The CASH-STRAPPED Nigerian government has options for raising billions of naira in revenue without imposing taxes on citizens, according to economists and management experts.
Nigeria is facing a fiscal crisis, recording a fiscal deficit of N1.48 trillion in the fourth quarter of last year, according to the Central Bank of Nigeria (CBN).
The Company Income Tax (CIT) generated in 2020 reported a 13.35 per cent decline, while oil revenue fell 41 per cent to $2.033 billion in the first nine months of 2020, compared with $3.47 billion received in the corresponding period of 2019, the Nigerian National Petroleum Corporation (NNPC) said.
Experts have suggested revenue low-hanging fruits for Africa’s most populous nation which faces revenue uncertainties and mounting debts.
Director-General of Lagos Chamber of Commerce and Industry (LCCI) Chinyere Almona said Nigeria should first identify its array of corporate, physical, intangible, human assets and determine their worth.
“Corporate assets should be securitised via public share issuance to raise equities. A typical example is Saudi Aramco’s IPO of 2019, where $25.6 billion was raised after the oil firm sold a 1.5 per cent stake to private investors, thereby establishing the value of Aramco to be over $2 trillion,” she said, in an emailed statement to The ICIR.
She said physical assets such as idle or under-utilised properties could be repurposed and redeveloped for commercialisation to generate revenue, citing the United Kingdom’s inner-city prisons reforms and the United States’ conversion of military bases into commercial places through the Base Realignment and Closure Commission (BRAC) as examples.
Almona said that time had come to break government monopoly in the infrastructure sector (railway, pipelines, power transmission) to get investors to commit equity funds into these sectors.
“A typical example was the liberalisation of the telecoms sector that incentivised investors to purchase GSM licenses,” she said.
She stressed the need for massive investment in skills and talent development to increase the country’s human capital pool, adding that the financialisation of Nigeria’s human assets would boost net foreign income and remittance inflows into the economy.
She urged the Federal Government to create an online digital platform where the financialised and commercialised assets would be offered for investment in the forms of Brazilian Partnership for Private Investment (PPI) and the Invest India websites.
With the third wave of COVID-19, Nigeria is being forced to raise taxes to generate more revenue.
In 2020, the International Monetary Fund (IMF) warned Nigeria against raising taxes, saying that it was inappropriate at this time when COVID-19 was ravaging economies.
Partner & Chief Economist, PwC Nigeria Andrew S. Nevin said Nigeria had $900 billion worth of dead assets in residential, real estate and agriculture land that should be revitalised and converted into liquid assets.
“If we want to get to where we want, we have to turn the dead assets into live assets,” Nevin said at Nairametrics Roundtable monitored by our reporter on August 7.
He explained that Nigeria must begin to drive export growth and diversification through services, noting that two-thirds of the global economy comprised higher-value services than physical goods.
Nigeria needs money to fund infrastructure and annual budgets. The country’s deficit stood at about N5 trillion, accounting for 3.9 per cent of the GDP, said the PwC. However, the challenge is that the deficit would be financed through borrowings of N4.9 trillion from the domestic and foreign debt markets.
Nigeria’s debt hit N33 trillion in March 2021, according to the Debt Management Office.
Chief executive officer of Financial Derivatives Company Bismark Rewane explained that Nigerian government must pay attention to budget impacts on employment, multi-dimensional poverty, illiteracy and other socio-economic challenges.
“When you have a problem and misdiagnose it, it will lead to crisis,” he said.
“In 1990s, South-East Asian economies were in crisis, but they learnt that you should not grow economies with remittances. The economic crisis is cyclical, and you can’t avoid it. You only have to insulate your economies,” he said
Rewane stressed the need to improve the productivity of Nigerians by avoiding negative activities that hurt productivity. He cited an example of the second quarter of 2020 when Nigeria had -6 per cent growth but 18 per cent increase in transactions.
“This happened because workers on levels 1-15 were kept at home, so the distortions and leakages were not there. The moments they came back, things went backwards. This means negative productivity,” he said, stressing the need for Nigeria to “stop doing dumb things.”
He stressed the need to remove petrol subsidies to destroy the cartel stealing from Nigeria’s scarce resources.
Executive Secretary of the Nigerian Investment Promotion Commission (NIPC) said Nigeria must pay closer attention to portfolio investments, arguing that direct investors often started investing in equities portfolios.
She noted that Nigeria must enhance the creative economy and connect the agriculture sector better with manufacturing.
Source: International cente for investigative and reporting
