Nduka CHIEJINA (Assistant Editor)
The year 2020 will undoubtedly give Zainab Ahmed a lot of work to do as Nigeria’s finance minister. Already, attention is focused on her to see how she will perform in the new year with all the plans and promises she has made.
In 2020, she is expected to deliver on a potpourri of policy initiatives ranging from her much talked about revenue boost through a new tax regime and other revenue generating measures; implementation of the Open Government policy.
She will also defend government’s borrowing plans for the year and beyond, especially the $29.9 billion about to be approved by the National Assembly and the 2020 budget execution among others.
On revenue, the Federal Government has concluded plans to increase the value-added tax (VAT) from 5% to 7.5%. This VAT increase will be about half the African average and amongst the lowest in the world, and it will see the state and local governments taking 85% of the proceeds.
While defending the VAT increase, Ahmed once said that “the VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.
The government’s borrowing programme could then ease and certainly the financially affected states and local governments could later focus on issues like poverty reduction, healthcare and power generation and transmission.”
Tax experts have argued that “the VAT increase, if enforced properly, forms part of the fiscal consolidation strategy for the country.
It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government across board.”
Zainab Ahmed will be the lead anchor of the recently passed Finance Bill. This is a web of laws proposed and passed to help government harvest as much revenue as it can.
The objectives of the Bill are to strategically “promote fiscal equity by mitigating instances of regressive taxation; reform domestic tax laws to align with global best practices; introduce tax incentives for investments in infrastructure and capital markets; support small businesses in line with the ongoing ease of doing business reforms; and raise revenues for the Government by various fiscal measures, including a proposed increase in the rate of Value Added Tax (VAT) from 5% to 7.5%.”
According to Ahmed, “going forward, the annual budget will always be accompanied by finance bills to enable the realization of revenue projections.
Future finance bills will therefore also provide us with additional opportunities to incrementally improve the fiscal policy (where tax resides) and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development.”
The initiative, which most Nigerians say is laudable with the proposed modifications to the fiscal rules around taxation, are clearly aimed at creating an enabling business environment and alleviating the tax burden for small and medium enterprises.
The Bill has amended the following tax provisions to make them more responsive to the tax reform policies of the Federal Government and enhance its implementation and effectiveness: “the Companies Income Tax Act has been amended to curb Base Erosion and Profit Shifting (BEPS) as proposed by the Organization for Economic Cooperation and Development (OECD) and thereby broaden the triggers for domestic taxation of income earned by non-resident companies in Nigeria through dependent agents and via online market platforms.
Address the taxation of industries, such as insurance, start-ups, and the capital markets, considered by the Federal Government as critical to the growth and development of the Nigerian economy with a view to stimulating activities in those sectors and fostering overall economic growth.
In a bid to create a level playing field for local manufacturers, this Bill wishes to subject certain imported goods to excise duties in similar manner as their locally manufactured counterparts, while the Bill also seeks to provide clarity and efficiency in the administration of individual income taxes in Nigeria.
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Debt management:
In the new year, the debate on Nigeria’s debt management will be intense and Zainab Ahmed, as finance minister, will be in the eye of the storm.
Already, a lot people have voiced their opposition to the proposed $29.9 billion loan. Despite the opposition to the planned borrowing, the National Assembly has vowed that it will authorize the government to access the loan.
The idea of the loan was mooted in 2016 but the 8th National Assembly torpedoed the idea. Infrastructure will gulp $18.3 billion from the amount the federal government will utilize $14.6 while the balance of $ 3.7 billion will be utilized by state governments for Mambila Hydro Electric Power Project; Railway Modernization Coastal Railway Project (Calabar-Port Harcourt-Onne Deep Sea Port Segment) Abuja Mass Rail Transit Project (Phase 2) Lagos-Kano Railway Modernization Project (Lagos-Ibadan Segment Double Track); Lagos Kano Railway Modernization Project (Kano-Kaduna Segment Double Track).
The federal government will spend $ 4.5 on Eurobond; $3.5 on Budget Support. On Social (Education & Health) the federal government will use $2.1 billion of the facility while state governments will spend $0.1 billion.
A total of $1.2 billion of the loan, when accessed, will be spent on agriculture and $0.2 billion Economic Management and Statistics.
The external borrowing plan is a three year plan covering proposed projects for 2016 – 2018. As such, the borrowings will be phased over the three year period. The borrowings are highly concessional (non-commercial), with low interest rates and long tenors.
The funding is being sought from multilateral institutions including the World Bank, Africa Development Bank (AfDB), Islamic Development Bank (IDB), Japan International Co-operation Agency (JICA) and China EximBank.
The planned Eurobond issuance in the international capital markets is the only commercial source of funding.
Open government portal:
At the tail end of 2019, President Muhammadu Buhari ordered the immediate implementation of the Open Government initiative where all government monetary receipts and expenditures are captured and uploaded on a daily basis.
The Office of the Accountant General of the Federation (OAGF) will lead the initiative under the supervision of Zainab Ahmed as finance minister.
It is a major test of the administration’s resolve to fight corruption. At the launch of the portal, Zainab Ahmed spoke glowingly of the benefits of the portal and many Nigerians, even government critics, praised the idea.
With this initiative, Zainab Ahmed has become the major driver of government’s anti-corruption efforts. If the project goes bad, she will be the one to carry the can.
Budget:
This is where Zainab Ahmed’s skills as the manager of the economy will be put to the greatest test. The government has transmuted from the haphazard budget cycle to the desired January to December cycle which people had demanded for.
What is now left is for Nigerians to see the positive difference the change in budget cycle will bring with regards to the volume of implementation.
How Zainab Ahmed will match a lean revenue pot to the huge financial demands required to execute the budget through early releases of capital votes will stand her out as one of the greats.
Excuses have been accepted in the past on the pretext that the budget cycle is unpredictable. Now that the finance minister has a desired and predictable budget cycle, the first half of the year 2020 will likely show what the whole year will be like.
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