How banks drive state IGR through technology
Nigerian, Africa’s most populous country has been experiencing economic turbulence since late 2014, when its yearly Gross Domestic Product (GDP) growth rate dropped from 6.22 per cent to 2.79 per cent in 2015.
Before plunging into recession in 2016, ending the year at about -2 per cent negative growth, the continued decline in prices of international oil has resulted in the drastic fall in federal government’s revenue in recent times.
For instance, a total of N429.127 billion was distributed as Federal Allocation in February, to the federal, states, and local government councils. Gross statutory revenue received for the month was N290.163 billion, which is lower than the N324.990 billion received in the previous month. With this dwindling federal allocation, it has become difficult for state governors to provide the needed infrastructure and social services necessary for enhancing the living standard of its people.
Unfortunately, it appears many State Governors are not being creative in terms of growing IGR. Statistically, state governments generate only 15 per cent of their revenue and depend on federal allocation for further sustenance. Unfortunately, this is no longer sustainable.
In view of this, experts have urged state governments to encourage the use of electronic payments system in order to boost Internally Generated Revenue (IGR). The commencement of lotteries for IGR in Taiwan as well as the introduction of a ‘New Act of China Taxation’ enacted on May 1, 2001, basically provided incentives for tax compliance, are just some examples of this new direction.
To speedily aid the country’s transition to a developed economy, there is a need to grow the tax base through innovative and efficient models leveraging on ideas, technologies from the most dynamic economies.
However, some financial institutions are already assisting some states to bridge this gap. For instance, one of the banks that is making strides in this area is Fidelity Bank Plc. The Bank has recorded cumulative collections of over N300 billion in IGR for all the three tiers of government over a period of 10 years.
The bank, according to information gathered, achieved this feat simply by driving efficiency in the revenue collection process, further putting it in pole position to play dominant roles in Nigeria’s burgeoning Electronic Payments and Services Market.
The bank also paved the way for informal sector IGR collections with its successful deployment of the point of sale (PoS) Terminal Tax Collections in Abia, Imo, and Sokoto states. This model has also been requested for and adopted by other state governments.
The bank has also deployed Automated Electronic Motor Vehicle Licence in Sokoto, Anambra, Abia, and Kano states, while successfully deploying the first electronic collection solutions for Ondo, Anambra, and Abia states’ Land Registry Automation Processes.
Banks in Nigeria began collaborating with governments on IGR collection in the mid-1990s through the duties and other levies collection with the Nigerian Customs Service, and Fidelity Bank was in the vanguard of that.
Working with states to provide support for the deployment of efficient and seamless IGR management systems has meant that states and local governments can help weather the current economic storm and emerge stronger and with a more diversified funding base.