Nigeria and revenue leakages
With revenue collection centralised and the operation of the Joint Tax Board, efforts at extracting additional revenue by some state and local governments have been greeted with cries against multiple taxation.
While armchair critics (who are unaware that the states have been dispossessed and emasculated taxation-wise) berate the states for low internally generated revenue, the Federal Government, despite controlling the lion’s share of the Distributable Pool Account, cannot point to commensurate service delivery regarding its constitutional responsibilities.
Also the revenue pool is expected to be adequately replenished and expanded directly by the Federal Government through sound economic management.
Hard-nosed analysis cannot miss the fact that lack of robustness of the DPA constituted the stimulus for the current heightened and widespread calls for restructuring and (true) fiscal federalism.
Nonetheless, as occurred after previous changes in the political arrangement since 1946, the outcome of eventual restructuring of the country should include assuaging the proponents’ zero accommodation of any federating unit that freeloads through a revenue allocation formula which gives to any federating unit from which revenue of whatever kind originates at least 50 per cent of the receipts (even if federally collected) with the balance going to the Federation Account for sharing among all beneficiaries in an agreed manner.
The present Nigerian Constitution gives the Vice President the constitutional role of Chairman of the National Economic Council, which effectively makes the incumbent the veritable terminator of past economic mismanagement and prompter of actualisation of the economic policies of the ruling administration.
The NEC has the mandate to hone and recommend “measures necessary for the coordination of economic planning efforts or economic programmes” designed to actualise the economic objectives laid down by the Constitution under Section 16 such as to “harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self-reliant economy” among others.
Therefore, the Vice President is the constitutional lead adviser on institutionalised (nationally honed) economic agenda or strategy. Thus, the impermanent economic management teams empannelled since 1999 were/are inferior rivals which (with the benefit of hindsight) have been bereft of the country’s sovereign and long term interest thereby merely pandering to foreign-leaning private policy measures. End product? An economy not anchored on Nigerian national interest. Such a directionless economy, left at the mercy of corrupt and self-serving domestic and foreign elements, was doomed to underperform.
So, the government should wake up to the fact that revenue required to meet government obligations should be sourced from various economic activities and not just from crude oil exports. Indeed, government would be best placed to meet its responsibilities, achieve national prosperity and accumulate huge external reserves if it took advantage of fully exploiting and utilising domestically the country’s petroleum endowments without leaving a single barrel of crude oil for export. It is instructive that it was the understanding from inception of commercial oil production that crude oil was (still is) a wasting asset and that proceeds from oil exports should be devoted to developing vital economic sectors in order to facilitate rapid growth and sustainable development.
Why has the above dream proved unrealisable 58 years into exportation of crude oil? The reason has been identified and cannot be over-restated. Oil proceeds accruing to the Federation Account are withheld only for the economy to be subjected to unappropriated excessive fiscal deficits with resultant persistent macroeconomic instability.
The CBN then proceeds to deploy the withheld public sector forex to fight the numerous symptoms of the apex bank-induced macroeconomic instability.
In the process, the bulk of the forex is used for anti-economic activities or gets purloined. In sum, the improper procedure leaks government revenue directly and indirectly to cheaters/haters/milkers of the country leaving a wobbly economy that traps the generality of the people in abject poverty.
The government should now take up its unambiguous constitutional mandate and block the revenue leakages. Firstly, the national domestic debt (NDD) is almost entirely made up of sterilised (unspent) excess liquidity funds: it is a fake debt. Payment of service cost and redemption of “matured” NDD tranches are avoidable leakages from the federal treasury, which should otherwise be used for genuine government obligations.
Secondly, public and private sector forex holdings in the country including remittances by Nigerians in the Diaspora fall under Nigeria’s export proceeds. These foreign currencies should be converted to naira (this is a naira currency economy) within a set short time limit in a single forex market at the Appropriation Act (AA) exchange rate. Buyers and sellers of forex should pay a fixed gross commission not exceeding one per cent.
Hence, for example, the existing wide differences between the 2017 AA exchange rate of N305/$1 and the various forex market segment rates represent government revenue leaking to interloping cheaters/haters/milkers of Mother Nigeria. It should be an integral part of national budgeting for the National Planning Commission to draw up and monitor a periodically updated eligible import list.
The list may be classified into, say, five priority levels. Top priority imports should access forex at the AA rate, but lower priority imports should be subject to graduated rising exchange rate (which incorporates forex access tax). Banks should collect and promptly remit the forex tax to government treasury. The traditional discriminatory import duties, excise duties, etc, would yield further revenue.
Thirdly, the petroleum equalisation fund should be scrapped in order to recoup revenue leakages. Kerosene subsidy should be formally removed to stop revenue being looted by the NNPC. Similarly, petrol consumption volumes, which are being bloated for the purpose of looting revenue, should be trimmed to actual size. Fourthly, Eurobond issues are subscribed using mainly forex previously purloined from withheld Federation Account allocations. This is unacceptable.
As said on this page before, the trouble with the economy revolves about the fact that government fiscal and monetary measures have not conformed to economic best practice by choice of the political leadership beginning from 1971. Nigeria needs patriots in government. Patriots who trust in the naira. Patriots to run the naira economy.
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