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By Dele Sobowale
“FG, States, LGs share N601bn for November.” News Report, December 2020.
Truth is constant; and wisdom is enduring. The amount shared by the three tiers of government for November, which will determine whether or not public servants will be fully paid their salaries for December 2020, is 14 per cent less than the N700bn monthly revenue which the Federal Government announced in 2018 that will be required for governments to meet their obligations to workers. Then, Minimum Wage was N18,000 per month; it is now N30,000 per month.
When President Buhari signed Minimum Wage Bill into law in 2019, with firm instructions for immediate implementation, some of us consulted our economic forecasting models and concluded that Buhari, the National Assembly and the State Governors were deceiving workers. The Nigeria Labour Congress, NLC, and other allied union groups assumed they were victorious. One of their best and brightest even proclaimed that Governors failing to pay will be prosecuted and jailed. We were certain that it was all a mirage. Governments will find it almost impossible — to pay the new wages. Nobody would be prosecuted.
“There are only two families in the world, my old grandmother used to say; the Haves and the Have-nots.” Miguel de Cervantes, 1547-1616.
As you are reading this article, four days to Christmas, millions of public servants in most states have no idea how much – if anything – they will take home for the Yuletide. Christmas 2020 already promises to top those of the past four years for dreariness and a pervasive sense of deprivation. Life, for most Nigerians has never been so bad and so sad. More millions of Nigerians have slipped into abject poverty than the same period last year.
At 77+, I am nobody’s grandmother, but rightfully a grandfather to millions of Nigerian kids. And, I can state authoritatively that never in Nigerian history has the dividing line between Haves and Have-nots been so sharp in this country. That, in part, has created the battle lines nationwide – especially in the North. All over the nation, the poor are no longer begging. They are demanding by violence for a greater share of the national wealth. A war has started between the Haves, especially those in top public service positions, and the Have-nots.
VAT PROVIDES A SILVER LINING
“The total distributable revenue of N601.1bn comprised statutory revenue of N436bn; Value Added Tax revenue of N156.79bn…”
Permit me to congratulate the FG for the historical achievement on the VAT revenue collection. For once, the FG listened to professional advice; took courage and increased VAT from 5 per cent to 7.5 per cent despite the hysterical objections of the NLC and other ill-informed commentators. Let me explain the breakthrough which the Buhari administration has achieved by this — for the sake of those who might not recognise the significance of that statement.
Hitherto, VAT as a percentage of distributable revenue has hovered between 8 and 10 per cent. But, in November 2020, VAT contributed a whopping 26 per cent of the total – about 160-200 per cent increase. Furthermore, while statutory revenue declined precipitously, VAT rose astronomically to partly make up the difference. As an unrepentant promoter of VAT, I challenge any of its opponents to ask the FG and state Governors to return 26 per cent of the November allocation because VAT is unacceptable. There is no doubt in my mind that nobody will listen to them – now that everybody has seen the benefits of VAT as a more reliable revenue generator than crude oil has become; and will turn out to be in 2021. Here is why.
“Nigeria’s daily oil production falls to 1.32 million barrels” News Report.
Budget 2021 will kick off in nine days time. Already, there is a lot of bad news portending another disastrous year. Since, our country is apparently incurably hooked on crude oil revenue and the FG cannot think of any other options, we are forced to examine first the implications of 1.32 million barrels per day production. Unless there is sudden change in production volume, the report indicates that we will only achieve 57 per cent volume projected in the budget. That will mean that the country will be running a negative variance in revenue, foreign exchange earnings, debt-to-revenue ratio and expected deficits etc from the first month of next year. The governments now finding it difficult to pay workers will be in more distress than ever before. In that case, VAT will play an increasing role in our revenue-generation effort. In that connection, we might need to revisit VAT first, and then consider a more radical approach to raising funds for our governments.
LEE KUAN YEW AND SAUDI LESSONS WE SHOULD NOT IGNORE.
“The world does not owe us a living; we cannot live by the begging bowl.” That was what Yew, 1923-2015, said when he became Prime Minister of a nation without natural resources; but which today makes Nigeria look sick with our abundant resources. Beggars are always treated with disdain globally. So we have no reason to expect respect. To restore our national pride, we should throw away the begging bowl and look more inwards for hidden funds to develop our country. There are still a few untapped possibilities – two of which could add N1tn to our revenue next year and set us on our way to self-reliance.
But, we have not exploited the potentials of VAT enough. As it is, left untouched VAT will deliver close to N1.5tn in 2021. We can adjust it and collect N500bn more. That amount should keep the universities opened annually – if given to them and stimulate aggregate consumption and production as well. For this purpose, we need to revisit the example of Saudi Arabia, a richer oil producing country which went farther with VAT and is scooping the rewards. I recall part of an article published earlier this year as COVID-19 was just showing its ugly head. The points made then remain just as valid today. We need to be tougher with ourselves to survive.
“Saudi Arabia triples VAT to support Coronavirus-hit economy”.
BBC NEWS, BUSINESS, MAY 11, 2020.
The news report went on to explain why Saudi Arabia, a nation many Nigerians assume has no financial and economic problems, has turned its attention to increasing the Value Added Tax, VAT, as an option for achieving macro-economic stability in the next three to ten years.
“Saudi Arabia is tripling its value added tax (VAT) as part of austerity measures to support its coronavirus-hit economy….Saudi Arabia’s state news agency said VAT will increase from 5% to 15% as of 1 July…These measures are painful but necessary to maintain financial and economic stability over the medium to long term.”
It is not only the sense of responsibility of the Saudi economic policy managers that one finds commendable. While Nigeria increased from 5% to 7.5%, the courageous Saudis went from 5% to 15%. The President of Nigeria had been under attack for a mere 50% VAT increase; the Saudi leader will most probably not receive any abuse by economic illiterates and academicians because the people are better educated, more patriotic and can see the temporary inconvenience as part of the price they have to pay for 200% increase.”