Analysts warn against economic distortions as Nigeria, others seek alternative sources of income

Nigeria and other African countries have been warned to guide against policies that could undermine interest of citizens and capable of causing economic distortions as they seek diversification of their economies, particularly, through taxation as alternative sources of income.

Analysts at Pedestal Africa Limited were unanimous in their submissions that before restructuring for alternative development agenda could become successful for these economies, certain basic elements need be assured.

“First, the objective of resource-rich governments to raise more revenue from alternative sources like taxes should be made to match citizens interests by causing the least distortions to economic activity as possible,” they noted.

The analysts, in its June 2016 report released yesterday, said governments with weak taxation systems, where tax revenue as a ratio of Gross Domestic Product (GDP) remains quite insignificant should consider implementing socio-optimised redesign of the tax systems.

“Despite the realisation that taxation is by far the most important of all revenues and a central part of modern public finance, there is also the truth that the present day tax burden brings with it a gravity of problems.

“Also, considerations to reflate the economy by facilitating huge government spending on infrastructural renewal, as is the case in Nigeria. It should be done within acceptable limits of budget deficits and debt to GDP ratios. This means that for such government investments, the future benefits need outweigh immediate costs.

“Transparency of the process, sufficient public participation and ultimately adequate oversight by the respective institutions charged with those responsibilities are critical elements for the success,” the report noted further.

According to the report, the latest release of the Open Budget Index for about 102 countries recently released shows that almost all resource-endowed economies of Africa are lagging behind on transparency and public participation pillars.

“The task of making public finance work for citizens need be based on established economic and institutional practices,” the analysts said.

Modestus Anaesoronye