FINANCIAL analysts have called on the government to adopt measures to curb rising recurrent expenditure as it considers new taxes and levies in 2022.
Analysts say such measures could enable Nigeria to wriggle out of some of its economic challenges.
“Let’s not pretend about it, the government is seriously broke. You could see the level of massive borrowing going on. However, we expect to see bold steps on the government cutting down recurrent expenditure,” Oil sector governance expert Henry Ademola Adigun told The ICIR.
At the public hearing on the 2021 Finance Bill organised by the House of Representatives’ Committee on Finance in Abuja on Monday, Minister of Finance Zainab Ahmed had alluded to the possibility of introducing new taxes, tariffs and levies as part of measures to boost government revenue.
However, analysts say apart from the impact the taxes could have on businesses, the government should put its house in order in terms of cutting cost of governance.
Associate consultant for the British Department of International Development (DFID) and a financial analyst Celestine Okeke faulted the move by the Federal government and told The ICIR that the government had a spending problem, not a revenue problem.
“Part of the reason why the recurrent expenditure keeps soaring higher is that we spend recklessly. For instance, are you aware that over 40 percent of government offices are still in rented apartments despite several houses recovered by the EFCC?”
He argued further that even if the government made 10 times what it presently earned, it would still spend the accruals recklessly.
“Reckless spending is the problem not the revenue,” he stressed.
Nigeria has spent an average 21 per cent of the total budget on capital expenditure in the last 10 years, according to an analysis done by Nairametrics. The highest percentage was 29.8 per cent in 2017. In contrast, recurrent expenditure as a percentage of total expenditure is as high as 115 per cent on average in the last 10 years, according to the report.
President Muhammadu Buhari had, on December 2, transmitted to the House of Representatives, the 2021 Finance Bill, seeking speedy passage of the bill to support the implementation of the N16.39 proposed budget.
The bill proposes key reforms to taxation, customs duties, fiscal and other reIevant laws, specifically providing for enhanced domestic revenue mobilisatlon efforts to increase tax, non-tax revenues, tax administration and legislative drafting reforms, particularly to support the ongoing automation reforms by the Federal Inland Revenue Service (FIRS).
In her presentation on Monday, Ahmed disclosed that the government’s retained revenue was N4.56 trillion (75 per cent of budget) as of September 2021 while federal share of oil revenues was N845 billion (56.3 per cent pro-rated performance). Also, N1.31 trillion (117.3 per cent above budget) was federal share of non-oil revenues, whereas N616 billion and N274.4 billion (121 per cent and 153 per cent of pro-rata targets respectively) were for Companies Income Tax (CIT) and Value Added Tax (VAT). About N418 billion was customs collections for the period under review.
She said modest changes had been proposed but more fiscal reforms were still in view as the ministry could not take all the proposals collected from stakeholders.
According to Ahmed, there were ongoing legal cases in court against the Federal Government on the Value Added Tax (VAT) and stamp duties, which was why the ministry stayed off those areas.
She, however, expressed hope that by mid-2022, the cases might have been dispensed with and the reforms in those areas could be proposed for parliament to consider.
“We prepared this draft bill along with five reform areas: the first domestic revenue mobilisation, the second is tax administration and legislative drafting, third is International taxation, fourth is financial sector reforms and tax equity and fifth is improving public financial management reform.
“The provision in the draft bill is proposing to amend the Capital Gains Tax Act, Company Income Tax, FIRS Establishment Act, Personal Income Tax, Stamp Duties Act and Tertiary Education Act, Value Added Tax, Insurance Police Trust Fund, and the Fiscal Responsibility Act.
“This is to amend the Police Trust Fund Act and the Nigerian Trust Fund Acts, the purpose is to empower the FIRS to collect the Nigerian Trust Fund levies on companies on behalf of the fund itself.
“Currently, because there is no such provision, the FIRS is unable to start collecting on behalf of the fund. Also, it is to streamline the tax and the levy collection from the Nigerian companies in line with the administration’s ease of doing business policy.
“So we do not have NASENI going out to collect that tax, the FIRS will collect on their behalf during their collection process and it will be passed through to them,” the minister said.
Nigeria’s debt hit N38 trillion in September 2021, according to the Debt Management Office (DMO).
However, an economist with the Centre for African Economies Mma Ekeruche told The ICIR that Nigeria’s public debt was relatively sustainable at 25 per cent of GDP.
She noted, however, that debt service payments were high, and the country’s ability to attract external private financial flows was hurt by macroeconomic imbalances and policy uncertainty.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.