Senate: With 85% VAT Revenue, States Have No Excuse Not to Pay Minimum Wage

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Solomon Adeola
  • Sen. Adeola: N’Assembly has identified ways to block leakages to support budget implementation
  • Why govt can’t stop fuel subsidy for now
  • We are going to full privatisation of the power sector

Chuks Okocha in Abuja

Determined to make the 30,000 Minimum Wage a reality, the federal government has already conceded between 80 and 85 per cent of revenues accruable from Value Added Tax (VAT) to states to enable them meet their wage obligation.

This was contained in the Finance Bill, recently signed into law by President Muhammadu Buhari, leaving the remaining 15 per cent to the federal government.

With this development, however, no state of the federation could claim inability to pay the minimum wage, because the new VAT law has been sculpted to ease the payment of the minimum wage.

In addition, the National Assembly said it has identified over 300 revenue-generating agencies that would enhance the implementation of the 2020 budget, even as it has suggested ways to block leakages that could affect the budget implementation.

Senate Committee Chairman on Finance, Solomon Olamilekan Adeola, who hinted at this development, while speaking to select journalists at the weekend, also agreed that there was a need to address the issue of fuel subsidy, but said there was need to first put the refineries to work before removing the fuel subsidy.

“The aspect of the Finance Bill that deals with VAT was amended to favour the states, because about 80 to 85 per cent of the revenue accruing to government from the value added tax will go to the states while the federal government will have just 15 per cent.

“The VAT is meant to assist governors to meet their wage bill. Any governor who wants to play with such money at this point in time is at his peril, because there is the burden of paying the salary.

“What we have done with the VAT increment is to assist the states meet their obligations to the workers. It is only the federal government that has enough money to pay its workers at the moment. About 20 governors have been able to negotiate with their workers and agreed to pay the minimum wage while about 16 are still outstanding,” he stated.

Explaining that the VAT exemptions as contained in the Finance Act has protected the common man enough as far as the increment of VAT is concerned, Adeola stated that although the Manufacturers Association of Nigeria (MAN) and other groups had also started raising alarms, they are also protecting their businesses.

Adeolu, therefore, urged those complaining about the VAT to come out with the data on the effect of VAT increment on the lives of Nigerians, adding that government would not allow any firm to take advantage of the masses in the implementation of the VAT increase.

On the effect of Electricity tariff hike, he said, “I think the federal government will do something about it, when the implementation starts. We are going to full privatisation of the power sector, starting with the distribution of meters.

“We are working towards the transmission too to ensure that we fully deregulate the power sector to save Nigerians from poor supply and estimated billings. As much as we are deregulating, we should embrace pay as you go with everybody having a prepaid metre.”

The senator claimed that the National Assembly had identified over three hundred revenue-generating agencies and that the federal government already had a plan to monitor the affairs of the agencies with a view to blocking leakages.
“We will be working very closely with all the revenue generating agencies. As at the last count, we had over 300 of these revenue-generating agencies, which we will be working with. They constitute part of what comes to the federal government.

“We will be working with them to ensure that there is a strict compliance with the relevant laws of the land especially, the Fiscal Responsibility Act. We will ensure that the targets of the revenue generating agencies in the budget are achieved.

“We will also look into other non-oil revenues. From time to time, we will engage the Ministry of Finance and get firsthand information on how our revenues have faired. All over the world, there is no budget that performs 100 per cent.

“A budget is an ambitious target. By the time we start performing up to 80 per cent, I don’t think that will be bad. We will ensure that a lot is done in the area of releases for capital projects.

“We will ensure that the people have the basic amenities through the provision of infrastructure across the country. This will also reduce the issue of uncompleted projects,” he explained.

He explained that it was for this reason that the budget was returned to the 12-month calendar cycle, with the amendment of the Public Procurement Act and all other laws that could help drive development and the performance of the budget.

On the issue of fuel subsidy, the senate committee chair on finance said, “I agree that we need to find a way by which we can tackle this issue of fuel subsidy. I can imagine if the money used in paying for the fuel subsidy can be withdrawn and used in implementing the budget.

“You should also understand the constraints that are there. We need to put our refineries to work. They need to be functioning before we can consider removing the fuel subsidy. If we proceed and carry out any urgent or immediate removal, we will be bringing untold hardship to Nigerians”.

Adeolu, however, said the current administration was doing everything within the ambit of the law to ensure that the refineries were functional and also not performing below capacity like it is currently the case.

“There is one under construction in Warri, Delta State. We have the Dangote Refinery in Lagos too. As soon as these refineries become functional, they will reduce the current subsidy that we pay on fuel or removing it in its entirety.
“There are some proactive measures the government must put in place before the total removal of fuel subsidy. We are working towards that. We are hoping that before this current administration comes to an end, we will have refineries that are truly functional,” Adeolu explained.