Government debts seen killing businesses in Nigeria

Abuse of public procurement process by different levels of governments including Federal, State, and Local governments constitute a threat to businesses in Nigeria by constraining investment capital, hurting profits projections and leaving companies indebted to financial institutions.

This is even as Kemi Adeosun, Nigeria’s finance minster accused many companies of failing to pay correct taxes preferring to procure bogus compliance certificates to bid for government contracts. Only 214 Nigerians pay taxes over N20 million in a country with over 770 billionaires.

Peter Obi, former governor of Anambra state in a speech at The Platform, a public discourse forum organised by the Convent Christian Centre, in Lagos, said that Nigeria is the only country where governors and local government chairman, order anything without any responsibility for paying for it.

“In the UK, public procurement is paid within 30 days. In Ghana and Rwanda is 60 days but here it doesn’t bother anybody.

“I have a governor who has since left and is doing very well, he bought from a company 50 jeeps for his traditional rulers at N9m, the company was expecting to make N1.5m, he took the vehicles, gave it to traditional rulers and everybody he wants to give it to, four years later, that company has not been paid.

“The company borrowed N300m to that job from a bank at 25 percent, today they have lost their profit, they have lost their capital injection, they are indebt of N732m as a result of that transaction, sacked over 200 workers and the governor has received all manner of titles from the traditional rulers and have been given all sorts of awards as a good performer and is looking for the next post.”

A recent audit report of debt Federal Government ministries, departments and agencies (MDAs) to Electricity distribution companies (DISCos) indicate defence, military and security agencies owe N51 billion.

However, this situation contravenes the Public Procurement Act 2007, which provides a mobilisation of 15 per cent fees to the contractor to enable him move their equipment to site, while another 30 per cent fees is payable after an inception report, otherwise, referred to as ‘Interim Performance Certificate’ is submitted.

The Act further provides that another 50 per cent payment should be made when half of the work is done and a balance of 5 per cent payable after completion of the work.

However, in her speech at the same forum, said that many contractors who come forward for payment are not meeting their own obligation of paying taxes.

“An audit we commissioned the FIRS to carry out indicates that only 214 persons pay taxes of over N20million in an economy where we have thousands of millionaires and billionaires.

“Our tax to GDP ratio is 6 percent; we have one of the lowest ratios in the world. Ghana is at 16.5 percent, South Africa is at 24 and most advanced countries are around 30-32 percent.

Adeosun said the Federal Government is working to reform the entire payment, debt and capital expenditure system of the government to make it responsible for inclusive growth.

“We are blocking all those loopholes (that allow for tax evasion), we are enforcing monitoring and improving efficiencies,” she said.

“We are enforcing the legal requirement that on every headed paper, names of the directors must be included, we must ensure that everybody pays their fair share, Nigerians have to pay the right taxes if we want services.”

 

ISAAC ANYAOGU