Understanding The Key Steps To Diversifying Nigeria's Revenue - Dr. Suleyman Ndanusa


Friday, June 19, 2020 / 4:22 PM / Bukola Akinyele for WebTV / Header Image Credit: DANE Investments

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The Co-Chair of the Nigeria Economic Summit Group, NESG Fiscal Policy Roundtable, Dr. Suleyman Ndanusa, has called on the federal government to rationalize spending. He also called for the diversification of the country's sources of revenue away from the oil sector. In doing this he urged that the process of tax payments be given top priority, emphasizing that the hallmark of the government's strategy should be the promotion of domestic productivity. Ndanusa pointed out that the NESG had come together to set the agenda for the tone and texture of growth and development in the country. He noted that the whole idea was to find how the issue of taxation could be approached to achieve faster-paced growth through revenues from expanded business activities. Giving further explanation,  the Co-Chair revealed that the NESG survey showed that the average Nigerian would want to pay tax but local morale was low based on the complexity of the tax system and the difficulty in linking tax payments to public service activities.

He was of the view that the complexities of domestic tax administration,  tax policy,  and the laws guiding tax payment make the process of tax recovery difficult. Ndanusa also observed that rural dwellers were ready to pay tax but faced unique challenges. He explained that from the NESG findings, the Committee realized that one of the reasons  Nigerians do not pay taxes was the clear breach of the social contract with taxpayers politicians who spend tax revenues on luxurious lifestyles rather than the provision of social infrastructure and communal services.

He was of the view that people would be willing to pay taxes if there was ready access to free or subsidized healthcare services, motorable roads, potable water and proper communal security. The link between social service provision and tax payment serves as a bedrock of the presumed social contract between the government and taxpayers.

According to the DG, if there is no value for money people would not pay taxes. He said the outcome of the survey was very important for Nigeria which had embarked on a campaign of upscaling its tax revenue base.  Ndanusa impressed upon the government to see the link between service provision and tax payment and the requirement of policymakers to ensure transparency in the process of revenue generation and revenue application. The situation where tax revenue is roughly 6% of GDP, in his opinion, was unacceptably low. He urged the tax authorities and the government to be conscious of the need to respect the underlying social contract that binds citizens and their governments.

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On the issue of the rising public debt, he said, the revenue needed to address debt servicing had shrunk in Q1 2020 as a result of a fall in domestic production and supply chain disruptions. Ndanusa believed it that raising revenue while the international price of crude oil was plunging was a hard battle to win. He said, Nigeria has diversified its economy but still faces the challenge of production. He was of the view that every sector or the entire value chain must become productive, also  foreign revenue needs to be diversified and to achieve this all sectors of the economy must become productive, he explained.

Ndanusa suggested that the country look at its expenditure and harmonize such spending with areas of optimal productive impact. He suggested that there was a need to rationalize spending to trim down expenditure to align more strategically with revenues. The DG also spoke on the need to diversify the country's sources of revenue away from the oil sector.

According to the NESG boss, the key steps to diversifying economic revenue sources, he said was to grow economic activities and tax the revenue flows that come from improved output and incomes. In his view,  the government must create an enabling environment for the ease of doing business thereby widening the tax base in the informal sector. The informal sector would likely to better with an improvement in the business environment and a rise in corporate incomes, this would bring these businesses into the formal sector and improve tax earnings by the government.

Speaking on how the capital market could help the economy in terms of Public-Private Partnerships (PPPs), Ndanusa noted that the capital market was an economic enabler in every economy. He noted that the Nigerian government needs to put in place the right policies for the investors to partner with it in growing the economy's productive base.  He noted that in the area of infrastructure there was a need for over  $30trn to bridge the domestic infrastructure gap in the country. He observed that the type of infrastructure that could generate the cash flow to pay itself and ensure decent returns on investor funds were the kind of instruments that could be brought to the capital market for funding. 

In conclusion, Ndanusa spoke to Opportunities that could deepen the fiscal space. He believed that policymakers must take citizen's social welfare more seriously to bridge the trust gap between the governed and the governing.  He also insisted that the country needs to simply the prevailing tax system which would involve removing incidences of double taxation. He thought that the capital market should be used to jump-start the economy by listing state-owned enterprises (SOEs) and creating liquidity and not just palliatives.

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