With our core revenue base (oil) dwindling, it is obvious that government at all levels need to fashion out innovative ways to mobilise domestic resources for sustainable development, averred experts at the 24th annual Nigerian Economic Summit, reports Jill Okeke
In the last couple of years, Nigeria’s revenue has been on the decline especially with the mid 2014 fall in the price of oil which affected its income which was largely dependent on oil. Consequently, the economy went into a recession in 2016 after experiencing negative growth in successive quarters. But with the price of oil picking up once more by early 2017, the country was able to exit recession.
In spite of high price of oil, governments’ revenue has once again been on a downward trajectory occasioned by low oil production.
With this kind of scenario, the country is in a fix to marry the two exigencies of dwindling resources and an ever increasing need to meet its obligations to Nigerians in terms of developing the economy.
It is essential to note that there cannot be economic development without development of infrastructure. With the government embarking on a borrowing spree in order to address the country’s infrastructure gap, it has become critical that domestic resource mobilisation is the only way out.
It has become obvious that the government needs to do more if it is to meet its ever increasing obligations.
Unfortunately, many developing countries, including Nigeria, have been unable to meet their obligations to their citizenry due to increasing inequality, falling international support dwindling foreign aids and grants, amongst others.
As former Deputy Governor, CBN, Sarah Slade, did observe in her opening remarks at one of the breakout sessions in the recently held Nigerian Economic Summit, with the theme ‘Leveraging domestic resource mobilisation for sustainable development’, “the inability of many developing countries to meet up with the achievement of the Millennium Development Goals (MDGs) was largely due to lack of finance to execute projects in most cases.
“It is in this context that mobilising domestic resources must be intensified in the country for rapid development.”
The tax question
In the past three years, noted Professor of Taxation, Teju Somorin, “the present administration set about increasing its financial base. This came in the form of Voluntary Assets Declaration Scheme (VAIDS); increase in excise duty for alcohol and tobacco and some others which increased the number of taxes paid by Nigerians from 30 a few years back to about 69 different kind of taxes presently, thus further increasing the burden of tax on Nigerians.”
Regrettably, stated the professor, Nigeria cannot get much from increasing its tax revenues without first addressing other factors. According to her, issues surrounding transparency and efficient use of tax revenues; funding of tax administration system; granting autonomy to tax authorities; and streamlining of the various taxes should be looked into.
“From the study we carried out, we discovered that tax officials as well as tax payers do not have an understanding of the tax laws. Tax payers pay tax but do not see the money at work, they cannot see their money working for them. Added to this is the burden of multiplicity of taxes which is too much for a Nigerian company,” she said.
A Director at the Nigerian Economic Summit Group, Dr. Adedoyin Salami, noted that lack of data is a major drawback to domestic resource mobilisation. He explained that without data to drive revenue generation, planning becomes difficult.
In his presentation, Senior Resident Representative of IMF in Nigeria, Mr. Amine Mati, stressed the need to tap into the potential of excise duties to boost the country’s tax revenues. According to the IMF chief, Nigeria can no longer rely on oil revenues due to its volatility.
According to him, “One interesting thing about excise duties for quick revenue generating measure, in changing the rate, you do not need to go through parliament and the whole process; this is an executive decision that can be made. In Nigeria, excise duties only bring 0.1 per cent of GDP. This is one of the easiest sources of revenue to get. 0.1 per cent of GDP compared to three per cent of GDP for ECOWAS and most other countries.”
Narrowing down on specific excises, he said, “such as excise in fuel products, excise on luxury goods, including on airtime fees. We just need some small simulation on that. That would give you 0.8 per cent of GDP within a year; that is money you can spend on import and development spending.”
Experts’ view
In order to leverage domestic resource mobilisation for sustainable development, Dr. Neil Mcculoch opined that it was time Nigeria began to minimise exemptions that it grants companies.
He added that to mobilise domestic resources, the government must be willing to tax rich people; utilise more of property tax; invest more in tax administration; address the issue of trust in the tax system; and reduce tax expenditures.
“Subsidy alone in Nigeria is about two third of all corporation income tax…..The government should state clearly in the budget what it intends to use the money for,” he added.
The crux of the matter, Salami observed, is the issue of fiscal governance. According to him, the Nigeria’s fiscal arrangement needs to improve if “we are going to take care of the people we are supposed to look after.”
He averred that without a meaningful budget circle it will be almost impossible to put every other thing in place. “Currently, with 2019 ahead, we are coming to the end of the year and it is pretty clear that what we did last year is what we will do again this year. How do we plan, how do we hope to get an economy going in the absence of an established reliable budget circle?”
For Kaduna State Governor, Mallam Nasir el-rufai, who was represented by Special Adviser on Economic Matters, Dr. Salamatu Isah, “for there to be an effective mobilisation of domestic resources, revenue generation must be diversified.”
Using her state as an example, she explained that “the government of Kaduna State pursued a policy of diversifying its revenue sources which involved ease of doing business and payment, in terms of efficiency of payment and collection.”
As Somorin did note, not much can come out of increasing a tax base when other factors are not addressed.
With overseas assistance reducing and the amount spent on debt servicing on the increase, it is expedient that the government begin to vigorously articulate ways of mobilising domestic resource.
But whether the advice of these experts will be heeded to drive the process of mobilising domestic resources for Nigeria’s sustainable development, only time will tell.
