Nigeria’s fiscal mess will definitely require the new government to take urgent and far-reaching measures to fix the problem.
For it is unsustainable to continue on that particular trajectory it met when it came to power few weeks ago. Opinions seem divided: One side of the divide; populated mainly by the led as well as professional economists; thinks Nigeria has a debt problem.
However, the other side of the divide; where you have the fiscal authorities, most especially the crop in charge of the policy for the last eight years; believes that Nigeria’s problem is a revenue one, not a debt one.
On the whole, Nigeria’s problem is clearly both. It has over N12.1 trillion in fiscal deficits in the 2023 budget alone, with overall national debt projected at a whopping N77 trillion when CBN’s Ways and Means of N23 trillion was securitised by the end of the last dispensation.
The CBN advances attract N1.8 trillion yearly in interest payments, and in 2022, a whopping 81 percent of revenue was used to service debts.
Debt service to revenue ratio even exceeded 100 percent in the first quarter of 2022. Similarly, as it is projected now by the World Bank to be in the region of 102. 3 percent for the current year.
Furthermore, the World Bank is projecting the same ratio to double what was experienced in 2022 to be 160 percent by 2027. Hence, the problem is both revenue and debt.
How fintech can help the new government
The new administration would do well in ensuring fiscal sustainability by broadening the tax base, reducing leakages as well as high cost of governance and the unnecessary costs of tax administration. Urgent reforms are needed to avert the looming danger as Nigeria approaches a fiscal cliff
More so, if a government is raking in huge revenues, there may be no need to borrow as it has a surfeit of resources to meet its needs. And to boost this income, the authorities can deploy technology.
Financial Technology (FinTech) can be maximised to increase government revenue. The new government can use FinTech to set up a system that helps it in formulating, implementing, and executing its fiscal policy, particularly for those ones around non-tax collections, taxes and even spending in an efficient way.
Setting up tax collection platforms just like India did in creating a portal for non-tax revenue where all fees, fines, and charges are paid.
No cash transactions should be encouraged, as making all payments cashless will cut down to almost nothing the chance of money being stolen or any other leakages.
It will also make the population have confidence in the process and the institutions rendering the service or providing the product.
Rwanda and the Dominican Republic equally have deployed FinTech to reduce waste and ensure any income meant for the government gets to the government unfailingly.
Tanzania too has deployed technology in its public finances to improve and modernise tax collection. Brazil too with its PagTousoro has helped it improve its non-tax income.
Senegal’s M-Tax (Mobile Tax) uses SMS and USSD for businesses to pay taxes. It has digitised tax payments hence making it more efficient, transparent, and seamless. FinTech can help reduce the rate of tax evasion which is one of the major problems for the taxman.
Other benefits accrue as a result of bringing in financial technology. The deployment of Financial Technology (FinTech) helps the government to substantially increase the speed of its transactions such as making and receiving payments.
It helps facilitate government interactions with citizens in areas like Governments-to-People, People-to-Governments, Governments-to-Businesses, and Businesses-to-Government.
It will help in debt management and strengthening of public finance management. FinTech will help strengthen accountability, make reliable audit trails, enhance financial data collection, and improve budget planning.
When tax collection is digitised this will lead to: better compliance hence higher revenue; automation leading to low costs of tax administration; greater accountability and transparency in tax administration; broader tax base as it will reduce Nigeria’s informal economy; and an abundance of data for effective decision-making.
Read also: Nigeria has 99 problems but is fintech one?
Conclusion
While deploying Fintech can help the new government plug leakages; raise more revenue; spend better; and provide the dividends of democracy in great measure.
This does not mean that it is all sunshine as challenges too abound to the use of technology. For example, the privacy of the participants concerned as well as the danger of cybercrimes can be daunting.
However, on the whole Fintech has been proven beyond the shadow of a doubt to be a better tool to the fiscal authorities than what has been used all this while.
Simon is head, Research & Hubs Coordination at Opolo Global Innovation Limited
