Business
Panic in OPS over FG’s ambitious non-oil revenue target

BY EMEKA EJERE
The push by the Federal Government to earn 78 percent of its revenue from non-oil sources in the 2023 budget is sending an unfriendly signal of additional fiscal burden to the private sector, findings have shown.
This is causing anxiety within the Organised Private Sector (OPS), which sees the move as Federal Government seeking to heap more taxes on businesses through its controversial Finance Bill 2022.
Recall that a couple of weeks ago, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, boasted that Nigeria no longer depends on oil revenue, compared to 2016, a year after President Muhammadu Buhari’s administration started.
Ahmed, who was presenting a break down of the 2023 budget signed by the President a day earlier, said in 2016, oil revenue accounted for 70 percent of Nigeria’s total earnings, while non-oil revenue was 30 per cent, noting that both revenue streams have switched sides.
The minister said in 2023, 78 percent of the Federal Government’s revenue will be earned from non-oil resources, with 22 percent contributed by the oil sector.
“So, in aggregate, 22% of the projected revenues are expected from oil related sources, while 78% is to be earned from the non-oil resources’’, she said.
But the organised private sector is protesting that the National Assembly hastily passed the bill, alongside the 2023 Appropriation Bill, without subjecting it to a public hearing.
According to the 2023 Appropriation Act, the total revenue available to fund the budget is estimated at N10.49 trillion. And this includes gross revenues of 63 government-owned enterprises totaling N3.87 trillion. Of this, the Federal Government’s oil revenue share is projected to be N2.29 trillion; non-oil taxes, N2.43 trillion; and Federal Government’s independent revenues, N2.6 trillion.
While the Senate gave a 24-hour public hearing notice, which some OPS advocacy groups described as unrealistic, the House of Representatives passed the piece of legislation before the advertised public hearing notice was due.
Sources say the OPS, which is seeking a thorough review of the document, would reject it if signed as passed by the lawmakers. Members of the private sector are worried that additional tax burden would only push operators to the edge.
According to Ahmed, the document undergoing a review, would bring to force broad reforms in the tax system and complement ease of doing business.
However, industry players are of the view that some of the provisions would weaken businesses, increase the burden of multiple taxation and make the operating environment more hostile to private investment.
The National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), recently decried the worsening business environment in the country, which it said, has left many industrial and manufacturing concerns in comatose, while several others have shut down.
The National President of NACCIMA, Mr. John Udeagbala, who stated this during the association’s first quarterly press briefing in 2023 in Lagos, said the Finance Bill 2022 that was passed by the National Assembly would have negative impact on the private sector.
“The 2022 Finance Bill attempts to add more financial burden on the private sector that is presently struggling to keep businesses afloat,” he said.
“As a matter of fact, the GDP growth rate has been dropping on a quarter -by-quarter basis since the 5.01 percent recorded in the second quarter of 2021.
‘’The implication of this is that economic activities are contracting, and businesses are dying. The private sector has suffered humongous losses due to the absence of turnaround targets for the basic needs of businesses in Nigeria.”
The Finance bill seeks the imposition of 0.5 percent tax on all eligible imports from non-African countries to fund Nigeria’s obligations to international organisations and an increase of Tertiary Education Tax from 2.5 percent to three percent of companies’ profits.
These do not go down well with economists, who believe the new taxes would have far-reaching implications for investors and citizens, affecting cost of production and undermining investor confidence. They also fear the taxes could increase inflationary pressure. Already, Nigeria’s corporate tax regime, which is currently 30 percent, is said to be one of the highest globally.
Experts believe the solution to the country’s revenue problem is not in increasing taxes but in plugging leakages in revenue sources, reducing cost of governance, fighting corruption and exploring other sources of revenue currently lying fallow.
They also argued that with a falling standard of living, resulting in low purchasing power, high levels of unemployment and low capacity utilisation by manufacturing companies, imposing more taxes could be counter-productive.
Treading with caution
In his intervention, the founder/CEO, Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, called for a change in Nigeria’s current tax administration and strategy.
According to him, while it is good to explore taxation as a source of increasing government revenue, many other sources have remained unexplored. He said right now, the pressure of tax is on those who are in the formal sector of the economy.
“Unlike in South Africa where personal income tax can account for about 60 per cent of revenue, the Nigerian economy is almost 60 per cent informal, operated by artisans whose records we don’t have because we have problems with data, so there isn’t much you can do in that area,” he said.
Yusuf also suggested that property tax is a low-hanging fruit, which the government can explore.
“Look at properties in Abuja now, is it a poor man that will put up those kinds of buildings? Do you know how much a plot of land costs in Asokoro? What are they paying in terms of taxes? If you can’t find them, at least, you can find their property?
“Go to the United Kingdom, Nigerians, who have properties there will tell you how much they are paying, even though they don’t stay there. So, we can do a lot more in the area of property tax.”
He also said Nigeria can get more revenue from its forex, noting that it was wrong for the government to have put the conversion rate of the naira at just N435 in the 2023 budget.
Yusuf said, “How can you be selling Nigerian currency at N435? If you put it at N650, which will even be generous, on our foreign exchange market, it would be oversubscribed. Why are we leaving our foreign exchange at N435 in the budget? Do you know how many billions you are losing, even from that alone?
“Our forex conversion rate has to change for us to make more money. We can’t be subsidising forex for people to go and be doing round tripping.
“We also need to get rid of this madness called subsidy. From that alone, we can save N6 trillion. There are a lot of leakages in our revenue collection system. Let us consolidate our revenue collection and put everything under the Federal Inland Revenue Service (FIRS).”
In his reaction, Fiscal Policy Partner and Africa Tax Leader at PwC Nigeria, Mr. Taiwo Oyedele, said the best way to raise tax revenue, at this time, is not by increasing rates or introducing new taxes.
This template along with how the Service will generate N12 trillion revenue for the economy from N10 trillion in 2022. the source added, will be presented to the incoming administration “to get their buy-in.”