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Antidotes to Nigeria’s rising indebtedness

Jide-Ojo
Jide Ojo

A September 19, 2022 press release by Nigeria’s Debt Management Office put the total public debt stock, representing the domestic and external debt stocks of the Federal Government, 36 state governments and the Federal Capital Territory at N42.84tn ($103.31bn) as at June 30, 2022. This has been a source of worry for financial experts who believe that though the country’s debt to Gross Domestic Product may be relatively low and tolerable, debt to revenue ratio has been a major concern as the country has not been meeting its income projections across the economic spectrum. In order to defray the revenue shortfall, the country has persistently relied on borrowing.

For instance, the proposed 2023 Budget of Fiscal Consolidation and Transition submitted to the National Assembly on October 7, 2022 came with a deficit of N10.78tn, which represents 4.78 per cent of estimated GDP and above the three per cent threshold set by the Fiscal Responsibility Act 2007. According to the President, the deficit will be financed by “new borrowings totaling N8.80tn, N206.18bn from privatisation proceeds and N1.77tn drawdown on bilateral/multilateral loans secured for specific development projects/programmes.” This means that Nigeria’s debt stock will hit Olympian heights of N60tn by next year. The sad part is that the country is grappling with her debt servicing obligations to its creditors. This is dangerous as Nigeria’s assets may be seized by these creditors if the country defaults in meeting her debt repayment plans.

What alternatives do we have to borrowing to fund the nation’s budget? There are many and some of them are as follows: The first is to reduce the cost of governance. I have on several occasions advocated for substantial reductions in the frivolities we pad our budget with. Items such as welfare and entertainment should have long been removed from our budget, or reduced drastically. Why should we be holding frivolous state banquets and giving expensive gifts to visitors to the presidency? Printing of calendars, branded souvenirs, diaries ought to have been removed from budgets of the presidency and ministries, departments and agencies. It is surprising to me that federal and state governments are still bankrolling the pilgrimage of some private citizens to the Holy Lands in Mecca and Jerusalem.

How could the country be borrowing to fund her budget while a whopping N11.92bn will be spent by the President and his vice for feeding and foreign trips in 2023?  This is not justifiable! Similar humongous amount is budgeted for by state governors. Yet these elected public officials keep saying the country is cash-strapped, and there is the need for citizens to tighten their belts for austerity measures. Why should they be loosening their own belt while urging others to tighten theirs? The number of jets and helicopters in the presidential fleet and long convoy of vehicles of the President and state governors are not reflective of a country in dire financial straits.

I have said previously and I’m still echoing it again that the relevant sections of the 1999 Constitution should be amended to reduce by at least one-third of the number of seats in the Nigerian Senate, House of Representatives and State Houses of Assembly. The Senate of the United States, for instance, is made up of 100 senators at two per state, irrespective of the size. The total number of secretaries, equivalent to our own ministers, in the US is 15 despite being higher in population and number of states than Nigeria. Why should Nigeria have 43 ministers despite our poor economy? The section 147(3) of the 1999 Constitution, which requires all the 36 states to have at least a representative in the federal cabinet, needs to be altered. Nigeria does not need more than 12 ministers to administer the country. The implementation of the Oronsaye’s mergers and acquisition of MDA’s 2011 report has been long overdue for implementation but it seems from all indications that there is no political will to implement the white paper by the current administration.

Aside from reducing the cost of governance, I have also posited the need to auction off some of the country’s white elephants, whether completed or uncompleted. Many projects are established for political and not economic reasons, thus some of them, in the long run, have become unviable and comatose. These are the ones that should be sold off without further delay. I, for one, do not believe in putting more public resources in the unattainable attempts at revamping our four ailing refineries. This also goes for the Ajaokuta Steel Complex and the several government-owned enterprises that have been running at a loss despite guzzling huge budgetary allocations.

If we want to halt more borrowings, there is a need to shore up the country’s tax revenue. Nigeria, sadly, is said to have perhaps the lowest tax revenue in the world, which is at six per cent when many other countries in Africa are doing between 10 and 15 per cent. Many European countries are doing between 30 and 40 per cent. A July 27, 2021 report in the online newspaper, The Cable, quoted the World Bank as saying that Nigeria’s revenue to GDP ratio is the lowest in the world. The bank’s country director for Nigeria, Shubham Chaudhuri, said this during a panel session at a virtual public sector seminar organised by the Lagos Business School last year.

It is understandable that both the rich and the poor in Nigeria do not want to pay tax for different reasons. One of them is lack of accountability for taxes collected as well as the ostentatious lifestyles of our political leaders. Many also attribute the lack of willingness to pay tax to the country’s over-dependence on oil revenue which is considered free money otherwise referred to as the national cake from which everybody wants to partake. In a strict sense, everybody pays tax, especially consumption tax. For instance, from January 2020, Nigerians have been paying 7.5 per cent Value Added Tax from the initial 5 per cent. There is no escaping paying this variant of tax unless you do not patronise products and services that are taxed.

The argument by the suffering masses is that the rising commodity prices, inflation, currency devaluation and high dependency ratio have made nonsense of their income and as such the government should not think of further taxing them under any guise. In order to protect the vulnerable and poor Nigerians from further taxation while at the same time increase the country’s tax revenue, financial experts have suggested the digitisation of tax collection to ensure their immediate remittance to government’s coffers; thereby preventing the extant challenge of non-remittance of taxes collected on behalf of the governments.

Capital Gain Tax has also been suggested, especially on property sales be it building, land, vehicles or any other property. Equally strongly recommended is the taxation of non-resident online businesses, such as those of social media platforms and online marketing and sales companies with no offices in Nigeria. These businesses make huge profits from their customers or clients in Nigeria, yet the profiteers do not pay tax to the Nigerian government because of the lack of physical offices in the country. I think this is why the Federal Government has asked Twitter to have a physical office in Nigeria. It has also been proposed that high net worth individuals need to be encouraged to pay appropriate taxes while the government should also stop abusing the tax waiver policy.

On the whole, transparency and accountability in Nigeria’s tax regime, both in terms of collection, distribution and expenditure, needs to be encouraged. People want to see what social amenities have been provided by their taxes and also want prudent spending of their commonwealth, be it tax revenue, oil and non-oil incomes.

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