DWINDLING REVENUE: Hunting Without Barriers
NECESSITY, they say, is the mother of inventions. This cliché well describes Nigeria’s ongoing hunt for whatever is called revenue to avoid shutdown in the face of dwindling economic fortunes occasioned by volatility in oil prices — the country’s major revenue and foreign exchange earner.
In this quest to cover the tottering revenue profile, three things have become outstanding, as well as recurring over the years. They have also had similar historic background. In no particular order, they are ‘Diversification’, ‘Stamp Duties Act’ and ‘Treasury Single Account (TSA)’.
The word diversification almost became a mantra in the administration of former President Goodluck Jonathan, and was propelled by palpable fears that what is presently hurting the economy could overtake the leadership during the tenure of the government. In fact, the price of crude oil assumed its cascading posture then.
Historically, in 2005, the oil price volatility, which lasted for eight months, may have been fresh in the mind of the then Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, because she served then in the government of former President Olusegun Obasanjo.
Perhaps, she orchestrated the raised consciousness of the diversification campaign in the last administration, as she saw the ‘handwriting’ of the impending international crude oil price volatility on the ‘wall’. First, she hurriedly declared austerity measure, followed by a proposal to tax all the luxury items, which revenue stream was calculated in billions.
Then, the campaign for diversification. Unfortunately, the country could not diversify at the end, because oil revenue was still streaming, though at a diminishing rate. The tax proposal never got mentioned in the National Assembly for legal backing. Again, diversification has currently emerged as a way out of the present economic doldrums.
The Federal Government drags in almost everything in an unprecedented search for resources to fund budget 2016 in the face of vanishing oil fortunes.
The TSA, possibly, was made popular by the current administration, but it is certainly not the originator. It was scripted to manage ‘undercurrents’ in the administration of the country’s public finance management system. It was not only a revenue management strategy, but also a revenue retainer and earner.
A Professor of Public Sector Accounting at Kogi State University, Stephen Ocheni, attested to the fact that global economies, particularly the developing countries like Nigeria are facing one of the greatest challenges of efficient allocation of resources, as well as stabilisation of the business cycles.
The outcome, he said, is the basis for the current global revolution in government accounting, following which Nigeria towed the path of the Treasury Single Account (TSA), among other economic policies, in expectations of taming the tide of corruption.
“An important factor for efficient management and control of government’s cash resources is a unified structure of government banking. Such unified banking arrangements should be designed to minimise the cost of government borrowing and maximize the opportunity cost of cash resources,” he said.
Judging from the revelations of the ongoing probe in the country, it would be apt to conclude that what killed TSA initiative in the last administration was actually what TSA came to kill. Indeed, it was not enforced and quietly its existence went into oblivion. We are still watching to see the trickling effects of the changed TSA drive, but in all, its rediscovery is tainted by necessity.
The Federal Government also stumbled into a 12-year old law called Stamp Duties Act 2004. Perhaps, as part of its brand of diversification project. The law, lying prostate since the year of enactment, it is obvious that the current administration is rewarded for dexterity and purposeful research into the constitutional provisions of the land. It still remains arguable why this new found opportunity is not a panicky move, because the traditional leadership style of the country has been marked by sitting quietly in the comfort zone as long as oil keeps churning out allocatable funds for the three tiers of government.
Could it be the real change?
Whether the real diversification will be recorded this time or not, it is still a matter of time. Whether TSA implementation and stamp duties deductions will remain part of the country’s public finance management and revenue earnings’ strategy, even when the economy rebounds, it is left in the ‘hands’ of posterity.
For analysts, the moves by the government represents a dynamic approach to governance, because they are bound to bring about improved resources in the hands of the government.
Already, the Governor of the Central Bank of Nigeria, Godwin Emefiele, has said that given the clarity in the policy direction of the administration, the various interventions in the real sector, gradual improvement in the power sector, and the reinvigorated fight against corruption, the country would come out better.
Of course, the central accounts of TSA initiative and Stamp Duties’ deductions are domiciled at CBN, while it also remains strategic to the renewed diversification agenda through its interventions- foreign exchange policy, import substitution campaign and cheap credit system, among others. CBN certainly knows better.
The Managing Director and Chief Economist, Africa Global Research, Standard Chartered Bank, Razia Khan, described the stamp duties policy measure as necessary one, given the urgent need to drive higher the revenue collection of the country, adding that there is no foreseeable “detrimental effect on financial access in the long-term.”
The Head of Investment Research at Sterling Capital Limited, Sewa Wusu, said the move was legal and borne out of the circumstances the country is going through, which has heightened macroeconomic issues.
“It is a fiscal strategy, sort of, to meet budget spendings. Even though, some will complain, it is a fiscal response to economic challenge. The Act has been there and this shows that there are other opportunities in the economy. This type of laws is obtainable in other jurisdictions.
A development consultant and civil society activist, Jide Ojo, also declared that the enforcement of the stamp duty law as a welcome development, but only raised concern about remittances of the deducted values.
“Transparent and accountable mechanisms must therefore, be in place so that the public is duly informed about income from this source and what it is being used for. There should also be adequate sensitisation of the banking public on this law,” he said.
The Executive Director, Corporate Finance, BGL Capital Limited, Femi Ademola, said that Nigeria has not been enforcing most of its revenue generating laws and thus, not collecting the necessary revenue.
“We, the citizens, all have to contribute to our economic survival. Due to the prolonged oil price decline, our economic stability is being threatened. To survive the current crisis will require very painful decisions to be made and implemented and the pain would be felt across board,” he said.