According to Obinna Chima, raising domestic revenue is critical to promoting economic growth and the quality of public services.
Nigeria’s revenue to gross domestic product (GDP) ratio, at under 8%, is widely acknowledged as the lowest in the world.
Algeria, for example, has a revenue-to-GDP ratio of 33%; South Africa has a ratio of 29%; Morocco has a ratio of 26%; Tunisia has a ratio of 24%; Angola has a ratio of 22%; and Egypt has a ratio of 21%.
Cote d’Ivoire has a revenue-to-GDP ratio of 20%; Zambia has a revenue-to-GDP ratio of 19%; Kenya has an 18% revenue-to-GDP ratio; Cameroun and Uganda have a 16 percent revenue-to-GDP ratio; Ghana has a 14 percent revenue-to-GDP ratio; and Ethiopia has a 13 percent revenue-to-GDP ratio.
As a result, the federal government has taken attempts to increase revenue, particularly from non-oil sources.
The federal government’s declaration last week of a plan to reinstate toll collecting on designated dual carriageways across the country was one of these initiatives.
Babatunde Fashola, the Minister of Works and Housing, made the announcement following a meeting of the Federal Executive Council (FEC) in Abuja. Tollgates are set to be reintroduced 18 years after former President Olusegun Obasanjo’s administration destroyed all toll plazas on federal roadways across the country in 2003.
Analysts, on the other hand, have emphasized the importance of transparency and accountability in the process of reopening the toll gates.
Only 5, 005 kilometers of dual carriageways, or 14.3% of the country’s 35,000 kilometers of federal roads, will be eligible for tolling, according to Fashola.
Vehicles would pay between N200 and N500 every journey, according to him, depending on their make.
Diplomatic, military, and paramilitary vehicles, as well as tricycles and motorbikes, would be exempt from paying the toll, according to the ministry.
“The complete network of roads eligible for tolling on the federal network today, assuming we were to start today, will be 14.3 percent of the total network,” he explained.
“As a result, 85.27 percent will be ineligible for tolling. The majority of such dual carriageways have alternate highways, but they are single carriageways. That’s why we abandoned them.
“Some bridges are the only exception to single carriageway, and they are noted in the regulation.”
With the council’s permission, mechanisms were being worked out to establish when the tolling system would go live, according to the former Lagos State governor.
“The Ministry of Works and Housing presented a policy paper for the approval of federal highways, bridges, and tolling policy, as well as a rule that would provide legal basis for the tolling policy,” he stated.
Between January and May 2021, the federal government spent 98 percent of its revenue on debt service, up from 83 percent in 2020.
“We’ve taken another step forward. To be clear, tolls will not be implemented tomorrow. Let’s be crystal clear about this.
“However, the big step toward actual tolling was done today by presenting for approval the broad policy that will guide tolling, so that local people, states, local governments, all those who manage roads, and potential investors would know what our tolling policy is. That will serve as the foundation for their financial modeling and investment decision.”
Fashola stressed that the open tolling system would not start until the affected roads were passable, and that agreements on the plazas’ construction would be arranged with relevant government agencies.
“First and foremost, tolls will not begin until roads are motorable,” he explained. Let’s be clear about something.
“Agreements with the government will need to be handled through the Ministry of Works and the Infrastructure Concession Regulatory Commission.
“Some of the highlights include the adoption of an open tolling policy rather than a closed tolling strategy. The difference is that with an open tolling policy, as we were used to, you pay at a barrier over a fixed or predetermined distance.
“You will pay tolls based on the distance you travel and the size of your car under the closed toll system. We’ve never done anything like this before. So we’re going back to the basics. We also agreed that dialogues should take place. Before specific routes are tolled, willingness to pay polls must be conducted.”
Increasing Profits
The federal government spent N3.10 trillion on debt service in the first 11 months of 2020 (January-November), out of N3.48 trillion in retained income. This accounted for 89 percent of the company’s revenue.
In its medium-term expenditure framework and fiscal strategy paper (MTEF & FSP) for the years 2022-2024, the federation’s budget office anticipated that debt repayment would use N48 out of every N100 revenue during the next four years.
That is why analysts have emphasized the importance of diversifying the government’s revenue sources away from oil, which has been a resource curse for the country in numerous ways.
Clearly, this was one of the reasons why the federal government launched the Strategic Revenue Growth Initiative (SRGI), which includes key elements such as revenue sustainability, enhancing existing and creating new revenue streams, revenue ecosystem cohesion, cost optimization, and liquidity enhancement.
The initiative’s primary goal is to raise the revenue-to-GDP ratio to 15% by 2025.
After leaving a recession in the fourth quarter of 2020, the Nigerian economy continued to improve in the first quarter of 2021.
According to data from the National Bureau of Statistics (NBS), real GDP increased by 0.51 percent in the first quarter of 2021, compared to 0.11 percent in the fourth quarter of 2020.
As a result, the World Bank has recommended the federal government to concentrate on low-hanging and revenue-yielding fruits in order to boost non-oil earnings.
These, according to the bank, will help the government make significant gains, increase Nigeria’s tax-to-GDP ratio to around 7%, and generate roughly N10 trillion in revenue over the next three years.
The bank recommended that the government boost “sin taxes,” charge fees for electronic money transfers, rationalize tax expenditures, close tax loopholes, and improve tax compliance through more disciplined revenue administration.
It further stated that tax funds were required to operate important services, provide citizens with security, aid in the fight against famine and poverty, and offer critical health and education services.
Furthermore, the Washington-based organization claimed that the COVID-related economic slowdown, as well as the severe drop in oil prices in 2020, highlighted the need for Nigeria to expand non-oil revenue, even as investment, jobs, and growth were all needed to increase.
“This necessitates a finely tuned set of legislative and administrative initiatives that can increase revenues without deterring investment.
“This precludes any increases in traditional ad valorem taxes such as the value-added tax, but it does provide a chance to fully implement existing tax policies and reform tax administration to close compliance gaps.
“Further down the road, significant tax reforms will be required to boost post-pandemic investment and economic growth. As Nigeria attempts to “rebuild better” following the COVID crisis, a more strategic approach to revenue mobilization would be required: “not simply taxing more, but taxing better; not just how much to collect, but how to collect, what to collect, and from whom,” according to the bank.
Mr. Edward Adamu, Deputy Governor, Corporate Services Directorate, Central Bank of Nigeria, stated that fiscal actions must be aimed at supporting a wide range of activities, including contact-intensive activities that have been severely impacted by the COVID-19 pandemic, in order to spur overall economic recovery and brighten the outlook for overall growth.
This, he argued, was critical because the total output horizon remains unknown, owing in large part to fears about the epidemic.
“As I previously stated, monetary policy at this moment must be based on a balanced assessment of the various economic factors. While adhering to the principle of price stability, Adamu stressed, “the choice of tool must be carefully considered to prevent compromising the fragile economic recovery gains.”
Prof. Adeola Adenikinju, a member of the Monetary Policy Committee (MPC), stated that the economy needed to diversify its economic and income base in order to limit sensitivity to external shocks and prepare for the worldwide move from fossil fuel to green economy.
“Our economic managers should not go about their business as usual. In order to offset external volatility, the economy also requires a robust buffer, according to Adenikinju.
Ahmed Aliyu, another MPC member, emphasized the importance of promoting non-oil exports and building vital infrastructure in the energy/power and transportation sectors.
“I am well aware of the limited budgetary space available, which necessitates broadening the revenue base to satisfy the government’s expenditure profile. The fiscal authorities’ recent attempts to strengthen revenue collection methods are excellent, and all stakeholders should support them,” he said.
Similarly, Mr. Mr. Folashodun Shonubi, Deputy Governor, CBN Operations Directorate, stated that the growing need to refocus the economy and look beyond oil is staring us in the face.
Many jurisdictions, he claims, have pulled back additional expenditures concerning the use of fossil fuels.
“As a result, we must take more initiatives to boost domestic investment and productivity, as well as strengthen the economy’s internal stabilizers,” he added.
Dr. Baba, Director-General of the West African Institute of Financial and Economic Management (WAIFEM), spoke for himself.
