Experts seek structural reforms to improve tax to GDP revenue
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Financing experts Tuesday, called for a review of the current fiscal policy regime to address the low revenue from Nigeria’s non-oil sector
The experts drawn from both the public and private sectors said the policy review has become necessary if the country must improve and strengthen revenue profile from the sectors, considered to be lowest in Africa
Sarah Alade, Chairman of Gates Foundation supported NESG Fiscal Policy Roundtable and former Deputy Governor (Economic Policy), Central Bank of Nigeria, in her remarks, identified Nigeria’s major challenges to include low and declining per capita income, adding that the country must improve on domestic resource mobilization
“Nigeria’s revenues have historically been low and overly dependent on the oil sector.
Report from the International Monetary Fund (IMF) estimates that revenue collected in 2016 across all tiers of government was only about 6% of GDP.
Historically, more than 70% of those revenues have come from the oil sector while the non-oil sectors which account for more than 90% of GDP has historically contributed about 3% to revenues.”
This has over the years limited the country’s ability to credibly execute its development plans and to fund critical social sector programs in health, education and infrastructure for example. It also leaves Nigeria very vulnerable to macro-economic shocks from low oil prices. The most recent fall in oil prices threw Nigeria into a fiscal crisis with spill-over effects on the economy resulting in a recession in 2016.”
The experts therefore see the need for a strong revenue base that is balanced between the oil and non-oil sector as critical to sustainably finance Nigeria’s development programs and long term macro-economic stability.
“The 2018-2020 Fiscal Strategy is focused on broadening revenue receipts by identifying and plugging revenue leakages, improving the efficiency and quality of capital spending, greater emphasis on critical infrastructure, rationalization of recurrent expenditure, and gradual fiscal consolidation to maintain the fiscal deficit below 3% of GDP as prescribed by the Fiscal Responsibility Act, 2007.”
Speaking on the topic “ Fiscal Governance and Taxation – Where Are We Now and Where Can/Should We Go from Here?”, Doyin Salami; Co-Chair and Resident Commissioner, Fiscal Policy Roundtable, noted that Nigeria must expand the fiscal policy space if the country is going to grow.
According to him, “ The fiscal space has to be expanded, any which way you look at it.
“ we are collecting only 71/2% of our Gross Domestic Product GDP in revenues , far below the African average of 221/2 %.
Salami who stated that the country has strong opportunities for development, added that this can only come about as a result of “efficient and effective spending in areas of priority, to boost the economy significantly”
Salami called for sanctions for violation of the nation’s fiscal laws, to enforce compliance
Revenue earned from non- oil taxation’s are ridiculously low, you are looking at 71/2% total for both oil and non-oil and non-oil is somewhere around about 3% of the GDP. and the moment you recognize that the non- oil is about 90% of the economy, yet it contributes only 3%, then you know that this is a striking contracts.
“ what is the problem, it is that we are not collecting the taxes, or that there are some sectors not just having inputs into taxations.
The need to ensure tax payers also get value for the taxes paid was also stressed,
“Our mandate it to impact revenue and impact expenditures”
Debt service to government revenue ratio has grown to about 46% which they say is also not healthy for the economy considering their impact on revenues left for executions capital projects
Speaking on “mapping the Perspectives and Challenges of Domestic Resource Mobilization in Nigeria”, Amine Mati; Mission Chief/Senior Resident Representative of the IMF in Nigeria, revealed that while Excises Duties contributes 0.1% to GDP, in Nigeria, it contributes over 6% to GDP in Turkey, on comparative terms.
He advised the country to review its tax policy if Nigeria must improve its revenue base.
He urged the government to explore the “large potentials” in the Excise Duties to leverage on increased revenue from the non- oil sector.
These include duties on smoking, drinking, consumption, amongst others.
“ In Nigeria today Excise are only applicable to alcohol and tobacco products. There used to be Excise that has brought a lot of revenue but which has been discontinued since 2009”
“ For changing the rates, you don’t need to go through the Parliament, this can be through an Executive Order or decision”
“ In Nigeria, Excises only bring 0.1% of the GDP, as against 3% average, obtainable in the ECOWAS sub region, yet, this is one of the easy source of revenue to get”
Tony Ailemen, Abuja