The huge funding gap of the Federal Government occasioned by the crash in crude oil prices would continue this year, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has said.
Ahmed said that although the trend might not persist beyond 2021, the COVID-19 pandemic had continued to disrupt economic activities in Nigeria and across the world.
The minister, who said these in a statement issued in Abuja on Friday by her media aide, Yunusa Abdullahi, stated that the pandemic had complicated a lot of issues leading to cyclical economic crises.
She said, “There is significant fall in crude oil prices resulting into very huge funding gap for the government. This trend is projected to continue into 2021 (hopefully, not beyond) as the pandemic continues to disrupt economic activities globally.
“The lockdowns of 2020 and the associated reduction in economic activities during those periods are expected to bear negatively on companies’ 2021 taxable profits.
“The extent of revenue decline from corporate income tax may not be known until 30th June 2021 when most companies would have filed their tax returns for the year.”
According to her, despite government’s best effort in providing palliatives to cushion the effect of the pandemic on businesses, families and individuals, the impact had been no less severe.
Ahmed observed that many people were struggling to provide food and other basic needs while a lot of businesses were struggling to keep their employees.
She said, “The situation has presented the government with a very difficult task of balancing the need to support struggling businesses and families through fiscal incentives and other palliative measures on the one hand, while on the other hand, raising necessary revenue to fund government budget.
“One way or the other, we must achieve, as a nation, the key objective of assisting businesses and individuals to pull through this difficult episode and put the economy back on track for stable and sustainable growth.”
Drawing attention to the need for understanding the rationale behind government policy measures, Ahmed explained that the reasons were better understood within the context of the peculiar economic situation facing the country.
The minister said, “In 2019, for instance, the government exempted small companies from tax while reducing tax rate for medium companies.
“This year, the government, as a way of helping workers remunerated at the lower rung of the wage ladder, exempted minimum wage from income tax and further reduced the rate of minimum tax for businesses.”
She said the government deliberately took the decision not to impose new taxes, notwithstanding the pressing need for increased revenue.
