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OBJECTIVE COMPARATIVE ANALYSIS OF PAST AND PRESENT ADMINISTRATIONS: ENUGU STATE EXAMPLE.

Published

4 years ago

September 14, 2020

By Jeff Ejiofor

Performance in governance is among other things, determined by the personal creative ingenuity of the leaders and the resources available to them. In a developing economy like ours, uncertainty is the bane of long term planning when it comes to governance.

The socio-political cum economic uncertainty has made it inconsequential to compare administrations and their performances in Nigeria nay Enugu state. When several factors such as revenue generation, federal subvention, and the strength of our local currency are considered, the inequality inherent in the system will make it absolutely untenable to compare administrations objectively. It is implicit to categorically state that revenue generation and cost of governance are critical determinants of the performance of any administration.

Consequently, looking at the comparative profile of the past and present regimes in Enugu state, the odds and opportunities available to each of them are clear. While this is not intended to emphasize excuses for anybody, it is imperative to note with objective recognition, the disparity in the cost of governance vis a vis the funds available as well as the prevailing exchange rate at any given time.

This is no doubt a major and indispensable factor in assessing the performance of various governments. For the purpose of this article, we will limit our assessment to the current democratic experiment which commenced in 1999. We will also look at Nigeria’s economic dynamics between the days of excess crude earnings and now that recession has driven the oil price to its lowest ebb.

Unarguably, the state of Nigeria’s economy is determined by the international oil market considering that earnings from crude oil account for 95 percent of the country’s foreign revenue generation. As a result of this fact, Nigeria, between 2007 and 2015 when the oil boom was experienced had a robust economy and enormous resources for developmental projects.

In Enugu state, for instance, the situation was not different. While those in government between 2007 and 2015 had enormous resources to bankroll developmental projects and other aspects of governance, handlers of government from 2015 to date have to look inwards and employ extra administrative acumen and dexterity to keep the economy of the state afloat to be able to carry on with the business of governance. It is on record that since the inception of Nigeria as an independent country, the external revenue base has not experienced the kind of drought currently being faced.

A lot of factors are responsible for this, and they range from global economic recession to reduced demand for crude oil by Nigeria’s major buyer, the United States of America whose shale oil fills the gap. This situation no doubt affects the economy of states within the Nigerian federation which includes Enugu state.

Another important factor orchestrating this economic inequality between the past and present administrations is the strength of our local currency at the foreign exchange market. The depreciation of the naira, our local currency at the international market is a great determining factor of our capacity as a people to affect economic activities in our society.

In 2015 when the current regime took over power, a dollar was going for #160 but today a dollar is #420. Those who understand the role of currency in international trade will know the difference in the cost of governance and other dynamics of economic development.

Expectedly, the cost implication of this on governance will be overwhelmingly high with definite exertions of pressure on the system. For example, a one-kilometer road which would have ordinarily taken #1m to construct will cost as much as #3m today judging from the prevailing exchange rate. Can we now see the dilemma of the present office holders when compared with the past?

When people are making comparative analysis and drawing conclusions, they often fail to consider the above undercurrents. This is indeed a major odd that should not be ignored for any reason because of its enormity in affecting the overall performance of any government. This is indeed capable of shaping the performance or otherwise of any regime.

Apparently, these identified barometers should form the basis of rating past and present administrations in Enugu state. It is absolutely subjective to disregard this important aspect of governance when drawing comparisons among previous and present public officeholders. For example, most state governments are currently grappling with the burden of paying salaries because of the present economic condition while that was not an issue In the past considering the huge resources at their disposal because of oil boom.

It is a common knowledge that crude oil which sold for 120 dollars per barrel before 2015 now goes for less than 40 dollars a barrel, and it certainly has a ripple effect on government spending capacity. In short, it suffices to say that finance is the bedrock of government activities with regard to the overall appropriation of developmental projects and other policies affecting the people’s welfare.

Finally, we would conclude by asking some pertinent questions as follows;

1, what is the rationale behind the comparison of two people given the same assignment but without equal opportunities and resources?

2, what is the wisdom in comparing a government with a better economic environment as well as the cost of governance and the one with a harsher and higher environment and cost of governance respectively?

The answer to the above questions is obvious. Whereas it required little or no skills to pilot the affairs of government in the recent past because of the enormous resources available then, it currently needs administrative ingenuity and extra efforts to paddle the canoe of governance in the face of unprecedented economic quagmire prevalent today.

It is mainly out of severe ignorance that people compare administrations, past and present without objective consideration of the inherent economic disparity between or among them. It takes critical objective analysis to unravel the real differences between governments before an informed conclusion can be made.

Even with all these, coupled with inherited huge debt profile, the current Enugu state government under the able leadership of Rt. Hon. Ifeanyi Ugwuanyi has employed deft political sagacity and economic wizardry to brave the odds, sustain the economic tempo, and maintain a high level of performance to the chagrin of informed minds. It is this ingenuity that took Enugu state’s internally generated revenue to an enviable height of #32 billion annually, making it one of the six states in Nigeria today that can survive without federal allocation.

Believe it or not, Ugwuanyi is outperforming most of his contemporaries across Nigeria today and will have the upper hand if rated on a holistic ratio basis with his predecessors. This assertion is verifiable with the application of an acceptable performance index.

Enugu is in the hands of God.

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Tinubu’s People-Centric Tax Reforms and Ndume’s Threat

Published

4 days ago

November 10, 2024

The Gleamer

By Sunday Dare

“We cannot continue to tax poverty when we are supposed to promote prosperity” – President Bola Ahmed Tinubu

Senator Alli Ndume. Controversial. Outspoken, brilliant and engaging. Of all his attributes I did not find a place for ‘willful ignorance’ as one of his attributes or did I miss something? His Channels Television Interview was at once interesting and absurd coming from a person of his status : ranking Senator of the Federal Republic.

If his attack of Tinubu Tax Bills now before the Parliament was understandable, his open admission that he has not read the Tax bill he was so vehemently opposed to is unpardonable.

In plain sight Senator Ndume displayed his ignorance. That ignorance will be best cured by facts and not bluster. The Tax bill is not dead on arrival. The tax bill is well and alive and that is why we are having this conversation.

Despite the consensus that a fair, equitable and business-friendly taxation regime is pivotal to Nigeria’s drive for economic growth and sustainable development, the requisite will to pursue the reforms needed for achieving this has, unfortunately, either not been there on the part of the leadership, or where efforts have been made, it has not produced significant results. Nigeria has consistently ranked as one of the countries with the lowest revenue-to-GDP ratios in the world, which, according to Il Jung, “makes its fiscal position vulnerable to shocks”.
This from the IMF staff who prepared Nigeria’s revenue mobilisation report 2023. President Tinubu understands this clearly.

Such is the situation that “general government revenue in Nigeria was 7.3 percent of GDP for 2021—less than half of the average in countries belonging to the Economic Community of West African States (ECOWAS) and nearly a third of the average of countries in Sub-Saharan Africa (SSA)—and ranked as 191st out of 193 countries in the world.”

At 9.4% in 2023, Nigeria’s tax revenue to GDP ratio was not only among the lowest in the world but also on the continent, according to Axel Schimmelpfennig, the IMF mission Chief for Nigeria. To Il Jung, “Nigeria’s low tax revenue has been mainly driven by the narrow bases of its indirect taxes, low tax compliance, large amount of tax exemptions as well as low rates. Tax compliance and tax morale are still very low. Nigeria’s VAT collection efficiency (C-efficiency ratio)—the ratio of actual revenues to potential revenue—is the lowest among peer African countries.” The result is “…that the government has too few resources for social and development spending on health, on education, on infrastructure, etc.,” Schimmelpfennig says.

This age-long challenge of narrow revenue base, huge debt burden and high demand for social and development spending, which successive administrations have been confronted with, is what President Bola Ahmed Tinubu decided to tackle head-long through a Root Cause Analysis in order to identify and resolve underlying issues in Nigeria’s tax system to enable it proffer appropriate solutions. President Tinubu had been upfront about tackling this challenge before assuming office, and in his inauguration speech, he assured local and foreign investors that his “government shall review all their complaints about multiple taxations and various anti-investment inhibitions.”

Less than 2 months in office, he announced the setting up of the Presidential Committee on fiscal policy and tax reforms, headed by former Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, Taiwo Oyedele, comprising of experts from both the private and public sectors to undertake comprehensive law reforms, fiscal policy design and coordination, harmonization of taxes, and revenue administration. At the inauguration of the committee in August last year, the President restated his commitment to reforms to ensure a more enabling environment and relief for small businesses and those at the bottom of the pyramid. “We cannot continue to tax poverty when we are supposed to promote prosperity,” he said.

The President’s vision and clear mandate is evident in what the Fiscal policy and tax reforms Committee delivered as recommendations to the government, and became a part of the Economic Stabilisation Bills (ESB) approved by the Federal Executive Council in September, as part of the Accelerated Stability and Advancement Plan (ASAP) of the government. The ESB which seeks to amend about 15 different tax, fiscal, and establishment laws to facilitate economic stability and set the country on the path for sustained inclusive growth, has as some of its objectives: inflation reduction and price stability; complementing monetary policy measures with appropriate fiscal interventions to strengthen the naira and sustain exchange rates convergence; promotion of fiscal discipline and consolidation; enhancement of job creation and poverty alleviation; as well as export promotion and diversification.

It was in furtherance to a realisation of these objectives that President Bola Tinubu sent a letter to the 2 chambers of the National Assembly, requesting for the approval of 4 tax reform bills, which are: “The Nigeria Revenue Service (Establishment) Bill”, “The Nigeria Tax Bill”, “The Nigeria Tax Administration Bill,” and “The Joint Revenue Board (Establishment) Bill.” These Bills seek to provide a consolidated fiscal framework for taxation in Nigeria, a clear and concise legal framework for the fair, consistent and efficient administration of all the tax laws to facilitate ease of tax compliance, reduce tax disputes and optimize revenue, among others.

While investors and the business community have welcomed this development, there has been a pushback from some quarters from those who have apparently not familiarised themselves with the contents of the Bills. The concern by the Northern Governors Forum about the proposed amendment in one of the bills is the distribution model for Value Added Tax (VAT) which has been addressed by Mr Taiwo Oyedele, Chairman of the Fiscal Reforms Committee. He assured them that the aim of the proposal is “to create a fairer system by devising a different form of derivation which takes into account the place of supply or consumption for relevant goods and services whether they are zero rated, exempt or taxable at the standard rate”.

The surprise, though, is the response from Senator Ali Ndume who has declared that the bills “will be dead on arrival”, even as he confessed that he is yet to read the bills, which we presume should be available to him, having been received by the National Assembly, as the Senate President announced on the floor of the Senate. I refuse to believe that any Senator, and definitely not one of Senator Ndume’s standing will say, “We don’t need to study the bill”, as he was quoted to have said. Senator Ndume can’t be that flippant, as the legislative business is serious business.

For the benefit of Senator Ndume and others who might be of the mind that they do not need to study a document before speaking to it, here are some of the changes proposed in the bills:

1.Changes to the income tax laws to facilitate remote work opportunities for Nigerians in Nigeria within the global business process outsourcing. This will empower our youths to play a key role in the digital economy space.
2.Zero rated VAT and other incentives to promote exports in goods, services, and intellectual property.
3.Tax exemptions for small businesses including WHT, VAT, and 0% CIT.
4.Exemption from personal income tax for minimum wage earners and reduced tax burden for over 90% of private and public sector workers
5.VAT at 0% for food, education, health, and exemption for rent and public transportation. These items constitute an average of 82% of household consumption and nearly 100% for low-income households to ameliorate the rising cost of living for the masses.
6.Introduction of the Tax Ombudsman to advocate for improved tax system and protect vulnerable taxpayers
7.Reduction of corporate income tax rate from 30% to 25% over the next 2 years and elimination of earmarked taxes on companies to be replaced with a harmonised single levy at a reduced rate.
8.Elimination of minimum tax on loss-making companies and those with low margins
9. Grant of input VAT credit to businesses on assets and services to reduce cost of investment and improve competitiveness
10.Redesign of the personal income tax band and rates, VAT and Capital Gains Tax to be progressive while protecting the poor
11.Changes to permit the payment of taxes on foreign currency denominated transactions in naira to reduce the pressure on the exchange rate and simplify compliance for businesses.
12.Proposal to repeal over 50 nuisance taxes and levies, and harmonise the remaining taxes to a single digit
13.Equitable basis for VAT revenue sharing to ensure that states without many headquarter companies are fairly treated and recognised for their economic contributions
14.Rationalisation of tax incentives to reduce uncertainty and provide a level playing field for all investors
15.A new National Fiscal Policy to set the framework for fair taxation, responsible borrowing and sustainable spending.

Without a doubt, these Tax-reform Bills have been thoughtfully and carefully designed in alignment with President Tinubu’s agenda to remove all obstacles impeding business growth in the country, promote small businesses and the poor, it is strange that Senator Ali Ndume, who purports to be speaking for the people will stand in opposition to them, even when he confessed to having not read them. If he has not read the bills, I doubt that he read a newspaper editorial, which quoted the Chairman of the Reforms Committee to have explained that “the reforms are geared towards correcting the structural imbalances in the tax system which has seen the poor overburdened with taxes while the elite and middle class routinely evade, avoid, or underpay taxes”.

Senator Ndume might need to familiarise himself with what is driving the reforms and the proposals that have been laid out, which include consolidating the different ‘nuisance taxes’ taxes and levies, which some have put at 62 official and 200 unofficial taxes into a streamlined system of 8 taxes to eliminate unnecessary financial strain on citizens while ensuring a more efficient revenue collection process. The committee is also pushing for a constitutional amendment to limit the total number of taxes on individuals and businesses to a single-digit. The objective, it says, to provide greater financial stability and predictability for taxpayers, fostering a more conducive business environment. Apart from that are the amendments to the withholding tax regulation, with businesses earning below 50 million Naira exempted from this tax, to provide relief for small companies and reduce the tax burden on emerging enterprises to engender growth of SMES, which play a central role in providing employment and the development of the economy.

Estimates from the Federal Inland Revenue Service (FIRS) a few years back had it that out of 70 million taxable adults in Nigeria, only 14 million pay tax, with 96 percent of those who do so through the Pay-As-You-Earn (PAYE) system, which is an indication that most of those outside the formal system don’t pay tax. Yet, a report listed Nigeria as home to almost a thousand billionaires (computed in naira), out of which only 214 pay taxes of N20 million and above. If any proof is needed for allegations of evasion and gross underpayment of personal income taxes, that must be it. President Tinubu’s bold decision to resolve the challenges that confront the tax administration system to improve Nigeria’s tax-to-GDP ratio, increase non-oil revenue generation, attract investment, support businesses and strengthen the economy deserves all the support it can get, especially from the Governors and the National Assembly. Senator Ndume will do well to rally support for the bold initiatives of President Tinubu, study the Tax Reform Bills and work with his colleagues for speedy passage so that Nigerians can take advantage of the opportunities they are designed to unlock.

Sunday Dare
Special Adviser to the President
(Public Communication & Orientation)

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