• Monday, March 04, 2024
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BusinessDay

Modi offers Buhari reform template with taxes on fuel after elections

Narendra Modi

Indian Prime Minister Narendra Modi is offering a template to Nigerian President Muhammadu Buahri, on how to quickly pivot from election populism to the serious business of Governance.

Modi has increased taxes on transport fuels, almost immediately after returning to power with a bigger mandate.

“Crude prices have softened from their highs,” Finance Minister Nirmala Sitharaman said in said in her maiden budget speech in parliament on Friday. “This gives me room to review excise duty and cess on petrol and diesel.”

Federal taxes on gasoline and diesel — the most used transport fuels — have been increased by 2 rupees a liter each.

Increasing taxes on transport fuels will shore up the government’s revenues, helping Modi to narrow the budget deficit and spend on infrastructure to spur economic growth.

Sitharaman said the nation needs an investment of 20 trillion rupees annually on infrastructure. Other avenues for raising funds include asset sales and selling sovereign bonds overseas.

Friday’s measure will increase the special additional excise duty on gasoline to 8 rupees a liter and diesel to 2 rupees a liter. Road and infrastructure cess will rise to 9 rupees a liter on both the fuels.

Nigeria spent about N1 trillion ($2.7 bn) in the past fiscal year, subsidising petrol at an artificial price of N145 per litre.

The Federal Government’s 2019 budget expects a deficit of N1.9 trillion, representing 1.37 percent of GDP.

Nigeria has struggled to boost revenue, partly due to the government’s inability to grow its tax base and a failure to deliver on a plan to reduce its stake in oil joint ventures.

The nation has earmarked N2.24 trillion ($6.23 billion) for capital projects, that include roads and rail, in 2019. Last year, it used only 46 percent of its capital budget after spending was cut.

Modi was sworn in on May 30th, with a slate of cabinet Ministers with experience for key portfolios as he began a second five-year term facing an economic slowdown and global headwinds, after winning the Indian General elections in April.

Buhari is yet to name a Minister, after being sworn in on May 29, following Nigerian General elections which he won in March.

 

PATRICK ATUANYA