Tinubu’s Four Executive Orders and the continual rise in inflation

Despite the prompt step taken by President Bola Ahmed Tinubu to mitigate the economic downturn, inflation has continued to skyrocket.

The President last week set up a Committee headed by Fiscal Policy Partner and Africa Tax Leader at PwC, Taiwo Oyedele, to develop better tax reforms nationwide.

In a statement by Special Adviser on Special Duties, Communications and Strategy to the President, Dele Alake  explicitly captured that the committee will comprise experts from both the private and public sectors and have responsibility for the various aspects of tax law reform, fiscal policy design and coordination, harmonisation of taxes, and revenue administration.

It recognises the importance of a sound fiscal policy environment and an effective taxation system for the functioning of the government and the economy.

“Nigeria ranks very low on the global ease of paying taxes while the country’s Tax to GDP ratio is one of the lowest in the world and well below the African average.

“This has led to an overreliance on borrowing to finance public spending which in turn limits the fiscal space as debt service costs consume a greater portion of government revenue, annually resulting in a vicious cycle of inadequate funding for socio-economic development.

“While some incremental progress has been recorded over the years, the outcomes have not been transformative enough to change the narrative,” he said.

It outlined the key challenges in Nigeria’s tax system to include multiple taxes and revenue collection agencies, fragmented and complex tax system, low tax morale, high prevalence of tax evasion, high cost of revenue administration, lack of coordination between fiscal and economic policies, and poor accountability in the utilisation of tax revenue.The establishment of this committee reflects President Tinubu’s commitment to addressing these challenges and bringing about transformative reforms in fiscal policy and taxation.

The committee’s primary objective is to enhance revenue collection efficiency, ensure transparent reporting, and promote the effective utilisation of tax and other revenues to boost citizens’ tax morale, foster a healthy tax culture, and drive voluntary compliance. These efforts will not only improve Nigeria’s revenue profile but also create a more conducive and internationally-competitive business environment.

“Our aim is to transform the tax system to support sustainable development and achieve a minimum of 18 per cent Tax to GDP ratio within the next 3 years without stifling investment or economic growth.

It should be noted that this committee will not only advise the government on necessary reforms, but will also drive the implementation of such recommendations in support of the comprehensive fiscal policy and tax reform agenda of the current administration.

Dwelling the four executives orders, the frst Executive Order was the Finance Act (Effective Date Variation) Order, 2023, which deferred the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023 to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy; The second order, Alake stated, was the Customs, Excise Tariff (Variation) Amendment Order, 2023, which shifted the commencement date of the tax changes from March 27, 2023 to August 1, 2023, also in line with the National Tax Policy; Thirdly, Alake said the president gave an order suspending the five per cent Excise Tax on telecommunication services as well as Excise Duties escalation on locally manufactured products; Fourthly, the presidential adviser disclosed that the president ordered the suspension of the newly introduced Green Tax by way of Excise Tax on Single Use Plastics, including plastic containers and bottles. He added that the president also ordered the suspension of Import Tax Adjustment levy on certain vehicles.

During the The Nigerian Employers’ Consultative Association’s (NECA) summit yesterday, the Director General, Adewale-Smatt Oyerinde pinpointed the new Executive Orders signed by Tinubu have stopped many organised businesses in Nigeria from going into extinction.

He buttressed his argument on the Small and Medium Enterprises springing up gradually, noting that the Executive orders would allow the organised businesses to constructively dialogue with the government on some of the defects of the 2023 Finance Act. It did not stop the whole issue but temporarily stopped the business economy from sliding. It has allowed businesses to engage the government on new plans to get out of the inflation.

Beyond the executive orders by Mr. President, drastic measures must be considered constructively to address the impact of the fuel subsidy removal few weeks ago. A special account as suggested by many civil society organisations (CSOs) should be introduced so that the monthly N400 billion recovered or saved from the fuel subsidy removal should be tailored into  infrastructural development.

Though, it is understandable that the organised labour unions and the federal government team are yet to come out with a lasting solution that will cushion the effect of the fuel subsidy removal, however, the government at the centre must focus on rapid infrastructural development nationwide especially providing effective electricity supply and roads network for businesses to strive.

The government in collaboration with stakeholders should encourage, fastrack the rise of modular refineries in addition to the Dangote Refinery because when more refineries spring up, there will be more products in circulation and fuel pump price will gradually reduce in accordance with laws of demands and supply in the market.

Another determining factor to curb inflation is that the federal and state government must be deliberate in the provision of palliatives, soft loans to the formal and the informal sector of the economy. Collateral requirements and interest rates on loans for the manufacturing sector should be drastically reduced to minimum.

The issue of salary increment for civil servants should be considered because if workers are well paid they will increase their standard of living which will lead to inflow of cash in the market for petty traders.

Ultimately, the Federal Government must look inwards by introducing policies and programmes that will enable state governors to harness the abundant mineral resources to contribute their quota to the development of the country. This will reduce the pressure on the funds coming from the Federation Allocation on monthly basis.