Despite the wobbly nature of her economy, there are no serious indications yet that Nigeria is ready to break away from the clasp of the cyclical rise and fall in crude oil prices. This view derives mainly from her consistently nonchalant attitude towards the non-oil sector of the economy, which, if well harnessed as an alternative, holds the key to real development, wealth creation and robust and sustainable economic growth.
Amidst poor and, oftentimes, erratic returns from the oil sector, the Central Bank of Nigeria report for the last quarter of 2018 showed that Nigeria failed to meet her projected non-oil revenue estimate of N1.4 trillion by posting N947 billion revenue. This leaves a shortfall of about N454 billion and also emphasises the dangers of dependency on oil, despite the lip service continually paid to diversifying the economy by the government.
In the report, the CBN attributed the dismal performance of the non-oil sector, which also fell compared to the corresponding period of the previous year, to shortfalls in receipts from the Federal Government Independent Revenue and Value Added Tax. While this may hold water to some extent, the truth, however, lies in the lack of adequate effort being made to expand the non-oil revenue base. Beyond VAT, which is probably the most embracing because it taxes practically anyone who makes payment for goods and services, how many Nigerians comply with other forms of tax in this country?
To throw some light on the issue, Vice-President Yemi Osinbajo, quoting the National Bureau of Statistics two years ago, said only 14 million of the 69 million taxable Nigerians were captured in the tax net. No serious country leaves its tax system so wide open to exploitation and abuse by unscrupulous citizens and businessmen. In fact, as “the most important source of government revenue,” according to Encyclopaedia Britannica, efforts are typically made to plug every loophole through which tax frauds could be committed.
In Spain, for instance, when big-earning footballers thought they had escaped with the crime of evading tax, the authorities were still able to bring them to book years later. In fact, they were all jailed but had their sentences commuted to probation because, as first time offenders, they had the option of not spending time in jail if their sentences were not more than two years. Cristiano Ronaldo, for instance, one of those who defrauded the tax system, agreed to pay €18.8 million, while his former coach, Jose Mourinho, was fined €2.2 million. Other prominent footballers such as Lionel Messi and Alexis Sanchez have also been caught in that web.
It is, therefore, surprising that the Chairman of the Federal Inland Revenue Service, Tunde Fowler, could be lamenting about 6,772 tax defaulters whose taxable assets are worth between N1 billion and N5 billion each, when he should have moved to enforce compliance, using state powers at his disposal. The same also applies in a situation where, despite the growing number of billionaires in the country, only about 214, all in Lagos, pay tax of up to N20 million each. And out of 900 others who pay up to N10 million, only two from Ogun State, reside outside Lagos State. What happens to those in other parts of the country?
Besides tax revenue, it is obvious that the government has been remiss in the promotion of non-oil exports. Agricultural exports, for instance, offer a veritable source of foreign exchange earnings for the country. What is more, agricultural products such as cocoa, palm produce and groundnuts used to be the mainstay of the economy before the advent of oil. At a point, Nigeria led the rest of the world in oil palm produce, while she was second to Ghana in cocoa production. Regrettably, that sector has been so neglected that it no longer has a commanding role in the economy.
The main binding constraints to our rapid economic diversification are mindless corruption, epileptic electricity supply, huge infrastructure deficit, low productive knowledge and inhospitable business climate. Fix these and you will get the economy sprinting. For instance, with the Apapa Ports, the main gateway into the country through the sea, abandoned to its fate, it is not surprising that non-oil revenue has continued to dip. Industrialist, Aliko Dangote, has said the country loses N140 billion weekly to Apapa gridlock, while a Lagos Chamber of Commerce and Industry survey done in collaboration with the Nigerian Economic Summit Group, Manufacturers Association of Nigeria and others, put the loss annually at $10 billion.
A 2017 report said about 24 personnel of seven government agents were involved in the inspection of cargoes in one ship in Nigeria, leading to delays; businesses, therefore, prefer to route their goods through neighbouring port in Togo or Benin Republic into Nigeria. By so doing, Nigeria loses revenue that would have accrued to government purse through payment of duties. In some cases, the goods are smuggled into the country through illegal land routes.
Nigeria has to pay more attention to non-oil revenues, which is what countries with little or no resources have achieved. Countries such as Japan, Singapore, South Korea, and Switzerland, have very little or no natural resources but have become very rich through industrialisation, importing virtually all their raw materials, which are then processed and exported. A report quoting the World Bank recalled that South Korea, for instance, had an economy on a par with Ghana in the 1960s, but is now one of the most industrialised countries in the world.
So, instead of depending on oil, Nigeria should invest heavily in education, agriculture, infrastructure, tourism, manufacturing and improving on the ease of doing business to encourage investment in the country. The Customs personnel also have to be more efficient to ensure that the country is no longer flooded with contraband, but only goods on which duties are duly charged. Above all, the authorities have to ensure that all the taxable people and companies pay their tax. Nigeria has to learn to live without oil. Norway avoided making public sector budgets dependent on volatile income. This has mainly been achieved by establishing the sovereign wealth fund and a fiscal rule imposing a constraint on oil revenue spending.
