ZAINAB JUNAID
The Civil Society Legislative Advocacy Centre (CISLAC) in collaboration with Christian Aid UK, Nigeria,(an international non governmental organization) have urged Government at all levels to enact policies that will manage the current fiscal crisis that has seriously eaten deep into Nigeria’s economy.
They made the call at a media presentation of Research on tax expenditure and debt management held in Lagos on Wednesday April 3, 2024, by Civil Society Legislative Advocacy Centre (CISLAC)/Transparency International Nigeria, and Tax Justice and Governance Platform with support from Christian Aid UK, Nigeria through an ongoing Debt Justice campaign.
To them, government need to focus more on tax expenditures, debt management, revenue mobilization reforms, and prioritization of spending, as urgent measures of confronting severe fiscal crisis inimical to best performances in the country.
“They should be committed to enacting measures that promote fiscal transparency, accountability, and sustainability,” the group said.
While speaking on a paper titled Nigeria’s Fiscal Challenges: A Comprehensive Approach, Executive Director, CISLAC, Auwal Ibrahim Musa (Rafsanjani) through virtual presentation, bemoaned the current fiscal crisis that is marked by a consistent decline in Federal government revenue over the past half decade saying government’s overreliance on unsustainable debts which is perpetuated by unrealistic and over bloated budgets, weak revenue mobilization efforts, misplaced spending priorities and lack of transparency and accountability in public finance management contributed greatly to the fiscal woes.
He posited that the alarming trend is evidenced by substantial shortfalls in revenue, with deficits ranging from 31% to as high as 50% in the years spanning 2018 to 2023.
“Concurrently, Nigeria’s overall debt burden has skyrocketed, reaching a staggering N97.34 trillion in the fourth quarter of 2023 from N87.9 trillion ($114.3 billion) as of June 2023. While Nigeria’s debt profile continues to grow, and it allocates most of its budget revenue to debt servicing at the expense of investing in more critical social sectors and infrastructural development, there has been a wide consensus around:
“The reasonability/sincerity of purpose behind external borrowings. In November 2023, the Government signed a $2.8 billion supplementary budget that included funding for new bulletproof cars for the President and First Lady, a Presidential yacht, and renovations of the President’s residential quarters amid a nation-wide cost-of-living crisis. This coincided with a Presidential request to the Senate for the approval of an external loan facility of $7.86 billion and 100 million euros.
“Government has also mortgaged its crude oil reserves in Debt for future crude arrangements- Project Eagle in 2020 and the recent Afrexim “pre-export finance facility” worth $3.3 billion at an 11.85% per annum interest rate.
“Increasing role of private creditors in Nigeria’s debt crisis and its human costs. 37% of Nigeria’s total external debt figure is owed to private creditors and the government will spend six times more on servicing debts than on building new schools and hospitals in 2024.
“Non-objective assessment of debt sustainability using Debt-to-GDP ratio (which puts us at a moderate risk of debt distress at 41.15% despite being above the DMO’s self-imposed threshold of 40%) as against Debt-to-revenue ratio (which stands at 73.5% and still above the DMO’s 50% self-imposed threshold for 2023).
“Lack of accountability mechanism in utilization of loans for the purpose for which they were granted/taken. The 2020 annual audit report published by the Auditor-General of the Federation revealed there was no document to show the movement and spending of the $3.4 billion COVID-19 emergency financing package loaned to Nigeria in April 2020 by the International Monetary Fund (IMF).
“Compounding Nigeria’s fiscal woes are significant revenue losses attributed to tax expenditures, encompassing incentives, exemptions, credits, and waivers. According to the 2021 Tax Expenditure Statement (TES), revenue foregone due to tax expenditures accounted for approximately 4% of GDP, equating to N6.8 trillion. This substantial leakage of revenue underscores the urgency of addressing tax expenditure and debt management issues with utmost priority,” he stressed.
Rafsanjani further disclosed that, in response to the multifaceted fiscal woes in Nigeria, CISLAC, the Tax Justice and Governance Platform with support from Christian Aid UK, Nigeria through an ongoing Debt Justice campaign, have undertaken several sensitization engagements with civil society and media as well as policy engagements with relevant state actors, most of which have been informed by the research on tax expenditures and its implications on debt management and sustainability in Nigeria.
Also in his welcome address, Victor Arokoyo, Head of Programmes, Christian Aid UK Nigeria, stressed how the international non- governmental organization is more concerned with debt management in Nigeria.
He stated that Christian Aid Nigeria collaborated with CISLAC to proffer likely solution to the fiscal crisis that has put the economy in a comatose.
His words, “We are more concerned on whether loans collected at both national and state level are being channeled to the right source they are raised for? Are they being approved in line with provision of the law? How can government reduce unnecessary incentives, tax holidays given out to private international companies/organizations which is seriously putting the country in debt crisis? How can we galvanized general public to show more interest on issues surrounding tax management, participate more in paying tax as this will help improve revenue? These among others are our vision. We want citizens to be more cautious of what happened around them and this can be achieved by getting more people to pay tax. Instead of government increasing tax of those that actually pay tax, why not get more people involved in tax payment. Currently less than 30% of tax payable citizens actually pay tax.”
He continued, “The issue of debt taken by the government can be reduced by increasing the revenue base of the government. The more accessible government has to revenue the lesser loan will be taken. “Also if government can reduce unnecessary incentives given to private international companies/ organizations it will help a lot. You don’t give out three trillion as incentives to private international companies and still go out to borrow six trillion from international sources.”
The groups concluded there must be sincere demonstrations in the government’s commitment to addressing Nigeria’s pressing fiscal challenges by harnessing the collective expertise and insights of all relevant stakeholders. “We are confident that we will navigate the complexities of Nigeria’s fiscal landscape and chart a course towards sustainable economic growth and development with transparency, accountability, and fiscal prudence as guiding principles,” they said.
Fiscal policy in a layman’s terms is a macro economic tool used in managing or stabilizing the economy. It is most closely related or associated with government spending and taxes.
The fiscal policy of a country decides the taxes that would be charged and the amount that the government would be spending. This policy can be tweaked, that is adjusted according to the needs of the economy.
