The issue of Nigeria’s indebtedness and debt servicing is a recurring decimal in the economy. The borrowing spree of the present administration has even made it more topical in the life of the country. In faraway Davos, Switzerland, the venue of the 50th World Economic Forum, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, in an interview with Arise News, a sister broadcast station of THISDAY, admitted that the nation’s revenues were underperforming and as such, the debt service obligation has become a struggle for the federal government. Ahmed also spoke on the implementation of the finance bill, especially as it relates to tax reforms. Kunle Aderinokun presents the excerpts:
Looking at the agenda and sessions that you have attended at the World Economic Forum, what have been some of your initial impressions?
For me, what have been useful are the sessions that spoke to financial sustainability as well as financial inclusion. We also have met with several groups including insurance companies and also some countries that we feel we can have good relationship with.
I met with the finance minister from Qatar and there was a multilateral meeting set up with the emirates. We had some meetings that are bilateral and some meetings I have sat down as a panelist to discuss issues around the growth of Africa. There is a new Africa growth platform that Nigeria was invited to and we discussed a lot of issues that are common to the Africa countries, but also a lot of opportunities that we have especially financial inclusion using Fintech and a lot of digital platforms to address public finance management and also provide more resources to majority of our people.
With regards to the Africa Growth Platform, you were invited to and some of the bilateral agreement that have the potentials to take place, what are your hopes for Nigeria future?
One hope that I am taking away from here is we have an opportunity to interact with the government of Qatar. They have a very large sovereign wealth fund that is interested in investing in Africa countries looking at Nigeria as an option.
So, we will follow up through very quickly by putting a team that including the Nigeria Sovereign Investment Authority, the Trade Authority as well as the fiscal side to sit with them and discuss both green and brown projects. They have indicated interest in some certain areas of the economy, so we advance this talk quickly.
You have been associated with a phrase “Nigeria doesn’t have a debt problem, but indeed a revenue challenge”. Can you explain why we should not be saying that Nigeria has both debt and revenue challenges?
Nigeria has a revenue problem, not a debt problem. Our debt today is still just 19 per cent of our GDP, the World Bank and the IMF recommends that an economy the size of Nigeria needs to have borrowed up to 50 per cent of GDP, but we are only at 19 per cent. Why I call it a revenue problem is that our revenues are underperforming and debt service obligation is a struggle for us.
To address that, we are working to increase revenue but, we are also working to reduce our cost of borrowing by refinancing our older domestic loans that are quite expensive in term of rates and also expanding the tenure so that the debt payment obligations can become easier.
In the last three years, Nigeria has not met its revenue target, what will be different in 2020. Are we putting all our hopes on the new tax bills?
All of the key ministries, department and agencies are working towards increasing every revenue aspect that they handle. Yes, we do have some hopes on the Finance Bill to the extent that we have increased VAT, which is more largely in favour of the states rather than the federal government, but the parliament has passed the production sharing amendment to the contract that will be seeing Nigeria realising as much as $1.5 billion.
Even though the finance bill has reduced taxes, in fact zero taxes for the smallest enterprises and reduced taxes from 30 per cent to 20 per cent, business that have turnover of between N25 to N100 million. We still believe that with these incentives, more businesses will do better and we will now be in the tax bracket that bring them to pay more taxes to the government.
What can you tell Nigerians to ensure well executed implementation of the tax reforms and how can the citizens be helped with orientation, automation and necessary support in paying these taxes as it is best practiced all over the world?
The Federal Inland Revenue Service Board has just been inaugurated last week. They have kept the ground running, one of the things they have done even before the board was inaugurated is a review of the electronic platform that they have been using.
FIRS is fine-tuning its iTax as well other platforms they are using for the purpose of collection of tax.
For example, they have a process now that VAT collection is automated when you are paying for things like tickets, hotel services and in large supermarkets.
In the past, those payments that these outlets collect are remitted to the FIRS maybe like a month after, but now FIRS have a view of them because the process is now automated and they are able to know exactly what those outlets have collected.
We are planning to expand a lot of this automation to include payment of excise duties using electronic platforms.
How can we as Nigerians do better to attract Foreign Direct Investment Inflows because the performance of FDI in the last few years haven’t been that good?
On the contrary, FDI performance has been good in Nigeria. In the last couple of months, we have seen some investors whose investments have matured and gone out because they have better interest rates somewhere not because there is a problem in Nigeria.
And then, in the past three weeks we have also seen a turn that FDIs are also coming back and then again this is not unique to Nigeria. In every emerging country, we have FDIs coming in and then they go out when there is a better rate somewhere else.
With all the effort government is making, including showing positive results on the ease of doing business, providing a number of incentives, trying to now make tax payment easier for people and also automating tax collection, it’s good for business because business now have better predictability and they are able to plan well.
How can we improve our rating based on the ease of doing business in Nigeria?
The good story is that the movement is forward. The last measurement of Nigeria is 149. We’ve moved up to 131. There is a lot of effort to work in the states because the measurement cannot be just at the federal level alone.
So far, we have three states that are doing well and moving forward. We are working to improve the performance of the states so that they can do more and that will improve the ease of doing business rating.