“Last year, we collected N1.1 trillion in VAT. So all things being equal, anywhere around the world, when you raise tax rate, compliance will go down because you give incentive to other people not to pay. Let’s assume Nigerians can not wait to help government and they would continue to comply. We would make additional N550billion. Fifty per cent of that go to all the 36 states; 35 per cent of that goes to the 774 local government areas; the Federal Government keeps about 15 per cent.Now that 15 per cent amounts to about N90 billion. And that N90 billion is a drop in the ocean in terms of the deficit of the Federal Government. At the state level, this 2019, all the 36 states in Nigeria has a budget of N9 trillion. And how much money did they make last year? Their Internally Generated Revenue (IGR) was N1trillion.Their share from the federation account was N2.5trillion, which means, as last year was one of the most successful years for us in terms of tax collection, let’s even say we repeat this year 2019, we would make N3.5 trillion. And they want to spend N9trillion.This extra N550 billion that they would get 50 per cent of it would not move the needle at all.”
Oyedele also shares his thoughts on sundry fiscal issues in the country.
I will start with a quote by the Saudi Arabia’s former Oil Minister, Sheik Ahmed Yamani, who said in 2000 that the Stone age did not end for lack of stone and the oil age will end long before the world runs out of oil. I think that is a very powerful quote that needs to remind us in a very simple term that Nigeria needs to start thinking about what to do with non-oil.
The oil sector is about nine to 10 per cent of our GDP, which means that the non-oil is about nine times as important as the oil sector. We should not be deceived into thinking that the oil sector is fine and I have the numbers. Saudi Aramco is the world’s largest and most profitable company. In 2018, it made $111 billion profit and paid $101.7billion in income tax; $70 billion in royalty to the government. Altogether, the taxes paid by Aramco is more than four times of all revenue generated by Nigeria from oil; all taxes and levies combined.
If NNPC at about two million barrels of oil per day has been as efficient as Saudi Aramco, NNPC would have generated over $40 billion to the government of Nigeria in royalty, income tax and dividend. But we did not make anywhere close to that. So my point is, we should start our diversification journey from the oil sector itself. Why are we not refining? Petrochemical ? Fertilizer? So it is a combined story that I want to tell. It is not surprising that Nigeria is still in poverty with 10 million people in extreme poverty and 120 million people living in poverty. That is less than a dollar, nine cent a day, which is approximately about N20,000 per month or N700 per day. We have to acknowledge the fact that Nigeria is not an oil-rich economy. We should stop deceiving ourselves. Nigeria is an oil producing economy. Correct! But it is not an oil rich economy!
If we do 2.2 million barrels per day and we sell at $60 per barrel, assuming our cost of production is zero and Nigeria owns everything. Corruption is zero; wastage is zero; we will still be very poor because this translates only to about N210 per person per day. That is extreme poverty.
So we have youthful population. Sometimes we brag about our population. Population is not a good or a bad thing. It is whatever you make of it. Do you know that there is a lack of opportunities for our people If you have that level of poverty. According to Maslow’s theory of needs, when people can’t feed themselves, they are hungry and when they are hungry, they are angry. They cannot be rationale. So a lot of the things they say, we are just being unfair to ourselves. Unless we address the issue of poverty and education, nothing is going to happen differently.
In case you don’t know,if you earn N300,000 per month,you are in the top one per cent of the society in terms of your wealth.It is not because you are so rich but because other people are so poor. Even NDIC said that Nigerians who can brag of N500,000 in their bank accounts, all BVN accounts combined, are only 1.4million.That is less than one per cent of Nigerians.
What that means is that until you fight poverty and create prosperity, you can not fight insecurity.
So as of today, as a matter of policy, we have the wrong approach and the wrong mindset. The government would come out and tell us, agriculture is where we want to focus on so that it can employ a lot of our people. It just speaks to how backward we are in our thinking.
If you are looking for agriculture to provide the highest employment for your people, you are living like 100 years behind time. The country that is self-sufficient in food today has less than two per cent of their population in agric and they produce more than they need. So when you have 30 per cent of your people producing food and you are still hungry, you are living so far in the stone age.
Now, we also need to acknowledge that our people are our biggest asset. Even today, with the level of our underdevelopment, Nigeria makes more from Diaspora remittances than we make from selling crude oil even as of today.
South Africa xenophobia
There is a point we all missing. We say South Africans don’t like Nigerians or all of that. The reason is, Awolowo said that the way you are treated outside of your country is a function of two factors: One, the quality of leadership. Two, the level of economic prosperity. In South Africa, people from the US; from the UK, from China not a single one of them has been killed. You know why? When they are there in South Africa, they are not there to compete with the lowest people in the society by opening shops here and there. They are there as expatriates,
The poor don’t see them as their competitors, right? They don’t operate where they are. Even the South Africans here in Nigeria, they are not competing with the poorest of our people. They are in MTN, they are in Multichoice; they are in Stanbic-IBTC Bank. They are competing with the middle class. When middle class want to fight, they don’t carry guns and cutlasses. They fight with the pen. So nobody gets killed. We have to get to a point where we are so developed that our people stop going outside of the country as immigrants. They start going as expatriates.
Where do I see the opportunity for us in terms of non-oil sector? I think the biggest one for me is in the real state sector. More developed countries, Australia, even the US, the largest employment is from the real sector. And guess what? We have the land; we have everything we need. I would only like to say that we are the reason why we are poor. It is not God, it is not anybody. It is us! So we can also fix it.
Another area for me is services as well as information technology. Why can’t Nigeria be the innovation centre for Africa. And we take it forward from there and see whether we can compete with Silicon Valley. Our entertainment and creative sector is powerful, but they are very poor. So we have celebrities who are living on perception; very poor in terms of what they have in their bank accounts because government has not supported them. The Hollywood and Creative sector in the US alone is bigger than Nigeria’s economy. When I travel around , I see people watch the Nigerian movies, and listen to Nigerian music but we don’t get the money. Why? Before you finish making the movie, you see it on the screen it has been pirated! Who’s supposed to protect you? Government! If you don’t help the people to create wealth, we will continue to be poor and tax revenue will be low.
I think transportation is another area as well as tourism and power. We do not have electricity but there are companies around the world with billions of dollars that some of them put in banks where they are getting negative interest rate. And they cannot wait to invest. They just want us to set the policy framework correctly, they would bring the money and create the infrastructure we need to succeed.
So what is the way forward from my own point of view? I think we have to look at all the promises government has made from ERGP to all other documents and be able to capture what is it that government needs to do specifically by sector and by areas of endeavour to help Nigeria diversify. I want to say enough about Nigeria that we shouldn’t stop at what government should do, we should have a list of what government must not do. And from time to time, let’s develop that into a scorecard that we can flash every year. “This is where Nigeria was in 2018; this is where we are now. What are the progresses we have made and what are the negative reforms that we have made.”If we put it out there, I think it would hold government to behave differently.
So let’s remove the disincentives that did not allow us to progress in non-oil sector just like the one in Real Estate Investment Trusts (REITs) and put our best foot forward. Emirate is one of the most successful airlines in the world. It is being run by a Brit. Nigeria still fights about the North and the South. “The person is not from my village”, when in some other countries, they can’t even be bothered. They look for the best brain in the World to lead their businesses. At the end of the day, the success is their own.
Government needs to think about why nations fail. We need to focus on strong institution, infrastructure and the spirit of our people. Of all those three, the most important is the quality of our institution. When you have strong institution, they can build infrastructure. When you have strong institution if you don’t have the skills, they show up from wherever they are in the World. Dubai is one of the most developed by harnessing skills in the world. It is not Emirati building Dubai, but people from all over the World. They have the institution, they have right policy framework, they borrowed the money and they have the infrastructure.
The VAT increase from 5 per cent to 7.5 per cent would not solve our problem. Last year, we collected N1.1 trillion in VAT. So all things being equal, anywhere around the world, when you raise tax rate, compliance will go down because you give incentive to other people not to pay. Let’s assume Nigerians can not wait to help government and they would continue to comply. We would make additional N550billion. Fifty per cent of that go to all the 36 states; 35 per cent of that goes to the 774 local government areas; the Federal Government keeps about 15 per cent .Now that 15 per cent amounts to about N90 billion.
Originally Reported by The Sun