Shrinking revenue: Time to tilt sectoral productivity towards increasing demands
That Nigeria recently has been caughtin the web of revenue shortfalls is much of a strong discourse in view. The vagaries of the inconsistencies in global oil prices have pushed the Country to the end where the shortfalls in revenue portend strains to the increasing demands of the economy. The inability to satisfy the demands through revenue has led to the heaping of debts from loans acquired to fund capital projects indisputably needed for the growth of the economy. While borrowings may not be condemned outrightly, its misapplications have been noted to be inimical. This is just as questions of whether increasing borrowings, particularly recently, were channeled appropriately to yield the right outcome expected of them, have continued to take the centre of discourse.
As the need to execute capital projects remains sacrosanct, it has become glaring that the Government is increasingly becoming handicap to fund formidable projects without borrowing. Achieving revenue projections have recently become a luxury for the Government as it grapples with challenges from revenue shortfalls. Data from the Budget Office revealed recently that the Federal Government recorded a revenue shortfall of about tN1.93trillion over a period of 11 months (January-November 2021). The Budget Office, in a document containing an overview of the 2021 budget implementation, disclosed that the Federal Government’s aggregate revenue projection in the 2021 Appropriation Act and Supplementary Budget was N8.13trn. According to the office, while N7.4trn was the prorated budget for January-November 2021, the government generated only N5.51trn in the period, resulting in a shortfall of about N1.93trn.
A breakdown of the revenue generated during the period under review showed that oil revenue contributed N970.3 billion while the share of non-oil tax revenue was N1.62trn. According to the document, non-oil revenue comprised Companies Income Tax and Value Added Tax of N718.58bn and N360.56bn respectively and Customs collections of N542.11bn.
Recall that Minister of Finance, Budget, and National Planning, Zainab Ahmed, who on several occasions had lamented the problem of revenue shortfalls had while presenting the details of the 2022 budget in Abuja last week, emphasised the subject of the pressure from the debt-service to revenue ratio viz-a-viz revenue shortfalls. She was quoted: “Nigeria’s debt service to revenue ratio, which was 76 per cent as of November 2021, is the highest among African top economies. This is proof that what we have is not a classic debt sustainability problem, but a revenue challenge. Efforts are ongoing to fix our revenue challenge, because cutting expenditure is not currently a viable option, as our public expenditure/GDP ratio is also the lowest among same Africa’s leading economies. The most viable solution to our fiscal challenge, therefore, remains to grow our revenues and plug all leakages.”
It is observable that the revenue from non-oil sectors is still largely insignificant to the demands of the economy; hence reflecting a slow pace to the yearnings for the diversification of the economy. While the Government has continued to eye increase in taxes for revenue by hiking certain levies, which at some point, occasioned increasing the rate of Value Added Tax paid by Nigerians, it is important to state that the need to blend strong parameters for overarching structures of coordinated responses to propel sectoral productivity for the growth of the economy remains sacrosanct. While strengthening tax coverage may not be spelt out as an absurdity, it becomes close to infer such if the revenue accruing from these taxes are not channeled for operational use within a defined architecture of insight towards driving the course of economic virility. It is hence, essential for the Government to emphatically focus attention and muster efforts towards evolving systemic framework to instruct patterns towards propelling the development of comatose sectors of the economy such as Agriculture, Mining and Steels, which hold strong potentials towards the quest of diversifying the Country’s economic base, but have remained within the corridor of epilepsy. Nurturing such sectors to the height of virility for optimum productivity remains sacrosanct for the Government, as the vagaries of oil accruals have proven its insufficiency for the increasing demands of the Country’s economy.
