Nigeria’s finance minister, Zainab Ahmed, says the government is expecting to rake in some N252 billion from sales of public assets in 2020.
Ahmed did not name the specific assets to be privatised.
Ahmed, who sat down for an exclusive interview with BusinessDay at the Udo Udoma and Belo Osagie Private Equity Summit in Lagos, Nigeria’s commercial capital, said this would help in better utilising some government assets as the country seeks to explore various forms in generating revenue in the wake of falling crude oil prices.
“We have some government assets that have been scheduled for privatisation and we expect to generate between N250-252 billion from them,” Ahmed told BusinessDay on Friday.
Ahmed, who holds a double portfolio as minister of finance and budget and national planning, said although the privatisation process has been slow, “one of what we are doing is to see how we can improve it and make it faster”.
Data from the Central Bank shows Nigeria hasn’t privatised a single asset since 2016.
Buoyed by a revenue shortfall due to a collapse in oil prices which led to five-quarters of negative growth in 2016, Africa’s largest economy has said it would sell off some of its redundant assets, but has dithered in doing so.
Other African countries, particularly Ethiopia, are taking the initiative to open up their economies to private capital while Nigeria slumbers.
Global consulting firm, PricewaterhouseCoopers, estimates that Nigeria has $900 billion in dead capital trapped in real estate alone.
Although the minister never mentioned the assets that have been earmarked for privatisation, she noted, however, that plans are underway to ensure speedy sales of the assets.
Like the sales of assets, there have been several policies to increase the government revenue to meet ballooning cost of governance and huge infrastructural needs across various sectors of the economy.
One of these was a 2017 initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payments of all outstanding tax liabilities.
The Voluntary Assets and Income Declaration Scheme (VAIDS) was not only meant to increase revenue for the government, according to Ahmed, but its implementation helped in increasing the number of taxpayers from 10 million in 2015 to about 20 million in 2018 while fetching N95 billion for the government, with about N75 billion going to the Federal Government while the states hold the remaining.
At 6 percent, Africa’s largest economy with a population of around 200 million has one of the lowest tax-to GDP ratios globally, according to latest figures from the Organisation for Economic Co-operation and Development (OECD), a grouping of the world’s leading market economies.
This ratio is meagre when compared with the 15 percent level which the World Bank says is necessary to achieve economic growth and reduce the over 90 million Nigerians living below $1.90 a day. It also falls behind other countries on the continent including South Africa with 29 percent, Ghana 18 percent, Egypt 15 percent, and Kenya 18 percent, says OECD.
Although the VAIDS may have ended given that the scheme was for a three-year period, 2017 through 2019, Ahmed noted the new Finance Act would help in further growing the tax net, which the government expects to hit 45 million by 2022.
“The Finance Act would go a long way in expanding the tax base because some of the measures we made were targeted at improving business and blocking loopholes on several of our tax laws that allow profit shifting for major multinational companies,” she said.
The Finance Act which was initiated to complement the 2020 budget kicked off implementation on February 1, 2020.
The Act is expected to set the tone for the country’s fiscal policy for 2020 and beyond by removing the bottlenecks in the country’s tax regime in order to expand the tax net and raise revenue for the government.
Among the stipulations in the Act are the slashing of tax rates for companies and an increase in value added tax from 5 percent to 7.5 percent which would be used to fund a 67 percent increase in the minimum wage, which Zainab said cost the government as much as N300 billion.
This figure excludes adjustment for pensioners and those engaged in the one-year compulsory National Youth Service Scheme (NYSC).
“With the Finance Act, we expect to achieve an increase of 50 percent collection of taxes since companies would be incentivised to pay taxes,” Ahmed said.
LOLADE AKINMURELE & MICHAEL ANI
