Viewpoint: How turf protection limits Nigeria’s revenue generation

By ‘Tope Fasua

The government could be a very funny and frustrating business. First, those who go into politics are often people with large egos. So, imagine the clash of many of those people in a single government. The civil servants also come with their cunny games. They’ve seen so many governments come and go. They’ve seen the desperation and folly of many politicians. And as we can see in Nigeria, the civil servants hold the ace. The desperate politician struggles to recoup his campaign expenses, the alleged bribes to the national assembly for his appointment to be confirmed and to get comfortable. But there’s little he can do in this regard without playing into the hands of the ever-patient public servant.

From our recent news in Nigeria, any normal person will be shocked at the billions that some top civil servants have shared among themselves, out of taxpayers’ money. And to be fair, it is only a handful of public servants. The vast majority are made to suffer in poverty while they wait for their turns – which mostly never comes. If their turns come to man the till, compressed anger plus years or decades of frustration and deprivation takes over. The rest will be history. Only a handful of parastatals have been able to play the system and ensure fantastic salaries and allowances for their staff. A controversy presently rages over the salaries and allowances at the Pensions Commission. That does not prevent them from being greedy though.

But my concern today is how the usual political ego mixes with greed in the average and not-so-average Nigerian, to keep this country down. I think the minister of finance, Zainab Ahmed, deserves pity from us. For far too long now, she has been repeating that Nigeria has a revenue problem, not a debt problem. Some of us differ with her on this, and for me, Nigeria has a debt, expenditure and of course, a revenue problem and even more rolled into one. We also have a thinking problem, a productivity problem, a visioning problem, a unity and patriotism problem, a sociocultural problem, and a sociopsychological problem as seen in the way most Nigerians are corrupt and can hardly be trusted with public funds which they loot and just keep or lose to foreign countries. And many more issues keep crawling out of the woodwork.

But despite Ahmed’s agony at our low revenue capacity in Nigeria, the next logical question to ask is; “what are we doing about it?”. For it is well within the purview of fiscal policy to drive revenue and ensure it is maximised no matter what sector the revenue comes from. And the revenue sources open to governments at all levels include taxes, rents, rates, duties, fines, fees, levies and whatever else is permissible under our constitution. What has become more and more obvious under the Buhari administration is that government has gotten increasingly frustrated with its capacity to generate revenue or even control these MDAs. Whereas I am in the private sector, I sometimes pity them, and I strongly believe that if I was in their place, I would have lost my cool by now. I also believe that the president is rather letting down the minister of finance. There is an executive backup she needs without which she will be frustrated out of her mind. The ultimate function of revenue generation belongs to a president. He only has to speak strongly, publicly, and consistently, raising the alarm that we need these revenues to save the economy.

And so it was that on Monday, September 5, 2022, one of the major news items was Isa Pantami, the powerful sheikh and minister for communication and innovation, stepped out to say that the 5% VAT/tax proposed on telecoms services by the minister of finance will no longer come into play. He explained briefly that the tax was stepped down at his behest and based on his advice. His complaint was chiefly that there were already too many taxes (41 he said), in the telecoms area and he did not see why telecoms should be the whipping boy for everyone else (in other words, territory protection). He also said the finance ministry did not carry him along. So, for those who know Pantami, he has only pulled his weight.

I did a little research and calculation. In 2019, Nigerians spent N3.2 trillion on calls and data. 5% on this would amount to N162 billion. 10% taxes on that will amount to N320 billion. That will not save Nigeria from Hades but it is something. And it is a good tax if administered. Two of the attributes of a good tax are its collectability and payability. A telecoms tax is easy to collect as it is monitored and received from telecoms providers. Indeed also, a 5% tax on phone calls or data will hardly be noticeable for most Nigerians. After all, we hear that the telecoms companies sometimes play us games, deducting little here and there from 180 million subscribers and nobody has yet been born who can track and tackle them. So why not?

Add to that the fact that the proposed tax is progressive. You pay more based on your usage. Heavy users of data and airtime simply bear more of the burden, not the struggling dependants. I was sad that we could not achieve this simple tax. I would later read that the director general of the Budget Office, Ben Nwabueze, complained about this development. Much as he sounded very professional and measured, I could sense his frustration. He informed the journalist that this tax had been written into the Finance Act 2022. But who cares about an act when egos are in play?
Advertisement

Nigeria’s 2023 proposed budget of helplessness

Snippets of Nigeria’s 2023 budget emerged recently, and they painted a spectre of disaster. The country wishes to spend a total of N19 trillion. But out of that amount, the federal government says it could only raise less than N7 trillion in revenue. The remainder – N12 trillion – will be deficit and must be borrowed. The government says that the planned deficit will be just over 5% of the gross domestic product (GDP) and admits that it has violated the rule which recommends that deficits should not be above 3%.

But this is only a subtle manner of minimising our predicament. We may have sworn never to wean ourselves off the trick of comparing everything with the GDP even when it hardly makes sense to so do. The GDP is just the calculation of everyone’s economic activity – the goods and services sold and bought in a country in a given year. It is not money that is readily available to the government. So, indeed government should never plan with GDP in mind. The GDP is just a nice little metric that allows a government to determine some level of progress or lack of it.

Therefore, whether we are comparing our national debt with the GDP, or in this instance the budget deficit of a given year, what is obvious here is that we are running away from the truth. What is more sensible is to compare the deficit with the very budget in which it is planned. In this instance, the deficit is 63% (12 trillion by 19 trillion). Way more than half of the coming budget will be financed by borrowing and the inability of the government to step up revenue collection as it comes under pressure to spend more for the people is a sign of helplessness. Has the government lost control over economic players?

By the way, this budget deficit issue has taken on a life of its own. Only a country on the way to its own collapse will keep up deficit budgeting ad infinitum. What countries do is that after a few years of deficit budgeting, they try to balance the budget. Having deficits over the long term, as has become the case for Nigeria, simply means that our debts are growing at a geometric pace. In 2006, when we were already in what they called a debt crisis, our foreign debt was a mere $35 billion of which we paid $12 billion and got a cancellation of $18 billion. Today, we are owing close to $50 billion to foreigners and another similar sum domestically. We have to rein in the deficit if we are to be honest with ourselves. And it is doable. But for now, the challenge is to grow revenue.

There are many areas in which we are losing revenues in this country. For one, our erstwhile top crude oil assets – Bonny, Bonga, Forcados – are bleeding. Nigeria loses perhaps 1,000,000 barrels per day to thieves and shut-ins as a result of vandalisation. A recent report by the Economist magazine details how we are the only oil-producing country not benefiting from recent highs in crude oil prices. I have given up on that sector. Also, for decades now, many of the top government-owned enterprises (GOEs) have been simply spending everything they earn for Nigeria on themselves, awarding huge allowances and bonuses to themselves, budgeting yearly to spend 99.9% of all revenues and collections. They are the lords of the manor. A couple of years back, the government brought initiatives to ensure we get something back from these GOEs, but there are always tricks in the bag to ensure very little if anything gets back to the common coffers of government. It is as if those guys are set up as adversaries to the people of this country. They operate in silos and many of them control their supervising ministers. They also understand that the oversight members of the national assembly are only interested in getting their huge kickbacks. All sorted.

It continues to be a tragedy, that all our treasurers steal from the till and there’s nothing we can do about that. They easily circumvent the technology, like TSA, GIFMIS and the rest. First, it was Jonah Otunla under the Jonathan government, now it is Ahmed Idris.

Apart from the pocketing of most of the revenues and collections of many GOEs, Nigeria is also losing money to outright corruption and deals made between operatives of those agencies and those who should pay. That is the more difficult corruption to stop because usually, nobody else is there when deals are struck. N100 million is due to the government, and the officials say the company should pay N5 million and give him N10 million. Which company will not go for it? Some agencies also still do funny accounting. Recently, the house of representatives committee on finance dragged the Federal Road Safety Corps for issuing physical receipts instead of allowing offenders to pay via electronic means. Billions were unaccounted for.

Then there is the fact that everybody just seems not to want to pay anything to Nigeria’s coffers. Everyone is now their own government, and it looks like things will continue that way for a while except we find a government that asserts itself against corrupt government operatives and the citizens alike. The organized private sector, as represented by Chambers of Commerce around the country, as well as manufacturers’ associations seem to have taken up an adversarial and activist role against the government when it comes to improving the collection of revenues or optimizing taxes as well. They are always up in daggers against any ideas. While Kemi Adeosun was around, she tried to increase excise duties on cigarettes and alcohol on the advice of the IMF. She met a stone wall. Nigeria remains the country where alcohol and cigarettes are the cheapest almost in the whole world. The OPS claimed that a mere N3 per stick of cigarette will collapse the entire industry.

Recently when the government muted the idea of a sugar/sin tax, the same manufacturers claimed the industry will collapse if a mere N6 is added to a bottle of Fanta. Many Nigerians say that because the government has not been using revenues well enough, they see no reasons why they should even pay anything. I don’t see it that way. I think we are digging a hole for ourselves collectively if we take that stance. Something must shift first. Citizens must cooperate with each other and have a positive view of contributing to collective development. Yet, we all happily pay these taxes and fines abroad.

I was in Ghana months back and in Buka Restaurant in Osu, Accra, the bill came with 17.5% VAT, 2.5% education tax, 2.5% National Health Insurance, 1% Covid Levy and 1% tourism fee. There were many Nigerians there happily paying with sheepish grins on their faces. Every bottle of water or drink being sold had a QR code printed on them to certify that duties and excise had been paid on them. Ghana’s economy may have issues today, but they jolly well take themselves seriously and may emerge as a solid economy ahead of us.

What about property taxes, which could be of great help at the state level and relieve the federal of some pressure? Every attempt to introduce this has been shot down by every state legislature. It is a case of the rich protecting themselves. Nobody wants to give an inch in Nigeria.

So, we know the answers to our problems but are just not ready to do the right thing. Since people are complaining about past profligacy – and that is indeed a problem – the coming government may want to make sacrifices (say ask appointees to work for free for a few years). The coming president must draw the line on all the indiscipline and thievery going on in government, so that we may save ourselves. We cannot keep drawing up budgets that will be 60% financed by borrowing when we are already using more than 100% of federal revenue to service debt. The minister even complained in her last presentation that the way things are going, the 2023 budget will not have any capital component as the entire budget will be for debt servicing and recurrent expenditure (like paying salaries). When a federal government only pays salaries and services debt, you know that the end is nigh.

The president should try and let all these powerful ministers know that they are working for one government, one Nigeria… one people. We shouldn’t be having ministers vetoing the honest suggestions of other ministers and all of that ego play. That N19 trillion budget for 2023 should be financed by at least N17 trillion revenue. I checked Kenya and that $150 billion economy budgeted $29 billion in 2022, which it is financing by about $20 billion in revenue. Its deficit is 25% as against our own 63%. The country has no crude oil. Its economy seems much better run than ours. I must quickly add that the solution is not to cut our budget as mindlessly suggested in some quarters. Ours is one of the lowest in the world on a per capita basis. Our budget is grossly inadequate as it is. In dollar terms, it even keeps reducing due to devaluation. Anyone suggesting a reduction in budget size is suggesting more poverty for the majority, and less public goods and infrastructure. Simple.

We have to get off our high horses in Nigeria. We cannot on one hand be prancing around the world in private jets and presidential planes and large entourages of privileged people saying we are giant of Africa while a vast majority of our people are tanking in abject want and poverty because we cannot raise government revenue as everybody ‘locks up’, as they say on the streets. If this government fails on these grounds, the next one should please take note. It’s a war out there. And the government must win that war.

Tope Fasua, an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP), can be reached through topsyfash@yahoo.com.

LEAVE A REPLY

Please enter your comment!
Please enter your name here