Tuesday Column By VICTORIA NGOZI IKEANO
When finance minister, Hajia Zainab Ahmed reportedly said some time ago (in response to fears about Nigeria’s rising debt) that the country’s problem is not debt but revenue, not many people got the import of that seemingly straightforward statement. With those few words, she signalled government’s intention to shore up its revenue base. Since our major revenue earner, oil has in recent years been witnessing a slide due to fluctuations in the international oil market, there is only one direction to look to: non oil sector. Government has now embarked on a rather aggressive revenue drive with planned introduction of direct and indirect taxes. Revenue generating agencies among them, the federal inland revenue services (FIRS), the Customs and many others have literally been given presidential marching orders to double their efforts with higher collection targets set for them; direct and indirect taxes are being reviewed. Thus, we are told that toll gates are now to reappear on federal highways, sales tax (value added tax) is going to be jerked upwards and introduced for a number of transanctions including online purchases; excise duty is to be imposed on carbonated (soft) drinks. The customs has already partially closed our land border in a bid to stem smuggling and goods that bypass payment of import duties; car marts are being raided to fish out those that escaped payment of duties.
In truth Nigerians are not used to and do not appreciate the concept of paying taxes whether direct or indirect as we had imbibed the notion that government exists to provide for all our needs. This belief was nurtured during the oil boom years when our Head of State at that time reportedly said that money was not Nigeria’s problem but how to spend it. And so began the era of subsidies with the citizenry paying little or nothing for many social services. For example ,there were parts of the country that were allegedly getting free electricity as the people saw no reason to give something in return, considering it as their right somehow. Same for some other amenities.
That was how the concept of Government as a father Christmas or charity organisation that doles out things free of charge took root; the notion that mania could fall on one’s laps without you doing anything or giving anything in recompense; the sprouting of those who live big on commission and rents as well as briefcase businessmen with no physical offices who garner huge financial gains by virtually doing nothing; corruption.
Once the bubble burst and free money et al were no longer coming from government quarters, people found it hard to adjust to the new, evolving environment and so sought ways to short circuit the system by indulging in underhand deals. So we found it hard to swallow when upon government partially washing its hands off electricity matter, the new private energy firms (DISCOS) asked us to pay what they consider as “fair” price for electricity but which we consumers see as “exorbitant” charge. Even now the electricity generating companies hint that they are operating at a loss and are pushing for increased electricity tariff. To maintain some semblance of stability government says part of the money it is borrowing from external sources would be used to subsidise cost of producing electricity. In same manner, government is to ‘continue subsidising’ fuel as it is budgeting billions of naira for that purpose. Of course the government has to make up for these subsidies by increasing its revenue base which is why according to the finance minister, the government is reforming the tax system to improve collection.
Nigeria’s VAT collection efficiency for instance is put at 0.2 per cent in contrast to Africa’s regional average of 0.33 per cent. Nigeria’s revenue target for 2017 was N5.08 trillion of which N2.70 trillion was realised; for 2018 the target was N7.16 trillion out of which N3.96 trillion was collected. This year, the projected revenue is N6.98 trillion out of which N2.04 trillion had been realised as at June. From above statistics, Nigeria hardly collects 60 percent of its projected revenue targets. Yet for 2020 the government projects total revenue of N8.9 trillion. It is not surprising therefore, that the government is going to embark in the words of the finance minister, “bold and audacious” revenue reforms to realise this target. Hajia Zainab Ahmed avers, that Nigeria’s revenue to GDP (gross domestic product) is one of the lowest among its peers at 19 percent. “What the World Bank and the International Monetary Fund (IMF) recommend is about 50 percent of GDP for countries that are our size. We are not there yet. What we have is a revenue problem”, she says. Also N2.5 trillion of the total 2020 budget of N10.3 trillion, representing 25 per cent, is earmarked for debt servicing. Nigeria’s total public debt as at end of June 2019 stands at N25.7 trillion. Of this amount, the federal government owes N20.42 trillion while the 36 states of the federation and the federal capital territory (FCT) owe N5.28 trillion. Added to this is the new minimum wage that would surely blow up its wage bill.
All in all, government is going to undertake a rather unprecedented, aggressive revenue drive if it is to meet up with its debt service obligations, recurrent expenditures as well as execution of developmental projects. State governments and private firms could follow suit with their own charges. Already telecommunication companies are contemplating making us pay for USSD operations as checking our balances, etc.