Independence in Nigeria brought with it a gradual decline of direct taxation as a component of government revenue. Following his well-developed views on the “two publics”, Peter Ekeh attributed this to the illegitimacy of the post-colonial state where citizens view the civic sphere as an ‘amoral entity’ and do not see themselves as being bound to contribute to its sustenance. In fact, it makes it legitimate in the eyes of the African to divert state resources to the private/primordial realm.
The Nigerian problem was exacerbated by the oil boom of the early 1970’s, which turned Nigeria into perhaps, the wealthiest country in Africa overnight. Unfortunately, it came during the period of military rule. Just fresh from fighting a bloody Civil War, the military government, on the pretext of promoting “reconciliation, reconstruction and rehabilitation” and ensuring rapid national development, quickly centralized all revenues from oil; taking the lion share and dispensing the rest to states based on some set formula. With so much money coming in, and with the takeover of virtually all capital intensive initiatives by the federal government (this included all universities and other institutions built and managed by the state governments, either wholly or in consortium), the states had no need to raise their own revenues. They just queued up to receive their ‘monthly allocation’ from the federal capital. Even religion was not spared as the government began to organize and even subsidize pilgrimages. Nigeria became a full blow ‘rentier’ state, and as is usual with such states where revenues are externally derived, the government became less responsible and less accountable to its citizens and increasingly became corrupt and inefficient.
Obviously, with so much money coming from oil, tax revenues became unimportant to the government. Therefore, the taxation systems set up by the colonial government, even as inadequate as they were, were gradually dismantled or ignored, particularly at the local level. For instance, in 1980, the NPN (National Party of Nigeria) as noted by the famous anthropologist, Jane Guyer, “abolished all community/poll and cattle taxes in the states where it held governorship.” In places however where the taxes were still charged, the annual tax were considerably less than the amount say, “a farmer might contribute as a minor participant in a single funeral ceremony, a chieftaincy installation, or as a purchaser of a single round of three Harp beers among friends.” Guyer acknowledged that the income of farmers fluctuate from year to year, but argued that these farmers would have to be destitute before the official appropriation levels came close to the one-third taxation level known from European peasant history.
Even today, Nigeria’s tax rates and tax compliance are one of the lowest in the world. For instance, in a World’s Paying Taxes report for 2015 published by PricewaterhouseCoppers (PwC) in collaboration with the World Bank, Nigeria was ranked 3rd worst globally and the worst in Africa in tax payment compliance. Similarly, Nigeria’s non-oil taxation amounts to only 3 per cent of national income. This, according to Oxford Economist, Paul Collier, “is quite astonishing low by world standards. In most modern economies the figure would be around 35 per cent, and even in poor parts of Africa it is around 12 per cent.” Also, Value Added Tax (VAT) rate, set at 5 per cent in Nigeria since 1993, is one of the lowest in the world. In 2007, the government attempted to increase it to 10 per cent but the labour unions, with the support of Nigerians, went on a strike to force a reversal.
Many Nigerians wonder why their country cannot manage proceeds from its oil resources like say, Norway, whose prudent management of its oil resources has made it one of the richest countries in the world. To be sure, Norway produces just about 1.6 million barrels of crude oil per day (less than Nigeria’s 2.3 million barrels/day). Yet, its $500 billion economy is dwarfed by its $740 billion Sovereign Wealth Fund, which is the largest in the world. The most astonishing fact about Norway however is that with a population of about 5 million, it still has one of the highest tax regimes in the world – 36 per cent personal income tax and 24 per cent VAT. Despite its wealth and low population, Norway still choose to operate a tough tax regime to prevent the country from becoming a rentier state, make its citizens equal partners in the social contract and better positioned to demand and ensure government accountability, and prevent its citizens from developing an entitlement culture. Therein lies the success of Norway.
In Nigeria however, the notion of citizenship is basically right-based – one that sees itself more as receiving from, and not giving to the public domain. Jane Guyer describes this kind of social contract as “representation without taxation”, an ingenious reversal of the popular American slogan before the revolution.
But this kind of social contract does come at a cost – an almost total absence of accountability in governance. Since the people contribute very little to government revenues, they do not have the moral right or even the incentive to know how the government manages the resources. Usually, such countries depend on external ‘rents’ or strictly speaking ‘unearned revenues’ for their sustenance. The common disposition is to view the rents, in Richard Joseph’s words as “manna from heaven poured down on the country to be grabbed by the lucky and well connected” because the money is nobody’s and is just there for the taking. With time, the embezzlement of such funds becomes the ‘strategic essence of governance’ or in diverse and multi-ethnic entities, the state becomes an arena where the struggles for shares of the national cake dominate all other considerations and actions.
(Concluded)
Christopher Akor
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