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Published On: Sat, Apr 28th, 2018

Revenue in Nigeria is high enough the problem is how you use it- Professor Ekpo

The Director General of West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo in this interview at the just concluded World Bank/International Monetary Fund (IMF) Spring meetings in Washington DC spoke about issues surrounding the Nigerian economy. Okey Onyenweaku presents the excerpts:

Professor Akpan Ekpo

One of the recommendations by the IMF is that Nigeria should increase revenue, especially by improving tax collections. What is your take on that?

 I don’t agree with the IMF. Revenue in Nigeria is high enough. It is how you use the revenue. Tax-to-GDP ratio is low because unemployment is a problem. When people are employed and have a certain income level, they would pay tax. Corporate income tax in Nigeria is rising. Personal Income Tax is linked to people working. I always say that people pay tax because they get service delivery. Nigeria’s oil revenue which has been trending upward over the years, if well managed, can transform the economy. I am not saying people should not pay tax. But I am saying undue emphasis on Tax-to-GDP ratio is not the answer, except you want to tax luxurious items. We have almost a dead manufacturing sector, so where will the tax come from? Our major tax is from oil and royalties.

Again, if you look at the states, there are some that generate a lot of revenue through taxes. For example, in Lagos state, property tax gives the state a lot of money. If you look at borrowing, Lagos borrows a lot, but it has the capacity to pay because the state generates a lot of tax. Lagos state is Nigeria’s business capital. Again, if you tax companies too much, they would move away. Nigeria is not the only destination for investors. So, you must be careful how you do it. You can mobilise resources in several ways. Look at savings in Nigeria, what is the returns on savings? People that save in the bank, what interest rate do they get for keeping their money in the bank? Not up to four per cent in some places. But if you pay something reasonable on savings, a pool of that savings could be used to develop infrastructure in the country. I think the IMF has a problem of one-size-fits-all. Once an economy has a problem, they say the solution is to raise revenue. What about expenditure? Expenditure is the other side of it. Are we spending efficiently in Nigeria? So, a system where the salaries of lawmakers is unnecessarily high and there is a kind of fiscal rascality, you need to look at that side of expenditure and not just revenue?

The federal government collects the juicy taxes, they should let the states collect some of these taxes and run them efficiently if they can. So, I don’t think the issue is revenue. If people have jobs, they would collect salaries and they would pay tax.

Do we put the blame of the challenges we have in the country on leadership or on the process of leadership recruitment?

 Both. The country has not had in my view, what we call visionary leadership for a long period. There were some attempts when we thought the country was about to make progress and suddenly, it is truncated. The process itself is a problem. The masses are not properly conscientised. The other day, a former Deputy Senate President, Ibrahim Mantu confessed that they used to rig elections. For him to have confessed meant that the process is not free and fair. For me, I would have preferred a benevolent dictator who will come, develop the country and another generation would take over and start voting. But it looks like that is late now. I think looking at Nigeria’s history, there are episodes where that would have happened as somebody who has been around for a while. In fairness, it was only the early leaders who were around before the first military coup that had clear vision about how to develop this country. As we went on, the military came and started looting.

But some have argued that the first sets of leaders in this country were not prepared for leadership when the country got independence?

 Yes, there was that argument. But for me, it is never here nor there. When do you define when you are ready to ask the colonialists to leave? We have seen that in some place they went, they refused to leave, and they became settlers. There, the indigenes became more revolutionised and fought for the colonialists to leave. We have also seen where after fighting for the colonial masters to leave, in some countries, those that took over never did better. My own argument is that there is no time to be ready. You cease any opportunity that you have. People forget that there were some violent that led to the negotiation for independence. People died in Enugu coal mine riot, in Jos and workers revolted in almost all the state. So, the military incursion into politics was the problem. Maybe if the first coup had succeeded, Nigeria would have been a different country. Again, at the time Nigeria got independence, countries such as Singapore, Malaysia, Indonesia and the rest, we had almost the same macro-economic indices and we were even doing better than them. Even China got it independence in 1948 and today, everybody agrees that within a short time, China moved 700 million of its population out of poverty. Others have said that eventually we would get there, but I am saying that we have the advantage of seeing what other countries had done and fast track our development. So, we need the right type of leaders to transform this country. In term of blueprints to change Nigeria, we have lots of well-written documents by everybody. But implementation is the problem. So, Nigeria needs visionary leadership at all levels.

We are gradually coming to the end of the fourth month of the year and yet the 2018 Appropriation Bill has not been signed into law. Are you not worried?

 To be honest, it is very embarrassing. When last year, the House of Representative said they wont look into 2018 Appropriation Bill till March this year, I couldn’t believe it. See, when you delay the passage of the budget of any country, it has economic implications. We call it structural lag and the so called private sector waits for the budget. So, I asked myself, “What do they do in the House? So, even if they are on recess, can’t they come back and discuss the budget? So, it is very embarrassing. Nigeria has what it takes. During the military era, even the Sani Abacha era, I remember that by January 1 of every year, the budget is out. So, it is very embarrassing. Then, they now shifted the goal post of the 2017 budget to May 31st. So, it shows how unserious they are by not passing the budget up till now. It has been a recurring decimal and it is unfortunate that it is only once or twice in about 20 years that we have passed the budget on time. One was to be during the time of Ngozi Okonjo-Iweala as Finance Minister. How can you go almost half of the year and you don’t have a budget? There are projects that need to be funded, some to be rolled over. You know we just came out of a recession technically, so this development makes a mockery of it. This confirms that the recession we came out from was the oil story because the budget is expected to power the fiscal policy. So, for me it is embarrassing and disturbing. I hope that stakeholders in the country would put pressure on the National Assembly because the budget is very important. It has adverse impact on the economy.

Given that we are beginning to see increased political activities ahead of the 2019 elections, if the budget is signed today, do you think there is much the government will achieve this year before 2019?

 See, the announcement of the timetable for elections in a country like ours has its own effects because once you announce it, politics takes over and nobody will have interest in the economy any longer. The interest becomes how to be re-elected. But if they have people’s interest at heart, I am sure that if they pass the budget, there are expenditure items they would execute that would help them in the elections. There is what is called election cycle, once you announce the date for an election, interest shifts automatically towards the election and economic issues becomes secondary. So, in my view, the reason for the delay in passing the budget is because politicians no longer have an immediate interest in the economy.

 

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