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Can Nigeria achieve N18 trillion revenue target?

The Minister of Finance, Budget and National Planning, Zainab Ahmed has hinted of plans to generate N13tn to N18tn across both oil and non-oil sources, a 15 per cent revenue to GDP target by 2023.

A cross-section of experts who have monitored the nation’s economic trajectory thus far have argued that though this is a rather ambitious target but can be achieved and surpassed if the nation’s economic managers get their acts together.

Although the economy has literally gone south, no thanks to the disruptions imposed by the ranging coronavirus pandemic across the globe, for those who control the levers of the economy, all hope is not lost.

This seems to be the blessed assurance of the Minister of Finance, Budget and National Planning, Zainab Ahmed, when she said the federal government has no revenue worries any more as it has the key to unlocking some untapped revenue sources hitherto neglected and overlooked.

Eye on new revenue streams

Specifically, the minister said the federal government had identified oil and non-oil initiatives that could help the country generate between N13tn to N18tn and achieve its 15 per cent revenue to Gross Domestic Product target.

She also stated that states would need to generate N3.4tn to realise this, adding that the COVID-19 pandemic had brought to the fore the need and urgency to further diversify the sources of government revenue.

Ahmed, who spoke penultimate Thursday during a webinar that focused on leveraging data to drive inclusive policy, revenue generation and improved governance, said the Strategic Revenue Growth Initiative of the government inaugurated last year would help the government in achieving this revenue growth target.

Ahmed spoke during a webinar that focused on leveraging data to drive inclusive policy, revenue generation and improved governance.

She said, “Under the SRGI, therefore, we have identified various revenue initiatives that could potentially generate N13tn to N18tn across both oil and non-oil sources, and ensuring that we are able to achieve a 15 per cent revenue to GDP target by 2023.

“Importantly, we recognised that the support of states would be necessary to achieve the 15 per cent target. In fact, the states would need to cumulatively generate about N3.4tn.”

According to her, “Analysis of revenue data shows that as at 2018, Nigeria’s revenue to GDP ratio stood at about eight per cent, significantly below many comparator countries on the continent, as well as the continent average.”

She said the economy faced serious challenges in the first half of 2020, seeing about 65 per cent decline in projected net 2020 government revenues from the oil and gas sector, with adverse consequences for foreign exchange inflows.

Ahmed said the government’s anticipation was that these challenges would continue into the third quarter of this year.

Not a forlorn hope

Speaking with a cross-section of experts in different walks of life, they expressed optimism that though the government’s ambitious target of raking in the princely sum of N18trillion into the public till was achievable, they however gave a caveat: government must be ready to roll up its sleeves in dogged determination in order to achieve the set target.

In an exclusive interview with The Nation at the weekend, Dr. Timothy Olawale, Director-General of Nigeria Employers’ Consultative Association (NECA), the umbrella body of employers in the organised private sector said the projection was not overly ambitious.

“It’s a very good projection. I don’t see it as ambitious but it now depends on what the government intends to do to realise that much flow of cash,” he deadpanned.

While advising government on what to do, the industrial relations expert said, “In addition to the regular inflow of taxes, regular inflow from export of crude, government can deepen its activities in the solid mineral resources area and invest massively in that sector so that government can pluck all the leakages that are currently happening there.”

Besides, the NECA boss said, “Apart from solid minerals, the government can also rake in funds through the sales of moribund or inactive national assets. An example is the Federal Secretariat, in Lagos state, which is rotting and decaying away. This (secretariat) can either be commercialised or sold outright to interested investors.

“We have the National Stadium edifice which can be commercialised through public, private partnership. Already the National Theatre is one of the assets that have been handed to the CBN, and the Bankers’ Committee for upgrade.  That’s just an example of the several other assets that are rotting and wasting away,”Olawale maintained.

Ministry of Finance, Budget and National Planning , Zainab Ahmed, Prof. Adi Bongo, an economist and senior lecturer at the Lagos Business School, also shared the same sentiments that the N18trillion revenue target is doable and can even be surpassed.

“Where the problem is where the government is now going to focus to garner these largesse. I think that if they should focus on the real sector, which essentially has been run on a rent-seeking basis and is full of all manner of corrupt practices, the oil and gas sector, and the government can get more than N18trillion even within a year.

People who know and understand the workings of this system can tell you that. I’m not an insider in the oil and gas sector but I understand a bit of the business model.

Government doesn’t collect what is rightfully theirs. Each time it is negotiated away as certain individuals are looking at what goes into their pockets,” Prof Bongo said.

He was however, quick to add that the government should not only focus on the oil and gas sector alone. “Of course, Nigeria has sufficient potential to yield more than that.

But as things stand today, it is going to be hard; it’s going to be difficult. Then we have to look at government-own institutional strategy to mop up funds. What are the fiscal strategies?”

For Prof. Uche Uwaleke of the Nasarawa State University, the N18tn target is achievable in a country where non-oil tax revenue to GDP is less than eight per cent leaving wide room for improvement.

“The implementation of the 2020 Finance Act, especially with respect to the stamp duty holds a lot of potential. Government can also develop new revenue lines through sale/privatisation of some government assets such as the refineries.”

Corruption remains crux of the matter

While attempting a prognosis of the socioeconomic crisis induced by Covid-19, Prof. Bongo said at the root of the country’s problem is the issue of corruption which has eaten deep into the national fabric.

The economist who fell short of blaming the government and its agents for the parlous state of the economy due in part to some incurably defective policies, said, “We run a system of patronage essentially, on rent-seeking such that instead of people supporting the government, it’s been the other way round.

You see government supporting businesses, government doing everything. Sometimes the government doesn’t support anybody because it has direct access to the money. They dig up the oil and sell it and the money is theirs.

They now dispense of it however they like to whom they want. So that’s just the cavalier way of putting it the kind of crude system that we run in Nigeria. It is very crude. That’s what it is.

“We can dress it up in fine grammar and technicalities but the crude way to put Nigeria’s system is that the government is simply the bandit, doing what it likes, what it wants.

Over the years, the government has inebriated itself in petrol dollar, they didn’t care about the private sector, they didn’t care about the market, they didn’t care about the system.

So the system was run on its own, nobody was collecting anything and nobody had any incentive to pay anything to the government. “

The poor can’t take Nigeria out of the woods

The analysts, who expressed worry that the federal government may be persuaded to shift the burden of additional revenue generation on the masses through imposition of taxes, were quick to warn that this may backfire; as such the idea should not be tinkered with.

Olawale who noted that there is a combination of the various interventions which the government can bring to bear to realise its ambitious target, insisted that the citizenry should not be made to bear the brunt.

“However, because of the situation of things in the country now, especially with regards to the very low purchasing power of the citizenry, it will be a disservice to the masses if their burden is further increased through either direct or indirect addition to their taxation.

So you are saying that as much as the government must apply measures, it must be careful in suggesting measures that could further impoverish the suffering masses. This is my position.”

Bongo who is also on the same page with Olawale, said, “If the government interest is to begin to harass small businesses and every other person for this revenue, of course, it’s not going to be viable; it’s not going to be feasible, it will not be realised.

First of all, we have been visited by this unusual crisis of the coronavirus pandemic. Businesses are all on life support so hoping that you’re going to get anything out of them is just a wishful thinking.

People have lost their jobs so there is a limit to which you can even increase taxes. Other countries are giving reliefs to their citizens. So you can’t just tax people under the guise of trying to improve revenue. ”

VAT revenue increases

Meanwhile, the total Value Added Tax (VAT) revenue recorded by the federal government increased by N50.79 billion to N651.77 billion in the first half of the year (H1 2020) compared to N600.98 billion in H1 2019, according to the National Bureau of Statistics (NBS).

This represented 8.45 per cent growth year-on-year with the professional services generating the highest amount of VAT with N95.92 billion.

According to the sectoral distribution of VAT data for H1 2020 report released yesterday by the statistical agency, the other manufacturing segment generated N67.63 billion followed by commercial and trading, which generated N31.10 billion.

Textile and garment industry as well as pharmaceutical, soaps and toiletries generated N499.19 million and N648.78 million respectively while mining recorded the least VAT of N127.58 million.

According to the report, a total of N327.19 billion was generated from VAT in Q2 2020 compared to N324.57 billion (revised) in the preceding quarter.

Quarter-on-quarter, VAT increased by 0.81 per cent.

Non-import (foreign) VAT rose by 3.92 per cent quarter on quarter to N82.42 billion from N79.31 billion in Q1.

On the other hand, the Nigeria Customs Service (NCS) import VAT rose by 12.44 per cent to N81.66 billion compared to N72.59 billion in Q1.

The marked improvement in VAT performance in both Q1 and Q2 has been attributed to the recent hike in VAT from five per cent to 7.5 per cent which became effective from February 1.

In Q1, the federal government generated additional N30.46 billion helped by the increment in VAT.

VAT receipts from banks and financial institutions amounted to N10.53 billion by half year and N5.11 billion in Q2 compared to N5.42 billion in Q1.

Also, federal ministries and parastatals recorded N12.37 billion of VAT revenues, while N802.38 million was recorded from local government councils in H1.

However, state ministries and parastatals recorded 11.05 per cent increase in VAT from N10.66 billion in Q1 to N11. 84 billion in Q2 with H1 receipts at N22. 50billion.

VAT from hotels and catering services dropped to N1.36 billion in Q2 compared to N2.52 billion in Q1.

The NBS said receipts from petrochemical and petroleum refineries declined by 29.97 per cent to N918.86 million from N1.31 billion in Q1.

As Nigerians anticipate a breath of fresh air to galvanise the productive sectors, pray would there be enough funds to get the economy back on an even keel? Time will tell.

 

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