Zimbabwe, and Tunisia this has led to strikes and protests. In Sudan austerity proved to be an important catalyst for mass protests resulting in the ousting of longtime ruler Omar al-Bashir.

Against the backdrop of fragile growth, generally poor public finances, a dimming global outlook, and a looming debt crisis, Africa needs to brace itself for more of the same.

This report reflects the views of the author alone, not those of How we made it in Africa.


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