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Nigeria’s revenue problem BY Rosemary Enemuo

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Nigeria generated revenues of ₦938.72 billion in the last quarter of 2019, a figure down from ₦1738.8 billion in the third quarter of the same year; contracting by 46.01%, and 17.97% in the same period the previous year.  The statistics on debt are weaker when compared to the revenue statistics.  Data from the Debt Management Office shows that the Nigeria External Debt stock has increased to $27,665.66 million as of March 31, 2020, a number up from $25,609.63 million when compared to this same period the previous year.

A basic rule of economics is that a nation does not earn more than it has produced.  Nigeria is evidence of this.  As more debt is incurred, so is the increasing need to borrow more, debt in itself is not avoidable as the end goal is to create more channels for revenue.   In Nigeria, Debt is used to write off recurrent expenditure, fund ‘socialist’ projects, and feed an oversized government.

The current debt to revenue service ratio is 99% which simply means that for every Naira Nigeria earns, 99 kobos are used to pay debts. That is a sinking economy by any definition. The revised 2020 budget has a ₦5.3 trillion deficit to be funded by international financial institutions; bad habits die hard. Budget value, a term referred to as fiscal deficit has continued to rise with this seemingly addiction of borrowing funds to score political points.  In Q4, 2019 Nigeria budget value stood at -₦1135.74 billion, up from -₦675.21 billion in the previous quarter, and -₦873.16 at the same period in the last year.

 

This affects the micro economy. As the oil sector revenue trends down, the government will begin to look for fast ways to generate revenue, causing panic and sharp inflation thereby increasing hardship due to a non-organized revenue creation mechanism and process.  Not only does it affect the micro economy but it also affects the country’s credit rating; a way to measure economic sovereignty, which can only be in good when we adequately service borrowed debt in a good time.

Monetary and fiscal policies are critical to achieving economic stability, what is central to this decision making will reveal how quickly we begin to see results and how fast we come out of our revenue and debt crisis. Nigeria is currently ranked 131 out of 190 countries in ease of doing business, and what is central to this analysis is how government policies have affected productivity and growth in the private sector.

Numerous policies frustrate revenue generation which affects employment. As more companies cut down on jobs, the corresponding increase in the unemployment rate, reduced pension RSA payments, corruption, cyber-theft, terrorism and other social vices will increase.  The private sector is currently the biggest employer of labor in the formal sector, while trade is, in the informal sector;  The Government is expected to create incentive policies that will enable growth in these areas.

Productivity should be Nigeria’s goal, which means that our attention should be focused on helping industries with the potential for revenue growth.  The manufacturing and exportation of non-oil commodities should be given positive policies that will ensure stability, meaning that the government has to pay attention to the issues deterring the full privatization of the power sector, and also letting go of disincentive policies that hunt small and medium business in Nigeria.

 

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