Belgore: Expanding Tax Base Critical in Raising Nigeria’s Revenue

Managing Director, Utica Capital Limited, Mr. Ola Belgore, in this interview advises the federal government to take steps towards expanding its tax base in order to boost revenue generation. Obinna Chima provides the excerpts:

What is your take on the second quarter (Q2) 2021 Gross Domestic Product (GDP) report released last week by the National Bureau of Statistics (NBS) that showed a 5.01 per cent jump in growth, compared with the 0.51 per cent recorded in Q1 2021?

It is a positive development for the economy. It signals recovery of economic activities despite the challenges. You will notice that trade contributed about 68 per cent of the recorded growth, while the ICT sector (with 20% contribution) was also resilient. It is also good that the agriculture sector, a priority sector for this government also contributed to growth. However, manufacturing growth remains soft, pointing to the need to address some of the structural issues in the sector and the real sector in general.

What do you think should be done to maintain the momentum?

Firstly, we need to get the vaccination rate higher to improve the safety of workers and prevent the likelihood of another round of movement restrictions. Beyond that, we need to face the issue of credit for the manufacturing sector and infrastructural challenges. Ultimately, we need to make the business and investment climate more friendly by tackling insecurity and boosting business confidence.

Do you think this positive piece of news will bring about a turnaround in the economy, especially regarding capital outflow?

Well, it is a good one but I don’t think investors will be carried away by the numbers; don’t forget it is coming off the back of a low base due to the pandemic. Also, capital flows is driven not only by GDP growth but also by other factors like inflation, interest rates, the presence or absence of capital controls, exchange rate stability, among others. If you look at the macroeconomic indicators now, I don’t think we can make a strong case for preventing capital outflows. On the other hand, we can look at the numbers as a signal of the potential in the economy and for investors who are used to our environment, it is an indicator of the opportunities in the economy, subject to their risk appetite.

The Nigerian Exchange Group last week celebrated its 60 years of existence, do you think the stock exchange has lived up to expectation in the past 60 years especially in the area of wealth creation and capital formation?

I believe so. I think the Exchange has come a long way to its current status as one of the largest securities exchanges on the continent. It has introduced many innovations that has facilitated process improvement and product creation, the Exchange has evolved technologically, from the days of call-over to now Straight-Through Process (STP). More importantly, it has improved greatly in protecting investors and improving transparency of the market through initiatives like the Direct Cash Settlement and trade alerts. Yet, there is still a lot to do and achieve which I think the recent demutualisation will help to drive.

In what ways can the government boost its revenue which has remained weak over the years?

Government should seek to expand the tax base, and explore more joint venture arrangements with the private sector on revenue generating projects. I think it is equally important to plug leakages from the system, partly by driving a more efficient tax collection system and cutting out expenditure on redundant items. Also, the government must intensify efforts with diversifying its revenues from Oil. Asides agriculture, the government has to also look into making the best out of the vast mineral resources available in the country like iron and steel. Technology is an enabler, government need to provide conducive environment for technological ideas to thrive, not hamper or frustrate initiatives like the financial technology which is putting Nigeria on the global map and creating jobs for our teeming and gifted young population.

Do you share in the optimism that has trailed the enactment of the Petroleum Industry Act? If yes, why?

It is a step in the right direction. It is a clear improvement on what existed in the Nigerian oil and gas industry. The Bill has been introduced to attract investments in the sector and also provide a guiding framework for the activities of the sector. Any concerns about certain provisions of the Act can be improved upon as we go along.

What is your outlook for the banking sector this year, especially as we look forward to more banks releasing their half year results?

Results released so far by some banks have been largely unimpressive mainly due to lower-than-expected interest income. On the other hand, income from fees and commission has continued to improve as a result of increasing use of mobile channels for banking transactions by customers. That notwithstanding, the decline in interest income which is the largest source of income trickled down to bottom line, impacting profitability negatively. Going into the second half of the year where yield is now declining, we have a cautious outlook for the banking sector. While we expect fee-related income to improve further across board, we do not expect much from other non-interest revenue streams like foreign exchange and trading income given the relative stability in the naira now. Overall, improvement in banks’ performance this year will be modest.

Give us an overview of what corporate and investment banking at Utica Capital entails. What has been your experience since the firm was created?

Utica Capital Limited is licenced by the Securities and Exchange Commission as a Fund/Portfolio Management company, what that means is that as an asset management company we can provide wide ranges of financial services and products to the various categories of clients. The portfolio management aspect of our business is particularly suited for the high net worth individuals and institutional investors whiles the fund management angles gives us the opportunity to provide professional management for individuals who would rather start small because of where they currently are on the ladder of wealth or those who would like to put a foot out first to test the water. The important thing for us is that people aspire for a better tomorrow and we are there to help them get there. The experience has been exciting, it is what I have always done but now I have more flexibilities to create innovative products to meet the yearnings of our clients. Being new, flexible and innovation help both us and our clients. We offer them the opportunity to contribute to how they want to be served and what new product they would like to have.

What is your strength in the industry and how have you handled competition and what are you doing differently?

Well, apart from the opportunities I have had and experienced gained setting up and managing firms in the top hierarchy in Nigeria, I would say our strength is in our people, we are young and dynamic, yet we have people with cognate experience to stay innovative even within the ambits of the regulations. The only time we compete is in our constant attempt to improve the quality of service to our clients. Otherwise, we see other capital market operators as collaborators. You will see what I mean when you take a look at our products and services offerings and find firms you would ordinarily call competitors working together with us for the greater good of all especially the clients.