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Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele was at the House of Representatives to brief federal lawmakers on the need to pass the bills on tax reforms arguing that majority of Nigerians stand to gain from the proposed new system of tax administration.

Mr President set up the Presidential Fiscal Policy and Tax Reforms Committee in August, 2023 with three very clear mandates. The first one is on fiscal governance.

For this committee to look at our nation’s finances, revenue, how we spend our money, our borrowing, the terms of those borrowing, and how we coordinate policies amongst fiscal, monetary, and trade, not only at the federal government level alone, but also across sub-nationals so that one level of government is not pulling to the right and another one is pulling to the left, bearing in mind that at the end of the day, governance at all levels is about our people.

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The second mandate is revenue transformation. How do we change the narrative for our country? And that includes taxation. That includes government assets. That includes government-owned enterprises. We want NFPs to give us tens of billions of dollars in profit, dividend every year, as well as natural resources, oil and gas, and solid minerals.

The last mandate is economic growth and competitiveness. We are given the mandate to look very closely at why is it that our businesses are struggling? Why is it that Nigeria today does not have like 50 multinational companies that are headquartered in Nigeria? That even when you are not selling crude oil, they are bringing money back home. We have a company in the world today, one of the largest companies, that their turnover alone is more than Nigeria’s GDP multiplied by two.

That’s one company. So why is it difficult for our small businesses to survive beyond five years? Why are they not growing? So those issues, why is it difficult for exporters to export? We spoke to people exporting and they said they have to go through more than 22 permits, approvals, clearance. That takes about two months and they have to pay for every single one of that.

By the time you are done, if you are lucky, your product is still fit for export. In putting the committee together, we’re very, very deliberate in ensuring that the committee is representative. We have over 80 members of eminent, qualified, experienced and patriotic Nigerians from all the geopolitical zones.

We have good representation of women and youths. We had 45 undergraduates from 22 universities across Nigeria working with us at the secretariat and they attend our meetings because we also want to get the views of the young people. We have over 20 government institutions represented.

 

Level of consultation

We have the organised private sector represented including trade associations, manufacturers, chambers of commerce, small businesses, professional bodies, large and small accounting firms and the civil society. In doing our work, we were very clear that it has to be national interest first, national interest next, national interest at all times. We said to ourselves that if we have a Nigeria that is working, everybody will find a space within a Nigeria that is working.

We were very, very particular about using data. Every single recommendation we have in those four views are driven by data. There was nothing we’re recommending that is emotional.

When we have meetings with our stakeholders, we say to them, give us data because it’s by using data that we can look back many years from now and say we did the best for our country. We also ensure that we have a clear philosophy for our tax system, which is that our tax system must be modern, it must be simple and it must be dynamic. It must enable growth and make Nigeria competitive.

If it cannot grow, it doesn’t matter what you want to do with revenue. Revenue cannot come because people cannot give what they don’t have. We came up with what we call the socioeconomic equation that says revenue and taxes are the consequences of economic activities.

Without economic activities, there can be no revenue. And where revenues have been collected, why are they collected? So that they can improve the lives, livelihood and the well-being of the people. That is the equation.

In our view, any policy we have, whether it’s tax policy, fiscal policy, trade policy, monetary policy, if they distort economic activities, those policies are not good enough. If they undermine the well-being of our people, those policies are also not good enough because we exist as a society for the interests of our people. So, with this background in mind, we did a lot of consultations and engagements.

Private sector: We had more than 40 sector groups. We met with them, individual sector per time. From farmers to small business owners to Nigerians with disabilities, to Nigerians in the Diaspora, to large businesses, to professional associations, FinTech, and the list goes on and on.

We also had public engagements with sub-nationals, finance commissioners, head of Internal Revenue Services under the Joint Task Force platform. We had meetings with the Governor’s Forum. We had meetings with the National Economic Council. We had meetings also with the National Assembly. We were privileged to be invited by the People’s House.

Even though it was a short interaction, but we had the opportunity to engage. We had a more elaborate engagement with the Senate. We had a two-day retreat as part of these processes.We’ve had meetings with many ministries and agencies that I cannot count. We’ve also had a lot of interactions with the international community, trying to learn from other countries, trying to learn from the books. We are trying to learn from ourselves.

 

Why past efforts failed

What is it that we have tried in the past that hasn’t worked? Why did it not work? What is it that we tried that worked? Because sometimes we don’t celebrate ourselves when we have done the right thing, we lose sight of them. We receive a lot of support from the international community, including the United Nations Development Program, African Development Bank, and so on and so forth.

We conducted surveys, and we asked for submissions from Nigerians. We were pleasantly surprised that we received submissions from every single state in Nigeria. We were not even expecting it.

There was no state in Nigeria where we did not get submissions from people. For this, we are grateful to the Nigerian people for the trust that they have in the work of the committee. Of course, we have a dedicated website, social media accounts, and we engage through the press, radio, TV, and other platforms.

But we know these engagements are never enough, so we are always very happy for the opportunity for further engagement. So, what did we find out from the work that we’re doing? Like Mr Speaker said, and also the Deputy Speaker, what are the mischief we are trying to correct? You don’t need to fix something if it’s not broken. In doing our work, we did a lot of findings.

The first one, I’ll just put it bluntly, Nigeria is running on a low budget. For 2024, the budget of the federal government including the amendment to the Appropriation Act that added about 6.2 trillion, it came up to about 35 trillion Naira. (21:59) For all the states combined, it was 15.9 trillion.

When you add up the entire budget for Nigeria, it comes to 51.1 trillion if you convert it to US dollars. It was only $32 billion for 2024. These $32 billion is the equivalent of the budget of Kenya.

Kenya has 54 million people, plenty of poor people as well. It is less than one quarter of the budget of South Africa. South Africa’s budget for 2024 is the equivalent of $130 billion.

South Africa has a little over 60 million people. How is it that Nigeria with all the potentials we have, with all the knowledge and the experience and human capital that God has blessed us with, how is it that we’re over 200 million people and our budget is barely the size of Kenya? That budget, if you dedicate it to just transportation infrastructure alone, roads, rail, flying, it will not be enough. If you do nothing else, that budget will not be enough.

The narrative for our country cannot be changed by increasing that amount by 5% or 10%. The base is just too small. It cannot fund our development.

The next slide shows our major revenue sources as a country, and there are eight of them. The eight major revenue sources for us as a country is personal income tax. The second one is property tax. The third one is stamp duties. The next one is value-added tax. And the next one is land.

These first five are mostly controlled by the states. And then now you have three that are shared amongst federal, state, and local governments. It’s corporate income tax, custom duties, and petroleum and solid minerals revenues. These are the eight major sources of revenue for our country. The sad news, or the bad news is that every single one of those eight is significantly underperforming. The good news is that every single one of those eight presents an opportunity for our country to change the narrative.

I just told you that our budget is small. What is even smaller is our revenue. On this next slide, the entire revenue that we generated from tax in 2023, because 2024 has not ended, so we are not done with the numbers yet, so we decided to use 2023 and it was only about N17.9 trillion.

 

Comparison with other countries  

If you convert this to dollar, it’s less than $20 billion, so which means that our small budget is even financed by borrowing. We can’t even raise enough revenue to finance a small budget. If you look at the breakdown of our major taxes, let me start with personal income tax.

In 2023, Nigeria, the whole 36 states, plus the FCT, collected 1.5 trillion Naira in personal income tax. In that same year, South Africa collected about 50.5 trillion naira equivalent in personal income tax alone. What South Africa collected from personal income tax alone is more than our entire revenue as a federation multiplied by two.

Even Kenya, that is a very small country compared to Nigeria, with a lot of poor people, I will continue to repeat that, they collected 5.8 trillion naira equivalent from personal income tax alone, almost four times what Nigeria collected, even though our population is four times their own population. I will not bore you with the other details because of our time, but I’ll just mention one more, and that’s to do with customs. In 2023, Nigeria collected 3.2 trillion naira from Customs.

In that same year, Kenya collected 8.9 trillion naira equivalent, almost three times. When we looked at the value of what Nigeria imported and the value of what Kenya imported, Kenya imported $23 billion worth of items. Nigeria imported $66 billion worth of items.

We imported almost three times what Kenya imported and collected about one-third of what Kenya collected. Something is not adding up, and those problems, we must fix them if we must make progress as a country. We know that the Nigeria Customs Service is doing its best.

 

We can do better

We are just seeing that we can do more and we can do better. Some of these issues are not isolated to any agencies. They are issues to do with the system and how the system can work. One other very important study I need to share with you, Your Excellencies, is we conducted a study about national tax perception and tax morale, and this was done by the Nigeria Economy Summit Group. I had the privilege to lead the round table that did the study. We were asking Nigerians whether they would like to pay their taxes and whether they think those who don’t pay their taxes should be punished.

We were alarmed at the result that we got. Only 17% of Nigerian adults, believed that they should pay their taxes and that evasion is wrong and punishable. 83% of Nigerians would do anything but pay their taxes.

When we asked them why, they said, number one, that they do not trust governments. Number two, they said even the little that they have paid, what are they getting in return? Many of them said after paying the taxes, they have to take care of everything government is supposed to take care of. Number three reason they gave is that even when they want to pay the tax, the process is complex and is corrupt.

Two in three adults said they were asked to pay a bribe in the process of wanting to pay their taxes. Bear in mind that this study covers all levels of government, so we’re not pointing fingers at anyone. We’re just being honest with ourselves because recognising the problems we have and acknowledging them is 50% of finding the solutions.

When we ask these Nigerian people, what can government do to make you change your mind and start paying your taxes. They want transparency so they can trust governments. And they said in terms of what government should spend money on, that the government should prioritise spending on number one, education; number two, health; number three, electricity; number four, security. Look at what Nigerians told us, four things.

Those four things align perfectly with the multidimensional poverty index. So, there’s perfect consistency as to what is putting our people into poverty and where they want government to spend money. Our view is that if government at any level, local, state, federal, is not prioritising spending in these four areas, then we have the wrong priorities. If we place our people first, these must be our priorities.