On Friday, the chairman of the Federal Inland Revenue Service, Mohammed Nami, lamented Nigeria’s low tax income and blamed it on lack of willingness by many Nigerians to pay income tax.
He disclosed that Nigeria has 41 million personal income taxpayers compared with the four million in South Africa but total amount of the country tax income remains low compared with South Africa’s figure.
While Nami may be right in his lamentation against the abysmal performance of Nigeria in terms of tax payment and collections, he should rather look beyond the surface and situate it within the prevailing economic conditions in the country.
Though Nigeria has the largest economy on the continent and by virtue of that, the country is regarded as the richest country in sub-Saharan Africa, the reality is much more than that because the economic outlook bleaks.
Nigeria with a Gross Domestic Product of $514.05 billion compared with Egypt’s $394.28 billion and South Africa’s $329.53 billion is driven by a hydrocarbon-dominated economy and its position is substantially sustained because of its oil resources and not as a result of its diversified production base.
Unlike South Africa and Egypt which are more industrialised and developed in terms of the manufacturing sector, the Nigerian economy is largely rent-seeking with huge portfolio businesses taking advantage of the corrupt public sector to scoop the petrodollar for personal use.
Also, Nigeria with a per capita income of $2,073 as of 2020 is far below South Africa’s per capita of $5,194 as of 2020 and behind Seychelles with $9,700.
For the uninitiated, per capita income represents a measure of the amount of money earned per person in a nation or geographic region. Per capita income can be used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population.
What this means simply is that the countries the FIRS chief was comparing its income tax collections with are far ahead of Nigeria in terms of earning capacity of their citizen.
Nigeria’s official unemployment rate is 33 per cent in the fourth quarter of 2020 compared with South Africa which is an average of 28.74 per cent in the same period. This is an indication of the poor environment in Nigeria which can not support the citizens to create wealth.
Also, with the country’s debt at N35 trillion as of June 2021 which is put at 23 per cent of the GDP and still growing and debt service to revenue of 74 per cent, Nigeria needs more than a miracle to get out of its economic morass.
While Nigeria is a land of opportunities with abundant human resources, the problem with the country is the lack of political leadership to help galvanise the populace towards productivity and tap the enormous wealth abundant therein.
Nigeria today has become a huge graveyard of dead manufacturing plants that, up until the mid 1990s, provided the solid base for the economic prosperity of the country.
Today, the likes of Dunlop, Michelin, Berec, Peugeot, Volkswagen and others have closed shop due to the harsh economic environment created by a corrupt system and moved to other climes where the environment supports production.
Most Fast Moving Consumer Product companies, that hitherto produced household products, beverages and other food products for the rest of West Africa now import their products from neighbouring Ghana into the country and merely label them “made in Nigeria” to give the impression that they still produce in the country.
Tax payment and collection are products of productivity and economic buoyancy and without a productive economy; tax income would continue to remain low.
As things are today, Nigeria seems not to be ready for the kind of work that would enable her to realise all her potential and produce the economy that helps the citizen to pay commensurate tax to increase its wealth.
The most prosperous industry in the country today is politics and its allied sector. The rest sectors are merely struggling to survive the harsh economic environment and the debilitating unfavourable business environment which has put the country in the reverse gear of growth.
Presently, the country is battling with foreign exchange scarcity, which has created rooms for large arbitraging with the privileged few taking advantage of the situation to enrich themselves while the industries that need the forex to survive are in short supply of it.
This is a country that borrows huge funds in the name of building infrastructure, but unfortunately, the bulk of the money is being frittered away by corruption.
Cost of building per kilometre rail line or road in Nigeria is higher than in Kenya, South Africa and many other parts of the world for instance, meaning that Nigeria is not getting the right value for the amount of money being borrowed to finance such projects.
Besides the bloated public service, many of the public servants would rather protect personal interest than the interest of the state, resulting in loss of revenue to the government and the whole nation suffers for that.
Despite the hues and cries of the chairman of the FIRS over the low income generation from taxation, Nigeria will remain in the present level until people in government recognise the need to put the country economy in the right gear and accelerate toward growth.
It’s imperative that until the government is prepared to develop domestic production structures, diversified economy and export orientation, and provides a conducive macroeconomic environment, unemployment and productivities will continue to be a major issue in the country while tax payment by citizens would not improve magically.
The many so-called billionaires being referred by the FIRS boss are over leveraged on debt while many of them could not genuinely explain the sources of their wealth; it’s therefore unreasonable to expect many of them to contribute to economic development positively.
It’s not too late for the country to retrace itself and rebuild the broken wall, with a genuine and sincere intention, the government can recreate the kind of economy that produces and attracts major manufacturing businesses to the country in the 1970s and 1980s.
The environment must be made right through reforms and policy initiatives that would ensure that investors’ confidence in the system is renewed while government focus more on regulations and reforms that create enabling environment where business can thrives.
Paying lip service to infrastructural development will not do the magic, but sincere focus on building infrastructure that would enhance economic development and not the one that pander to the religion and ethnic interest of those in government.
The government must be humble enough to learn from our smaller neighbouring countries on what they are doing right to attract the kind of foreign investment and lure manufacturing firms from Nigeria to their shore.
Job creation through public private sector’s partnership would lead to the revival of the economy and provide a spring for the country to leap forward into the league of countries currently creating opportunity for their teaming youth to benefits from the global economy.
If building a railway from Lagos to Onitsha and Aba, where major manufacturing is taking place, will bring rapid economic development, so be it. Rather than Nigerias borrowing money to construct rail line to Maradi, in Niger Republic, the government should first concentrate efforts in building critical infrastructure where they are needed most to boost economic activities and then later consider geo-political spread to satisfy our diversity.
If the people are empowered, it would be easy to collect taxes and enlist the citizens in the developmental process, otherwise, Nigeria will continue to grope in the darkness of economic backwardness and earning from tax will remain low.
Mayowa is a financial analyst based in Lagos
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