The Guardian newspaper has reported on how the sliding profile of the nation’s revenue base has irked economic experts, who said the development portends far-reaching implications for the economy.
Already, eight state governments have been identified as unable to pay salaries, while about 12 have obtained approvals to raise their respective debt profile by way of borrowing.
The Managing Director and Chief Executive Officer of Financial Derivatives Limited, Bismarck Rewane and Chief Executive Officer of Economic Associates, Ayo Teriba, at the Lagos Business School Alumni Association conference, in Lagos, were unanimous in their assessment of the economic distortions already in the system and more, if left unchecked.
Rewane, in a panel discussion on the state of the economy and 2015 outlook, said that at present, governments are now concerned with how to cover the revenue shortfalls both at the federal and the state levels.
He contended that while 12 states have obtained approvals for borrowings in the name of projects’ completion and the Federal Government’s budget remained largely on expenditure side, what adjustments are needed fiscally to balance the issues?
According to him, the economy’s fiscal adjustments in terms of borrowing must be accompanied with the resolution that it must be for investment purposes, not for consumptions.
“That the state governments must realized that if one is going for governorship position and the cost of the race is N11 million, with a probability of winning after staking that much, it means one should review the expectation of the revenue to the state given the falling oil price. Politicians should review now the stake in politics in relation to the returns they expect when they are finally there.
“We have announced increased taxation on champaign and all the likes, but the real issue is not the tariff, rather if the price of petrol is N97 per litre when the price of crude oil was $100 and above, what is the price of petrol per litre now that the crude oil is in $70s?
“Should it still be N97 or less? If it is still N97, who benefits from the subsidy? Total subsidy is being valued from N1.2 trillion and above, and assuming that the subsidy is no longer in force because of the fall in the crude oil prices, what happens to the N1.2 trillion subsidy fund earmarked? This is enough to cover the shortfall more than the tariff regime.
“Again, by how much are we going to bring down the benchmark price for crude oil and what are we going to save for? We must note that fiscal measures take long to manifest on people’s well being and the economy. So, I do not think that the fiscal measures now are enough to achieve the goals,” he said.
He expressed gratitude that the government acknowledged that all is not well by taking the measures in the first place, but reiterated that proper measures must be taken, otherwise it would amount to nothing at last.
However, the Chief Executive Officer of the Nigerian Stock Exchange, Oscar Onyema, admitted that beside the crude oil price issues, the market faces other challenges from the political side.
“The market, even all over the world, does not like uncertainty and it will surely react to any trace of it. For the 2015 outlook, it be clear by March 2015, when the impacts of politics and fiscal policy may have played out and then the actual direction of the market could be projected,” he said.
He noted that the current development is a beginning of the good things to come as the economy, though concentrated on services during the rebasing exercise, is now more diversified and has 14 per cent record from oil and gas, while telecommunications opens another aspect of revenue for the system.
Teriba pointed out that there is disconnect among the acclaimed growth figures, growth projections, budget developments and fiscal contraction/austerity in the face of “ongoing domestic economic expansion.”
He noted that the country failed to produce ‘savings’ from years of oil-price benchmarking and inept in raising revenue from evident and widely acknowledged boom in non-oil activity.
According to him, statistics showed that of the N70 trillion non-oil Gross Domestic Product (GDP), N2.95 trillion was federally collected non-oil revenue, representing 3.7 per cent of GDP.
He acknowledged that aside from oil, Nigeria is still bigger than any other economy in Africa, as non-oil GDP is bigger than each of South Africa and that of Egypt’s GDP.
“Why should they each have more tax revenue than Nigeria? Why do we lay claim to becoming one of the 20 biggest economies soon when our budget remains stagnant year after year? We can effect needful immediate heavy investment in health, educational, security and defence capabilities now and be happier for it.
Credits: The Guardian
