- Says business environment, taxable income mostly affected
- States, FCT IGR shrinks by N28.15bn
BY COBHAM NSA – There is no denying the fact that Nigeria’s worsening security situation and currency depreciation are taking a huge toll on the business environment in the country.
This is the honest submission by the Nigeria Governors’ Forum (NGF) as it admits that the growing insecurity and humbling economic challenges have clearly afflicted stress and negative impact on productivity and taxable income across every sector.
The NGF’s position is against the backdrop of concerns by the States’ Fiscal Transparency, Accountability, and Sustainability Technical Assistance (SFTAS) Programme that between 2019 and 2020, the total Internally Generated Revenue (IGR) of the 36 States and the Federal Capital Territory (FCT) shrunk by 2.1 per cent, representing N28.15 billion.
Speaking at a workshop organised for Finance Correspondents by the SFTAS Programme Coordination Unit, Federal Ministry of Finance, Budget and National Planning in Abuja, the NGF, through its Director General, Mr Asishana Okauru, also tackled the issue of weak social contract between citizens and the government, noting that the development continues to threaten the legitimacy of taxation.
Okauru, who highlighted the importance of the social contract between the government and its citizens as represented by the quality of public services and the public’s willingness to pay or evade taxes, said; “Based on NGF’s taxpayer perception survey 2021, many informal sector workers question the notion that tax authorities have the right to make people pay taxes.”
In a presentation titled, “Improving Internally Generated Revenue (IGR): Trend and Emerging Reforms”, the NGF Chief Executive said Nigeria is still battling to recover from a combination of adverse fiscal and macroeconomic conditions that have clearly exerted strong pressure on the fiscal sustainability of governments at both national and sub-national levels.
According to him; “Worsening insecurity and currency depreciation is affecting the business environment and consequently, productivity and income to be taxed.
“Tax revenues are essential for state governments to maintain fiscal sustainability given the boom and bust cycles the Nigerian economy experiences
“The structure of the Nigeria economy reflects a predominance of the services sector which accounts for nearly 55 per cent of the GDP for Q4 2021. Unfortunately, economic activities under this sector still suffer low productivity and wages.”
Represented at the occasion by Mr. Lanre Ajogbasile, the Senior Programme Manager, NGF/SFTAS, Okauru attributed the adverse fiscal pressure to over dependence on Federation Accounts Allocation Committee (FAAC) transfers constantly threatened by the increasing volatility in global oil prices as well as mounting subsidy payments.
He further stated thus “the impact of this has been exacerbated by long years of increases in government permanent expenditures arising from increased cost of governance, new minimum wage and rising debt service.”
For him, the COVID-19 pandemic also put a dent on government spending, economic activities and invariably the IGR, adding that the Organisation for Economic Co-operation and Development (OECD) had in 2019 estimated Tax-to-GDP ratio in Nigeria at six per cent.
However, Okauru stated that when compared with the average for 30 African countries, according to the OECD Revenue Statistics in Africa 2021 report, the number stood at 16.6 per cent.
Noting that examples of Tax-to-GDP ratio in other African countries analysed include Ghana (13.5 per cent); Niger (10.1 per cent); Egypt (14.2 per cent); DR Congo (8 per cent); Kenya (17.3 per cent); Uganda (12.1 per cent); and South Africa (26.2 per cent), the NGF boss said average tax effort (tax-to-GDP) of Nigerian states stood at 2 per cent based on the NGF 2018 data.
Okauru also said based on the 2017 GDP record for 22 states, the Service sector accounted for 54 per cent while Agriculture and Industry accounted for 23 per cent each, respectively, even as he admitted that the poor employment record, 33 per cent unemployment rate for full year 2020, and estimated 35 per cent for full year 2021, reflected low productivity and the absence of a strong manufacturing base.
Hear him; “According to the 2017 data, only three and four states out of the twenty-two states that reported data on gross domestic product had an agriculture and industrial base that accounted for up to 20 per cent of economic activities in their states.”
He said among the states that have shown remarkable growth over the period under review are Sokoto State, which moved from N7.5 million to N519.5 million in Direct Assessment; Niger State – N1 million to N2.07 billion in MDA revenue; Jigawa State – N1.4 billion to N3.8 billion; Kogi State – N444.8 million to N3.6 billion in other taxes; Osun State – N53.3 million to N253.7 million in other taxes and the FCT – N2.6 billion to N19.4 billion in other taxes.
The NGF Director General said despite existing and emerging challenges, the States have continued to record steady progress in reforming the tax environment and system to improve their IGR by adopting the Treasury Single Account (TSA) and cashless policy.
Other measures adopted by the States include; “Improved collaboration between the SIRSs and identity management Ministries, Departments and Agencies (through the Joint Tax Board); the establishment of Joint State Revenue Committees to improve collaboration among the State, Local Governments and in-State revenue generating MDAs.”
Similarly, he said; “SIRSs are being granted financial and administrative autonomy to enable increased capacity in delivering their mandate, and increase in technology adoption for revenue monitoring and collections – enabling online payment of taxes, fees, levies, and charges.”
Also addressing the need to bring more citizens into the taxpayers’ net for increased revenue generation, the NGF Chief Executive noted that total number of registered taxpayers (States and FCT) was estimated to reach 35 million persons 2019/2020, which was about 50 per cent of total labour force of 70 million persons.
