Sharing VAT according to generation will make states serious about growth
Dr Chinyere Almona recently assumed office as the Director-General of the Lagos Chamber of Commerce and Industry (LCCI). In this interview with FEMI ADEKOYA, she talks about macroeconomic challenges, how they affect the organised private sector and what should be done to address them. Specifically, she noted that sharing Value Added Tax (VAT) according to generation will encourage states to become more serious about the business environment in their states and how companies are supported to thrive.
The Central Bank of Nigeria is set to launch the eNaira. What is your position and how will it help to deepen trade both local and intercontinental?
Digital transformation is a journey, not a one-off. As digital transformation is evolving across the globe, Nigeria cannot afford to lag behind and catch up later. We only advise on international best practices that are well domesticated to fit our local economic realities. Regulation, case study analysis, and supervision are critical. With the proposed international financial center, and Nigeria seeking to be a big player in Africa through the African Continental Free Trade Agreement (AfCFTA), the emergence of special economic zones, and several other intercontinental trade agreements, a digital currency is likely needed to play a facilitation role for trade and exchange.
It is imperative that digital platforms need to be well supported and regulated to reduce cybercrimes. Since innovative digital solutions will continue to dominate the way business is done across the globe, Nigeria cannot afford to lag behind in the scheme of things. It is, however, important that strict regulations according to best practices are put in place.
Again, we urge the best model of regulation that will boost business transactions and not stifle businesses that will like to play in that sector. Regulation should work towards achieving cybersecurity and protecting transactions from frauds and hacking.
Despite stopping the sales of dollars to Bureau De Change, the Naira has continued a free fall. What is the way out of the rapid devaluation?
Any exchange market responds to the forces of demand and supply. The forex market is not an exemption. We had envisaged that the banks will not be able to meet the demands for forex and this will force manufacturers to source forex from the parallel market with rates hitting the skies. We have also advised that raw materials that are not available locally but are a critical component of production should be supported till when we can build enough capacity to produce them locally. For instance, some of the 41 items excluded from CBN forex funding are critical ingredients of production for some manufacturers, and currently, they import such items at the prevailing black-market rate.
We have a case where the supply of forex does not meet the demand and this has put persistent pressures on the Naira leading to its weak position against major currencies. Many businesses now source their forex needs from parallel markets. We need to boost the supply side of the forex market through more inflows from exports, diaspora remittances and crude revenues.
The present inflationary trend appears to have defied all forms of interventions despite monthly deceleration. As a professional, what measures do you suggest can be deployed to check the trend, especially as food prices get out of reach of ordinary Nigerians?
We simply need to check the major factors driving the high rate of inflation, which are supply chain disruptions caused by insecurity, forex scarcity, speculative demand among others. In addition, we need to continue with the dedicated funding programmes targeted at critical growth sectors such as agriculture, manufacturing, technology and entertainment. These sectors have shown resilience and are job-rich by nature of activities.
What’s your position on the current debacle on VAT administration and its effects on the private sector?
The decision on who collects VAT rests on the judiciary. With the recent judgment on stay of execution of the earlier judgment, all parties pending when the appeal is resolved, are expected to maintain a status quo. What it means is that the states cannot collect VAT now until when the FIRS’ suit at the Court of Appeal is resolved. We have advised that the sharing formula for the states and LGAs be reviewed such that states with more generation of VAT receive more. This will encourage states to become more serious about the business environment in their states and how companies are supported to thrive.
The challenges with budget design and implementation have remained a recurring issue. What do you think is the way forward, especially now that deficit financing appears to be the trend?
Beyond the politics and economics of budget preparations and passage, there is need for due diligence in the preparation of budget estimates by MDAs and more monitoring and supervision when appropriated. At the point of preparation, there should be more consultations with relevant stakeholders who can provide facts and figures that are critical to having a good fit aggregate for a national or state budget.
Beyond passage, there should be strict compliance with budgetary provisions and approvals and well supported with a dedicated monitoring and evaluation system.
Many have said Nigeria’s problem is more of a spending problem than that of revenue generation going by the kinds of interventions and expenditures recorded daily. How can these challenges be addressed?
There should be more compliance with revenue collection procedures of the government at all levels such that all applicable payments should go into the government’s Treasury Single Account. Recently, we have heard of cases of leakages in government MDAs and how they appropriate revenues collected by them for their expenditures beyond budgetary provisions and approvals. We both have issues with controlling our spending and generating more funds. If we succeed more with our fight against corruption, then the spending problem may reduce.
Looking at the country’s debt ratio, do you see the current debt level and proposed borrowings as sustainable? Some have argued that we need to look beyond sustainability to responsible borrowing. Do you agree with them?
The Federal Government has made a fresh request for $4billion and 710million Euros as external loans. We spent N2.02tn on debt servicing in the first half of 2021. This figure represents 90.58 per cent of the total revenue of N2.23tn generated by the FG within the period; a development, which experts said signified a dangerous trend for the economy. An overview of FGN 2022 Budget Call Circular showed that as of June 2021, the Federal Government’s retained revenue was N2.23tn, which is 67.58 per cent of pro rata target of N3.3tn for the review period. This means that the Federal Government failed to realise N1.07tn of its revenue target in the first half of the year. There is a twin crisis of low revenue and high debt servicing.
Nigeria needs more revenue than borrowing to finance our spending (budget). We made a recommendation recently to both the state and federal government on how we can package our state and national assets to attract equity investments that can raise revenues for the government instead of borrowing. This recommendation is not about selling our national assets but finacialising and commercializing them for needed revenue without losing them to outright sale.
Since the government sees borrowing as part of its financing options, we advise that such borrowings are sourced from the cheapest lenders and tied to fund critical infrastructure that in turn drive the economy to generate more revenue. The National Assembly has a responsibility through oversight functions to ensure the requested loans are tied to capital projects that provide infrastructural support to the ease of doing business in Nigeria. Loans should be tied to projects like agro-industrial clusters, mass roll-out of renewable energy projects, and technology hubs that support businesses, create jobs, tackle inflation, and drive more revenue generation in the long-run. This will improve our debt to revenue ratio from the current 91 per cent downwards.
How can MSMEs and small-scale industrialists tap into the opportunities inherent in the AFCTA agreement?
First, they must build capacity in understanding the rules, opportunities, procedures and financing options available for trade expansion through the AfCFTA. Secondly, the government must create an enabling environment by curbing the menace of insecurity that has made it difficult for businesses to access raw materials for production. If our SMEs produce at higher costs, their products will not compete well at the international markets. Thirdly, there should be dedicated funding for targeted sectors where SMEs operate to empower more SMEs to scale up to meet international standards. Fourthly, SMEs require support in packaging and marketing to the whole world.
What are your plans for the chamber?
I am a seasoned professional with a broad range of experience. As the DG of the Lagos Chamber of Commerce and Industry, I am responsible for developing and directing the implementation of strategy to ensure achievement of objectives of the Chamber while ensuring and managing the growth and development of the institution.
I plan to build on the successes of my predecessor, by enhancing stakeholder engagement and advocacy with various arms of state and Federal Government. It is also critical for me to diversify and grow the Chamber’s revenue sources and improve efficiency and service delivery to members to increase member engagement. With the support of my team, I will improve the Chamber’s visibility via regular programs and active use of social media.
With my 30-years’ experience in multiple disciplines, such as corporate governance, management consulting, advisory services, strategy, and human capital development, I will lead the repositioning of the Business Education Services and Training (BEST) Unit to maximize opportunities and position it as a leading business resource center in Nigeria.
Having worked in various sectors of the economy, and in international development, with a strong network across Africa, I will lead the outreach to the rest of Africa, supporting our members in the AfCFTA journey. In addition, LCCI already initiated the yearly AFRICA HALL and AFRICA SPECIAL DAY projects to contribute to the growth of trade within the African continent during the yearly Lagos International Trade Fair.
What should the business community expect from the 2021 Lagos international trade fair?
The Lagos International Trade Fair is the largest trade fair in the West-African region, and it attracts about 500,000 business visitors and above 2000 exhibitors from various countries, yearly.
The Lagos International Trade Fair will provide the business community with a platform to promote their products and services to a target market, create brand awareness, and demonstrate market leadership?
It will also give businesses a unique opportunity to get robust customer feedback and enable them to explore business-to-business trading, including building a customer database from the visitors to their booth.
If LCCI can help businesses to boost revenue in these austere times, it will have an impact on the economy. We are working very hard to continue to provide our members with the support they need to promote their businesses to a wide range of customers locally and internationally.
As part of the Fair, we are providing an opportunity for exhibitors in the African countries to showcase their goods and services in the ‘Africa Hall’. A day would be dedicated to these countries during the ten-day fair, (Africa Special Day). There will be opportunities to make presentations, organise B2B sessions, panel discussion, product unveiling or have interactions on intra–African trade initiatives.