The World Bank and the Federal Government of Nigeria have highlighted the need for the country to increase its tax revenue and phase out petrol subsidy.
The fiscal challenges facing the country were highlighted at a panel session during the ongoing Nigerian Economic Summit organised by the Nigeria Economic Summit Group (NESG) in Abuja on Monday.
Shubham Chaudhuri, country director for Nigeria at the World Bank, said there should be a model for mutual accountability, whereby the federal government encourages the state government in its growth drive.
“Similar to matching grand schemes in some other federation where the federal government as an executive has an interest in encouraging subnationals to take certain actions or policies in areas that provides the subnational with an incentive, either in terms of fiscal management or being able to generate increased IGR which can be supported with some form of financing upfront,” he said.
The World Bank director said after that, the next real step is to think about how to sustain Nigeria’s own fiscal federal setup.
“Nigeria needs to spend more on the right things and spend better but to do this, it needs to raise more revenue; if you phase out fuel subsidies, the government gets more money to do other things,” he said.
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He also spoke about taxes, saying people are willing to pay more if the government spends better, especially on provision of basic services.
He said there are some basic taxes that every other country in sub-Saharan Africa has that Nigeria does not, which needs to be reviewed.
Zainab Ahmed, minister of finance, budget and national planning, said the fuel subsidy is a fiscal drain affecting the country significantly, especially as the government struggles with revenue problems and a high debt profile.
She said the funds channelled to fuel subsidy can be used for other things aimed at economic improvement instead of increasing the country’s debt profile
“Personally I wish we can introduce the federal personal income tax which will be a topper on the existing income tax collected by the state; I also wish our VAT was at 10 percent and not 7.5 percent,” she said.
Ahmed said Nigeria’s citizens have low tax morale because there is not enough returns on it to the citizens which has discouraged further remittance.
“The citizens are not paying taxes; we have to communicate to them more and show taxpayers what their money is being used for, also we have to make tax compliance easy for easy remittance,” she said.
While speaking earlier at the opening ceremony, the finance minister said although challenged by a shortfall in revenues, the government has remained committed to driving growth and prioritising infrastructural development.
Speaking on the implementation of the National Development Plan 2021-2025, she said the government has made transformational investments in infrastructure to restore the national railways and road network.
She added that for this plan, financing from government will rely heavily on domestic resource mobilization from non-oil revenue sources through the results of the implementation of the Strategic Revenue Growth Initiative and the Annual Finance Acts.
She said the government remains focused on unlocking the economic potential of the non-oil and high employment-generating sectors to achieve sustainable and inclusive growth and development.
She also revealed that the Nigeria agenda 2050 which seeks to increase the country’s per capita GDP to $33,000 by 2050 and has a moral imperative to lower the poverty and unemployment rate significantly to ensure sustainable broad-based growth will be launched soon.
Clem Agba, minister of state, budget and national planning, said the NDP 2021-2025 has a unique objective of establishing a strong foundation for a concentric economic diversification.
“The plan is designed to lift 35 million people out of poverty and generate 21 million full time jobs by 2025, thus setting the stage for achieving the government’s target of lifting 100 million Nigerians out of poverty in 10 years,” he said.
He added that the plan is underpinned by a very strong macroeconomic framework projecting an annual average real GDP growth of 5 percent adding that improvement in revenue is expected to result in total revenue projected at 15 percent of GDP by 2025.
“The growth is envisaged to come from Agriculture, Trade, Services, Construction and Manufacturing, Communication sectors,” he said.
Agba also said that the Plan has an investment size of N348.1 trillion, 86 percent of which is expected to come from the private sector while the other 14 percent will be from the public sector, all of which will be allocated to Sectors, Programmes and Projects.
For the Nigeria Agenda 2050, he said this was formulated to address several subsisting development challenges in the country within the framework of six 5-Year Medium- Term Development Plan has programmes and Projects in the Plans are expected to vigorously spur development and poverty reduction.
Agba said the agenda is in batches consisting of the National Development Plan, 2021-2025 which is already approved, published and being implemented, 2026-2030, 2031-2035, 2036-2040, 2041-2045, and 2046-2050.
“As the economy continues to recover from external and internal shocks, Nigeria’s Perspective Plan (Nigeria Agenda 2050) is designed to transform the country into an ‘Upper-Middle Income Country’ by the year 2050,” he said.
Pascal Dozie, pioneer chairman, NESG in his keynote address also highlighted a nine point focus for the incoming government to prioritize and work on with focus on security, enabling business environment among other factors.
“our economy needs a positive regulatory environment that is private sector and business enhancing, by addressing issues around uncertainty in the system and regulatory problems; our education system must be unified and solve employment needs,” he said.
He added that Nigeria is a secular state and must remain so hence he said public funds must be utilized strictly for matters that are of national importance without any form of sentiment.
“Regardless of the cost we must deal with threats to national security, violence attacks, terrorism, war, espionage, in a smart, transparent and accountable way,” he said.
Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC, recommended that to drive a sustainable fiscal system,government at all levels should publish revenue collection data annually with necessary and accurate data adding that political leaders and MDAs should be fully compliant with the law and demonstrate this to the public
“For revenue growth, the government should harmonise multiple taxes and collection agencies and for spending it should implement zero-based budgeting, address subsidies, leverage equity finance, re-prioritise spending, re-assess tax expenditures,” he said.
Asue Ighodalo, chairman of NESG, proposed that Nigeria must target becoming the most prosperous black country in the world, with a GDP per capita that is at par with the OECD countries, by 2050 especially with projections that the population will hit 450 million by then.
“We would need to grow our GDP to somewhere between $4.5 trillion and $9 trillion; We would need to build an economy that is 10 to 20 times the $440 billion economy we have today; we must set ourselves a task of growing at over 15 percent every year,” he said
Ighodalo recommended that Nigeria must try to achieve macroeconomic stability, by boosting its economic competitiveness, strengthening institutions and addressing infrastructure deficits.
The chairman also revealed that after the summit, Niyi Yusuf, current vice chairman, will take over as chairman of the NESG. This is coming after Ighodalo served as chairman for two tenures.
