Malaria taxes or basket water?
A few days ago at an event in Ghana, Tunde Fowler, Nigeria’s chief tax collector, said that a tax of N5,000 was enough to save a child suffering malaria from death. It is refreshing and indeed heartwarming to hear the FIRS boss use persuasion to make the connection between taxes and life outcomes for Nigerians. It is certainly a welcome change from the way the FIRS has been going around terrorising businesses and shutting them down for owing often spurious taxes.
But making such a connection between taxes and human development raises some interesting questions. Shall we run through some numbers?
According to the former finance minister, Ngozi Okonjo-Iweala, the federal government spent N857bn on salaries in 2009. The current finance minister, Kemi Adeosun, has said it on several occasions that the APC government inherited a monthly wage bill of N165bn – that is N1.98trn per year. In other words, the cost of paying people to run the Nigerian government has more than doubled in less than 7 years. Did the performance of the Nigerian government, in terms of delivering services to Nigerians, double in the same period? Of course not. Recently at the Nigerian Small Business Summit, Dr. Henrietta Onwuegbuzie of the Lagos Business School, reminded the public that in 2010 the percentage of Nigerians living in poverty was 69%. By 2015, the poverty percentage had increased to 75%. That is, the more the government spent on running itself, the poorer Nigerians were getting.
Why did government spending increase in that manner without a corresponding increase in performance? The answer is oil. Prices were high and the money was pouring in, the government had no choice but to activate its long running policy of lau lau spending. This is nothing new by the way – between 1969 and 1977, the price of oil quadrupled while the amount of oil produced by Nigeria also increased by 380%. Government revenues rose from $4.9bn to $21.5bn. The Nigerian government was awash with money. What to do with it? Almost overnight, the infamous ‘Udoji Awards’ increased salaries of civil servants by up to 130%. In just 3 years, the government had increased its spending by 6 times what it was spending before the oil boom. This is how the Nigerian government has always behaved when it suddenly finds itself with a lot of money. It is the same reason why government spending on salaries shot up astronomically in the last 5 years. Oil prices were consistently around $100 per barrel for 4 years.
But here we are today. The last time oil prices were $100 per barrel was in August 2014. Since then it has even dropped below $30 per barrel at one point. Adding insult to injury is the activity of militants in the Niger Delta who are doing their best to shut down Nigeria’s oil production. Oil prices have crashed before but this time around, a big reason for the crash is technology – production of shale oil in America has gotten cheaper and more competitive. Has anyone ever successfully fought against technology and won? I don’t think so. The machine that the Nigerian government built on the back of $100 oil cannot be sustained by $40 oil. Something has to give.
The logical next question to ask is if anything has changed? Well, Kemi Adeosun regularly reminds us that the current government has reduced that monthly wage bill by N6bn through the elimination of some ghost workers who were unfortunate enough to be smoked out. The bill that went up by 130% in 6 years has now come down by 3% in one year. At that rate of reduction, we are stuck with the high bill for a long time which means that what was paid for with oil money now has to be paid for with money from somewhere else.
So back to Tunde Fowler. When oil money entered the Nigerian system in the past, it did not come out as treatment for malaria. It came out as salaries and all manner of wasteful spending akin to fetching water with a basket. As we can see, that system has not changed – it is merely looking for a new source of funding for its old ways. So, by what logic is Mr Fowler telling Nigerians that if they pay their taxes today, the money will be used to treat malaria in children? Talk is cheap. It is better to show workings.
All of this perhaps explains the desperation with which FIRS has been hounding businesses to pay taxes. It is not looking for money to treat malaria in children. It is looking for money to pay salaries. It is true that the current budget has the largest capital spend on record but this was achieved by dramatically increasing the size of the budget. That is, it did not take money away from unproductive spending designed based on high oil prices, it just added the capital spending on top of the old system. You can see how dangerous this is – we are now looking for money to pay salaries as well as to build roads and treat malaria while oil prices have crashed. But why should taxes be used to pay salaries that have done nothing for Nigerians?
Please pay your taxes – it is the good and proper thing to do. But oil money is different from tax money. So if you want your taxes to go towards building roads and treating malaria in children, do as my friends at BudgIT say you should do – Ask Questions. Or else your money is going into a leaking basket.