Nigeria’s Fiscal Sustainability: Imperatives, Impediments and Options


Posted Wed, Jul 1, 2020 6:19 AM

Nigeria’s Fiscal Sustainability: Imperatives, Impediments and Options

Nigeria recently kicked off the development of a 2021-2025 development plan intended to succeed the vision 2020 and economic recovery growth plan (ERGP). Nigeria’s fiscal sustainability is expected to play a huge role in the new development plan especially given the economic problems that followed the COVID-19 pandemic. It is on this premise that the Nigeria Fiscal Policy Roundtable of the Nigerian Economic Summit Group (NESG) held a webinar with the theme “Nigeria’s Fiscal Sustainability: Imperatives, Impediments and Options” on Tuesday 23rd of June, 2020.

The chairman of the board of the NESG, Mr. Asue Ighodalo while delivering his opening remarks said that it has been clear to the NESG over the years that Nigeria needs to diversify its revenue base, enhance economic growth and protect the Nigerian economy from external shocks and this can be achieved by enhancing the country’s fiscal policy. He stated that in 2018, the NESG in collaboration with the Bill and Melinda Gates foundation established the Fiscal Policy Roundtable (FPR) which is made up of 10 world-class and renowned technocrats including Dr. Sarah Alade and Dr. Doyin Salami who served as pioneer co-chairs and who have been replaced by the equally capable hands of Dr. Suleiman Ndanusa and Professor Teju Somorin. Furthermore, Mr. Ighodalo revealed that the FPR recently conducted a nationwide tax survey and that has contributed to the enhancement of fiscal processes. More so, he mentioned that the enactment of the finance bill, creation of a favourable threshold to optimize tax collection and reduction of the tax burden on the financially disadvantaged of society will help to improve the economy and cushion the financial effects of taxes.

The governor of Ekiti State and the chairman of the Nigeria Governors Forum (NGF), Dr. Kayode Fayemi said that the NGF has set up an Internally generated revenue dashboard that focuses on sharing knowledge and experiences in tax collection and revenue generation across Nigerian states. He stated that states cannot continue to depend federation returns which is quite low at the moment. “If there is a sustained improvement in IGR, blocking tax leakages, creating new tax sources and improved efficiency in tax collection, there will be improved socio-economic indices and citizens will see a direct correlation between tax payments, usage, economic and infrastructural development.” Dr. Fayemi stated. He mentioned that leaders need to continue to ensure that resources generated from tax payers are effectively utilized and that government at all levels should ensure that tax leakages are plugged and properly utilized.

Dr. Sarah Alade, Special Adviser to his excellency President Muhammadu Buhari on Finance and economy who represented the Honourable minister for finance, Mrs. Zainab Ahmed said that low revenue was something Nigeria is currently grappling with. She said that the COVID-19 pandemic and the inherent lockdown means that the GDP of Nigeria will in its best-case scenario contract by 4 percent and in the worst-case scenario contract by 8 percent. Dr. Alade mentioned that up to 21 million jobs could be affected by the pandemic and that the economic sustainability plan will help mitigate against the effects of the lockdown and ensure stability through the support of MSME’s, accelerating infrastructural development, deregulation of refined petroleum products, incentivizing the use of pension funds and supporting states to access external funds amongst others. She reiterated that revenue mobilization was important and that debt relief and external funding must be sought to achieve this.

The executive chairman of the Federal inland revenue service of Nigeria (FIRS) and chairman Joint Tax Board, Mr. Mohammed Nami said that the FIRS is rewarding professionalism in its system and deploring technology in its operations to ensure the payment and collection of taxes is easier. He said the FIRS is boosting the morale of tax payers through communication portals where members of the public can engage him and other senior members on tax issues directly.

The country director of the Bill & Melinda Gates foundation, Mr. Paulin Basinga said that the value of the FPR is most important at this critical time of the COVID-19 pandemic. “For Nigeria to accelerate Human capital development, there is is a need to grow Nigeria’s revenue base. The Bill & Melinda Gates foundation continues to partner with state and federal governments to strengthen tax administration, social contract and help in unlocking new revenue sources.” He stated. More so, Mr. Basinga mentioned that the COVID-19 pandemic has  imparted the delivery of routine healthcare services and that government continues to struggle to meet up with the health challenges and the socio-economic effects of the pandemic but that the Bill & Melinda Gates foundation will continue to assist government to provide essential services and mitigate against future shocks.

The international monetary fund (IMF) mission chief and senior representative to Nigeria, Ms. Jesmin Rahman said that it was important for Nigeria to raise trust in public institutions and services by ensuring accountability. She said this can be achieved through increasing tax revenue, expansion of the tax base and modernization of the tax system. While proffering solutions, she said that Nigeria needs to raise its revenue and that policies needs to be made to make the number of registered voters commensurate with the percentage of active tax payers which is currently low.  “Worldwide and in sub-saharan Africa, countries that rank the highest in fighting corruption and having good governance are also the ones with higher tax morale and collection. Fiscal transparency and accountability are very important” Ms. Rahman concluded.

The moderator of the session and research director and commissioner of the FPR, Mr. Taiwo Oyedele while delivering a presentation said that tax officials face a number of challenges including inconsistent government policies, unrealistic targets and political interference. He said that the FPR recommends social exchange, communication, capacity, transparency and accountability to help solve some of the problems of tax collection the government faces. Furthermore, Mr. Oyedele said it was important for government to regularly publish tax revenue collection data and ensure that all strata of society comply fully with tax laws.

The co-chair of the FPR, Dr. suleiman Ndanusa while delivering the closing remarks lauded the NESG for its evidence-based advocacy and said that the critical role of public-private dialogue will be important in fostering Nigeria’s economic development.

At the end of the webinar, the overarching objective was on governance, transparency and accountability. The 10-point agenda agreed upon focused on policy, legislation and administration. On policy, it was recommended that government at all levels should publish revenue collection data annually by type of tax, number of taxpayers and cost of collection; Political leaders and MDAs should be fully compliant with the law and demonstrate this to the public and taxation should be clearly linked to the provision and improvements in the quality of public infrastructure and social services. On legislation, the FPR believes government should amend tax laws to resolve ambiguous and draconian provisions, amend the constitution to clarify the taxing powers of various tiers of government, to eradicate overlapping jurisdictions that result in multiple taxations and ensure full and effective compliance with tax obligations as a pre-condition for political offices.

Furthermore, the 10-point agenda recommended the utilization of one central identification number that harmonizes various identities (NIN, TIN, BVN etc), the continuous promotion of professionalism and implementation of training and capacity building for tax officials at all levels and full adoption of technology platforms and measurement of the rate of usage by taxpayers as a basis for continuous improvement.

The financial markets and inclusion policy commission continually works to facilitate the adoption of various financial sector-specific NES recommendations with a view to improving Nigeria's financial system and positioning the sector to support the growth and development of Nigeria's economy.

Find a blog post