There is no denying the fact that Nigeria’s worsening security situation and currency depreciation are taking a huge toll on the business environment in the country.
This is the honest submission by the Nigeria Governors’ Forum (NGF) as it admits that the growing insecurity and humbling economic challenges have clearly afflicted stress and negative impact on productivity and taxable income across every sector.
The NGF’s position is against the backdrop of concerns by the States’ Fiscal Transparency, Accountability, and Sustainability Technical Assistance (SFTAS) Programme that between 2019 and 2020, the total Internally Generated Revenue (IGR) of the 36 States and the Federal Capital Territory (FCT) shrunk by 2.1 per cent, representing N28.15 billion.
Speaking at a workshop organised for Finance Correspondents by the SFTAS Programme Coordination Unit, Federal Ministry of Finance, Budget and National Planning in Abuja, the NGF, through its Director General, Mr Asishana Okauru, also tackled the issue of weak social contract between citizens and the government, noting that the development continues to threaten the legitimacy of taxation.
Okauru, who highlighted the importance of the social contract between the government and its citizens as represented by the quality of public services and the public’s willingness to pay or evade taxes, said; “Based on NGF’s taxpayer perception survey 2021, many informal sector workers question the notion that tax authorities have the right to make people pay taxes.”
In a presentation titled, “Improving Internally Generated Revenue (IGR): Trend and Emerging Reforms”, the NGF Chief Executive said Nigeria is still battling to recover from a combination of adverse fiscal and macroeconomic conditions that have clearly exerted strong pressure on the fiscal sustainability of governments at both national and sub-national levels.
According to him; “Worsening insecurity and currency depreciation is affecting the business environment and consequently, productivity and income to be taxed.
“Tax revenues are essential for state governments to maintain fiscal sustainability given the boom and bust cycles the Nigerian economy experiences
“The structure of the Nigeria economy reflects a predominance of the services sector which accounts for nearly 55 per cent of the GDP for Q4 2021. Unfortunately, economic activities under this sector still suffer low productivity and wages.”
Represented at the occasion by Mr. Lanre Ajogbasile, the Senior Programme Manager, NGF/SFTAS, Okauru attributed the adverse fiscal pressure to over dependence on Federation Accounts Allocation Committee (FAAC) transfers constantly threatened by the increasing volatility in global oil prices as well as mounting subsidy payments.
He further stated thus “the impact of this has been exacerbated by long years of increases in government permanent expenditures arising from increased cost of governance, new minimum wage and rising debt service.”
For him, the COVID-19 pandemic also put a dent on government spending, economic activities and invariably the IGR, adding that the Organisation for Economic Co-operation and Development (OECD) had in 2019 estimated Tax-to-GDP ratio in Nigeria at six per cent.
However, Okauru stated that when compared with the average for 30 African countries, according to the OECD Revenue Statistics in Africa 2021 report, the number stood at 16.6 per cent.