There have been worries about government spending for years, as recurring expenditures in the budget have consistently outpaced capital expenditures. Now with the subsidies removal and certain reforms, experts in the economic and oil sectors mark the move as a bold step that would cut-off governing costs and help raise revenue to implement further infrastructure development and projects like the planned minimum wage increase for workers, and other palliatives. These measures are aimed to ease the financial impact of the fuel subsidy cut-off without adding to Nigeria’s already substantial debt load.
Dr. Muda Yusuf, an economist and chief executive officer of the Centre for the Promotion of Private Enterprise, has stated that, in addition to eliminating subsidies, other essential reforms include increasing the tax bracket, requiring all revenue-generating ministries, departments, and agencies to pay their fair share of taxes, and ending oil theft, among other things. He elaborated on the need to cut government spending to the bare minimum, saying that foreign exchange subsidies should also be eliminated.
Lack of data and intelligence for tax is a crucial roadblock.
Nigeria may now be able to save between N6tn and N7tn this year with the fuel subsidy removal, the amount that fuel subsidies were expected to consume. While this may not be a direct infusion of cash, it will help lower the accumulating budget deficit which is already at about N12tn. Yusuf, a former director general of the Lagos Chamber of Commerce and Industry, said that by using a single exchange rate, “we should be able to generate a minimum of about N4tn revenue.”
Remarking on tax payments, Yusuf stated that changes will be made to the tax system that would increase the number of people subject to taxation, improve the efficiency of existing taxation structures, and perhaps even create entirely distinct taxation mechanisms. There are clauses in the Finance Act 2023 that deal with forthcoming taxes that are anticipated to increase revenue as well. PwC’s Fiscal Policy Partner and Africa Tax Leader, Mr. Taiwo Oyedele, has stated that a lack of data and intelligence for tax administration is a crucial roadblock to increase income at all levels of government.
Revenues have the potential to increase by 200–300%.
He pointed out that even those who were technically obligated to pay taxes were not doing so in full. Yusuf emphasized the incredible potential of this strategy to increase Nigeria’s revenue if it is implemented. In as little as three years, revenues have the potential to increase by 200–300%. He added that if all liable citizens paid their fair share of taxes using the currency in circulation, Nigeria would have a surplus and no need to resort to borrowing from abroad.
On his part, Dr. Sam Nzekwe, a former president of the Association of National Accountants of Nigeria, claimed that the results demonstrated that the majority of Nigerians who pay taxes are the only ones who have been doing so for many years. He further said that, rather than introducing new taxes, the government should widen its existing taxes in order to capture the few remaining tax evaders among the industries and corporations in the country.
Government should utilize the proceeds to address other key issues.
Billy Gillis-Harry, president of the Nigerian Petroleum Products Retail Outlets Owners Association, presumes that the country’s high cost of governance is a cause for concern. Gillis-Harry praised President Tinubu for ending the petrol subsidy and suggested that the government utilize the proceeds to address other significant issues. Some experts claimed that if the Tinubu-led administration paid greater attention to these crucial areas of the economy, it may avoid resorting to borrowing and would have enough funds to provide materials for the people.