The World Bank on Wednesday warned that Nigeria urgently needs to optimize its tax system and focus on other areas to boost revenues, to avoid irrecoverable collapse of her economy and looming cessation of her sovereignty.
The World Bank noted that despite the rise in the price of oil in the international market, Nigeria has failed to reap the benefits because of the huge amount – trillions of naira – spent on fuel subsidy.
The Senior Public Sector Specialist, Domestic Resource Mobilisation, at the World Bank, Mr Rajul Awasthi, said these at a virtual pre-summit, with the theme ‘Critical Tax Reforms for Shared Prosperity,’ organised by the Nigerian Economic Summit Group on Wednesday. He insisted Nigeria would have to eliminate the subsidy regime eventually.
After the Federal Government earmarked about N4tn for subsidy payment in 2022, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said recently that government might spend a whopping N6.72tn as fuel subsidy in 2023 or pay N3.36tn up to mid-2023 if the subsidy regime would to end in May 2023.
Nigeria’s debt stock had risen to N41.6tln in the first quarter of 2022 with projections that it could peak at N45tln by the end of the year. Nigeria is rated the fifth on the list of the World Bank’s debtors, with $11.7bn debt stock as of June 30, 2021.
The International Monetary Fund had in March projected that Nigeria might spend 93 per cent of its revenue on debt servicing in 2022, but the minister disclosed a few weeks ago that about 119 per cent of the country’s revenue was spent on debt servicing. This implied that government had to borrow to meet its debt financing obligations, a development many economists had described as disturbing and unsustainable.
The virtual event, anchored by the PwC’s Fiscal Policy Partner and Thematic Lead, NESG Fiscal Policy and Planning Thematic Group, Mr Taiwo Oyedele, was attended by several stakeholders, including the representative of the Manufacturers Association of Nigeria and the Executive Secretary of the Joint Tax Board, Mrs Nana-Aisha Obomeghie.
Meanwhile, in a slide he shared during his presentation, which showed Nigeria’s Development Update, Awasthi explained that between 2015 and 2019, Nigeria’s non-oil revenues were among the lowest in the world and as a result the second lowest in spending, and that oil revenues were also falling even when oil prices were higher.
He stated, “Nigeria has the largest economy in Africa and the largest country in Africa by population, so it is critical to Africa’s progress. There is no doubt about that. But the government of Nigeria, from the public finance perspective, is really facing an existential threat. Let’s not downplay the situation. That is the actual reality.
Speaking on how to get out of the woods, Awasthi stated that in the non-oil sector, Value Added Tax compliance gaps were immense and they needed to be breached as well as rationalize tax expenditures.