The socio-economic development of any nation is primarily determined by the efficiency of its public finance management systems, which involves raising revenue, managing expenditure, and debt portfolio while effective public finance management systems promote good governance, human development, and poverty reduction. Against this backdrop, Civil Society Legislative Advocacy Centre (CISLAC), with support from OXFAM Nigeria held a one-day dialogue in Lagos on policy gaps and alternative in fiscal transparency. The Executive Director of CISLAC, Auwal Musa Rafsanjani, fielded questions from Funke Olaode
What motivated the recent dialogue on fiscal transparency and good governance by CISLAC?
The Nigerian economy like the rest of the world has been faced with disruptions to its supply chain and productivity from the need to comply with lockdown guidelines following the COVID-19 pandemic. With the resultant crash in oil prices which is the mainstay of the Nigerian economy and capital flight which threaten to push the economy into recession, the government, agencies, and market regulators have adopted measures to cushion the impact of the crisis as well as stabilise markets and the economy. With the severe impact of COVID-19 on the private sector, the government mobilized support for small and medium-scale businesses through fiscal measures and the development of an Economic Sustainability Plan (ESP). The ESP which incorporates the Economic Recovery and Growth Plan (ERGP); the report of the Economic Crisis Committee; the Finance Act 2019; and the Central Bank of Nigeria (CBN) intervention, is to be funded from Special FGN Accounts, the CBN in the form of structured lending, external bilateral/multilateral sources and to the least extent from other funding sources.
It is however imperative to strike a delicate balance between the fiscal measures for supporting and sustaining small businesses and the economy, and a means to mobilize revenue to fulfill the robust goals of the ESP and the country’s budget. It is to this end that the Civil Society Legislative Advocacy Centre (CISLAC), the national chapter of Transparency International (TI-Nigeria), took the initiative with support from OXFAM under the Strategic Partnership-Financing for Development project, to develop a Public Finance Management Roadmap report in Nigeria to help articulate the ideal public finance model that is workable in Nigeria, acceptable and beneficial to Nigerian citizens. While acknowledging the auspicious timing of this fiscal roadmap, it represents a complementary contribution to the Federal Government’s efforts within the Economic sustainability plan and satisfactory budget implementation.
In the face of unstable economic situation and inadequate funds, what feasible options are available for Nigeria?
Many options are available if we can tap into them. There are unremitted and uncollected taxable funds. The government should expedite actions in collecting those funds. Oil companies are there and many mega-companies are not paying taxes. And then we can also block leakages and increase taxation in some areas because there are viable sectors where the government is not paying much attention such as the maritime sector, in the extractive sector and so many areas that Nigeria has neglected. In my own view, instead of borrowing money, agencies saddled with revenue collection should wake up to their responsibilities. Again, what of the looted funds that have been repatriated back into the country? What has the government done with it? Everyone knows that oil In Nigeria is becoming unreliable, the NEITI Reports had clearly brought out so many companies both in public and private sectors that are supposed to remit money to the Nigerian government and they have refused to do that over the years. Also, we have witnessed so many companies dubiously coming to seek for tax holiday or tax waiver and there was no concrete system in place to ensure that they are actually in distress. And after the tax holiday or waiver elapses the same people will come back disguise under a new name. That is why as a group we have been clamouring for Beneficial Ownership Register so that we can identify the people behind these companies.
Ineffectiveness has been identified as one of the factors militating against public finance in Nigeria. How do you think this problem can be tackled for the country to be able to meet its development agenda?
These factors are everyday occurrences such as poor domestic resource mobilization, obsolete laws, and regulations, weak public institutions, low tax revenue, corruption and leakages in the public procurement process, over-dependence on oil revenue with a high level of market volatility. I can go on. Everybody knows that many developed countries rely on tax to drive their economies. But here, there is a gap in Nigeria’s tax projection with only six percent of Nigerians paying. Ghana has an 18 per cent ratio. It means many Nigerians don’t pay while those who volunteer to pay cannot see how the money is being spent. The problem is not reflected in the developmental projects as often find their ways into private pockets. The government should embark on critical reforms of the Nigerian tax system, strengthen tax administration, and ensure progressive tax structure with the view to expanding the tax base of the country and scope to bring more taxable people and business into the tax net.
How do you think government through its agencies can increase its tax revenue?
It is simple. The government should implement progressive taxation and ensuring that rich persons and companies pay these taxes, expand the tax base by bringing more taxable Nigerians into the tax net through effective reforms, increase tax compliance by rich individuals and companies such as payment on offshore hidden properties and lastly by strengthening anti-tax evasions and avoidance policies, transfer pricing legislation and measures against tax havens.
Reshaping public expenditure is key to meet the development agenda of any nation. How do you think the government can achieve this?
Well, there is a need for the government to adopt participatory budgeting systems that allow for the needs and aspirations of the citizens to be capture in the budgeting process because active citizens’ participation at all stages of budgeting ensures open budgeting and allows for effective budget implementation. Also, setting realistic budget goals is key. And lastly, it is advisable for any government to prioritizing capital spending because, with improved revenue, there is a need to improve capital spending to drive real economic growth. I believe any government that wants to achieve real economic and developmental growth as a matter of policy will concentrate and increase public spending to develop infrastructure in education, health, and other critical sectors.
Various recommendations have been made on how improved finance management can help develop Nigeria. In your own view, what do you think can work best?
Well, our recommendations or roadmap at the recently held dialogue on Wednesday, July 29, 2020, centered around three things. We believed for effective financial management, an inclusive public finance framework is very key which means the government at all levels should develop an inclusive public finance framework with a clear resource mobilization plan that looks beyond oil revenue. The framework should make provision for the diversification of oil revenue beyond sales of crude oil and other accruable rent. More importantly, there is a need for Nigeria crude products to be refined locally, and that entails ensuring holistic overhaul of the nation’s four refineries to function in full capacity and possible building of new ones.
This will prevent the loss of huge resources due to crude oil swapping. Also, the FG should ensure the efficient management of the extractive sector by ensuring the passage, assent, and functioning of the Petroleum Industry Government Bill as well as the other components, particularly the Petroleum Industry Fiscal Bill. This will bring an end to the porous resource mobilization and management regime that dominate the oil industry. Due to obsolete laws and Memorandum of Understanding (MoU), Nigeria had not been able to harness the potential of its oil tax revenue. There is a need to review all the MoU governing Nigeria oil sector relationships and tax agreement. And as mentioned earlier, the overhauling of the Nigerian tax system for efficiency is also important Lastly, a lot of economic revitalizations need to happen which can also be achieved if a focused economic management team is put in place.
This team will be able to galvanize the economy, energize the economy to create jobs, be able to provide the right policy that can drive the economy. As it is now, a lot of factories and companies are closing down because the electricity is failing, the corruption in the system is becoming overwhelming for them to bear. They cannot meet their targets because of extortion, poor infrastructure, and energy to be able to carry out factory activities. For me, government at all levels should wake up to their responsibilities by focusing on governance, this is the only way Nigeria can move forward.