Improving and managing non-oil revenue in Nigeria

Following the persistent fall in the prices of crude oil at the international market, the revenue accruing to government has fallen by more than 50 percent, according to the National Bureau of Statistics. This has created panic in the system and has unsettled all tiers of government. Most state governments are facing serious liquidity problems and are finding it difficult to meet their obligations.

The current drop in prices is not expected to moderate in the near future as Iran, following the landmark agreement with the world powers on nuclear programme, is set to start pumping its own crude to the international market. This will result in glut in the oil market, and will crash the prices even further.

The future is grim for the Nigerian economy. The impact of the shortfall in revenue is so glaring. A lot of projects are being delayed and some have been cancelled outright. The Muhammadu Buhari-led APC government will struggle to implement the party’s manifesto due to this sharp fall in revenue.

If the APC government is bent on fully implementing the developmental and social plans in that manifesto, the total cost is expected to be in the neighbourhood of N2 trillion per year. As it stands now, the manifesto is a mirage as the current revenue base of the government cannot sustain the current economic realities, how much more implementing a ‘juicy’ party manifesto. It may not be as bad as it looks if the government will exercise fiscal discipline, control wastages and profligacy in governance.

To cushion the effects of the drop in oil prices and improve the non-oil revenue, the following policies should be pursued vigorously by the Federal Government and other tiers of government.

Fiscal discipline

The waste in governance in Nigeria remains the highest in the world. All tiers of government have shown strong penchant for greed and official corruption has been elevated as a way of life. Legislative and executive arms of government have shown little interest in fighting this scourge and are not so keen on checkmating it, at least at the moment.

Government can still save huge sums of money from executive wastages in award of contracts, recurrent expenditures and procurement activities in ministries, departments and agencies. At the moment, white elephant projects litter the entire landscape. Most contractors abandon projects after collecting mobilization fees often running into billions of naira. Governments at all levels should ensure that future projects have direct bearing on the people’s lives and should not waste scarce resources on projects that will not uplift the standard of living of the masses.

Diversification towards the non-oil sector

There is enormous revenue to be made if government could consciously diversify the economy towards agriculture and mining sectors. These two sectors remain the most under-utilized sectors in the Nigeria economy. The two sectors have potentials to increase revenue for government if adequate policies are put in place. The agricultural value chain holds so much promise, and if well tapped, could generate employment for millions of unemployed youths and increase government foreign exchange earnings.

Government has not really benefitted from the law enacted by the US congress on promotion of export of agricultural products by African countries to the US. The Africa Growth and Opportunities Act (AGOA) has the potential to bring in foreign exchange if strong value is added to our agricultural produce.

South Africa remains the only African country to have benefitted immensely on the back of this act and the Nigerian authorities should look at the possibility of generating enormous foreign exchange through export to the US market, reputed to be the biggest in the world. Mining sector offers a great avenue to ramp up growth if the opportunities in that sector could be explored and maximized.

Presumptive tax for the informal sector

Presumptive tax is a way of raising tax assessment on those operating outside the formal sector. These categories include the traders, artisans, private business owners and the ‘brief case’ contractors.

The National Tax Policy reckons that the presumptive tax would help the tax authorities ‘deal’ effectively with all taxable persons who have historically failed to comply with the tax laws due to their size or lack of business addresses. They largely appear to dominate the informal sector of the Nigerian economy.

The Nigerian informal sector remains largely un-taxed. The presumptive tax should have a legal framework to work as arbitrary tax is not recognized in the Nigeria tax system. There has to be a framework for its operation to avoid abuse by unscrupulous tax officials.

The new Treasury Single Account (TSA)

This is a consolidated government bank account that gives a consolidated view of government cash receipts. It is a pool account where all monies that belong to the government are paid into and is managed by the Central Bank. Payment and collection into the account are via electronic platform.

Happily, the implementation of the TSA has started and government has declared a positive increase in the consolidated revenue available for sharing by all the three tiers of government in the month of August. We expect stiff resistance to come from some agencies because of human nature. People remain the biggest resistance to change, and we urge the government of President Buhari not to be intimidated by any agency or group of agencies on the premise that the Act that established them conferred on them the right to manage their funds.

In conclusion, fiscal discipline and institutional framework lie at the heart of revenue management. Successful economies that have used and are still using taxes as a major source of government revenue have an entrenched fiscal discipline and strong institutions as the foundation.

Emeka Ogbachalu