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Lagos leverages grey market to meet N1.168 trillion target



Lagos State Governor, Babajide Sanwo-Olu last week, presented a budget of N1.168 trillion to the Lagos State House of Assembly for approval in the 2020 fiscal year. The budget was higher than the 2019 appropriation bill by 34 per cent.
According to the governor, capital expenditure was expected to gulp N723.75 billion while recurrent expenditure is N444.81 billion, giving a capital to recurrent ratio 62:38 percent.
Sanwo-Olu disclosed that the proposed budget would be funded by a projected revenue inlay of N1.071 trillion and a deficit amounting to N97.53 billion.
“This, in our view, is strong for development. We have placed an increased focus on wealth creation where we will take deliberate steps in courting a partnership between our people and various development institutions.“In line with this, we have provided N11.8 billion as counterpart funds in preparation for various social impact schemes. In addition, we have made provisions for N7.1billion this year, to provide for industrial hubs, parks, graduate internship programmes and virtual markets for artisans,” he added.
There are concerns however about how government seeks to generate the revenue, considering that the Land Use Charge was recently reviewed despite agitations by many residents.To address the shortfall, the Lagos State Commissioner for Economic Planning and Budget, Samuel Egube, said the State will be exploring opportunities in many grey industries, even as he put the total number of tax payers in the state at about 400,000.
Egube, disclosed this during an interview with journalists in Lagos, on the state’s 2020 Appropriation Bill that Governor Babajide Sanwo-Olu presented to lawmakers.
“At the heart of the budget is our capacity to generate revenue.  So if you look at the tax architecture, what we have decided to do was to ask the question about the tax collection potential of Lagos.“Because taxes come from business activities, so if you think a little bit deeply, what taxes do transporters pay? I am talking of formal taxes now. It depends whether you see them as individuals or as businesses. The entire transport business is largely in the grey market. And we have thousands and thousands of them. 14 million people are moving every day in Lagos. It is not that they are not paying, no society can sustain without taxes.
“I was in a forum with David Cameron, the former British Prime Minister, and I said, if you were to advise Nigeria, what will you advise Nigeria? And he said well, he is not an expert in advising on Nigerian affairs but one of the things he can say is that governance is about two things. We thought he was going to come out with some profound idea, and he said governance is about the rule of law and taxes. And the way we moderate the behaviour of people using taxes,” he added.
The total amount of tax payers in the state showed that only two per cent of its population, which is estimated at about 20 million, pay tax.Egube, pointed out that even though the state has between 700,000 and one million persons and organisations in its tax data base, most of them were defaulting.
“Even though we say we are over 20 million people in Lagos, the amount of people and organisations actually paying taxes in Lagos is only about 400,000.  “So, when people say Lagos has a lot of money, it is true, but when you look at it per capita, that is, compared with the over 20 million we have in Lagos, then there is nothing,” he explained.Owing to this, he said the state government would take steps to, “nicely bring people into the net.”
According to him, technology would be deployed to ensure that more persons in the state pay tax.He said the 2020 proposed budget aligns with the state’s revenue capacity, saying the government would support revenue generating ministries, department and agencies.
“We want people to see taxation as their contribution to the development of the state. So, there would be a lot of advocacy around that. We shall build schemes to support taxpayers in the state.“When you look at a state or a country, it is the way you are organised that helps you run. The difference between a developing and developed environment is in their organisation and you cannot say you have access the potential of your revenue if you are not controlling the commanding height of that economy in taxation,” he said.
According to Egube, the 2020 budget proposal has very broad objectives, saying the heart of the state’s Appropriation Bill would be to encourage citizenship participation. “There are different types of programmes which we are going to introduce to take care of that. Developing human capacity to drive productivity is very important. And the way we see it, human capacity is going to be developed from education, health and environment.
“No matter how you see it, there are people in the society that are vulnerable, so we need to support them. We also need to connect the education we have to the industry,” he explained.He pointed out that Lagos State was instrumental to the recent improvement recorded by the country in the World Bank Ease of Doing Business ranking.
“If you know the way it is rated, Lagos has about 70 per cent of that evaluation. So, if Lagos fails, then Nigeria fails. So, Lagos is at the heart of that World Bank rating.“So, we want people to find it easier to do business in Lagos. So, we are focusing on optimising relevant infrastructure. You will see that in transportation, technology, drainage and other physical infrastructure,” Egube added.He also explained that the state plans to mobilise volunteers to fix some roads even as it has started holding talks with the Chinese Civil Engineering Construction Company on some strategic roads and infrastructure.
Egube said the state had not abandoned the plan to construct rail lines across the city but added that this would be achieved through the use of special financing from the private sector.To fix bad roads, the commissioner said that the state would soon constitute ‘Team Lagos’ to enable the government to tap into the huge potential of volunteering for road construction and repairs.
He said, “When it comes to volunteering for fixing roads in our nation, people will contribute. We want to be able to galvanise what we call Team Lagos.“We want to be able to push our volunteering system. So it is not only about people volunteering as nurses; we will also see people saying ‘I want this road done and I want to fix it myself or with my friends’.
“So we are looking at all of those kinds of systems that will come on top of our budgetary positioning.”Egube said the state government would provide guidelines for volunteers interested in fixing roads as well as ensure quality control.He also said, “The rail has not been abandoned. The roads including the Badagry Expressway have not been abandoned. As soon as this government came in, it had meetings with contractors for them to go back but they need to be funded.”

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Babajide Sanwo-Olu
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