Economy: Nigeria has to raise taxes to exit recession – PricewaterhouseCoopers
The Country Senior Partner, PricewaterhouseCoopers Nigeria, Uyi Akpata, discusses the performance of the economy and government policies.
What is your assessment of the Nigerian economy and the policies that have been introduced to keep it afloat?
I remain very optimistic because we can see that the government and the private sector appear to align in terms of where we think the real change needs to come from. It was very obvious from the beginning that we needed to stimulate the economy.
So discussions about loans are timely and if you look at that against the backdrop of a government that is preaching transparency, if we match those two together and we get those funds into real development, then we are on the path to economic recovery.
It is going to be challenging, as I tell my people internally, and we need to redouble our efforts to come out of recession.
What policies should be introduced to come out of recession?
I think the policies have been fairly consistent though the economy is telling us a different thing. From a very clear point of view, we are still quite dependent on foreign currency. Ultimately, if we reduce our dependence on that and drive economic development, things will turn around. We need to plough those funds into the real sector. One area I will like to see quick change is in encouraging the private sector.
All the loans that are coming in will help but it is going to be on the long term. The government should just target the policies around the ease of doing business. The foreign funds coming into Nigeria will be very significant. People will want to bring in such funds when they know they can get proper returns from them under a more stable environment.
What type of taxes should be reviewed?
It is like a catch-22 situation in which you say companies or businesses are doing badly and you are thinking of increasing taxes. The truth is that when we think about the ratio of taxes to Gross Domestic Product, Nigeria is one of the lowest. It means that there is a huge gap for us to explore. So, if there is anyone interested in real development in Nigeria, then we have to recognise that we have to raise the basis for taxes. That is one of the income and revenue streams that will see us out of these economic doldrums.
Is increased government spending capable of reducing the high inflation rate, which is currently at 18.48 per cent?
That will be in the short term. But if the government provides such funds and real development takes place, there is going to be a plateau at some time and obviously, we will be better for it. There are still challenging times ahead but I believe we have seen the worst of it, at least from the feelers around us. But we still have people who are just like 'let's just get round this curve.'
Everyone is anxious to see things happening. When we are dealing with the government from different areas, people are excited and saying they want to invest in entertainment, tourism, capital projects and infrastructure. Lagos State Government, for instance, is one of the clients we interact with.
People want to do business here because they see the potential. The opportunity in Europe is very limited. Africa still remains the destination but we just need to send the clear-cut signals that we are ready to support such investments.
How do you reconcile Nigeria's continued dependence on crude oil with the measure to diversify the economy?
We survived on $30 oil price for a long time and $50 is an exciting price. I am happy with what people are saying about the issue of security because if we ramp up production to about 2.5 million barrels a day, the price will not be a factor provided we deal with issues related to OPEC membership.
A price of $50 with a production range of 2.5 million barrels a day is enough for us to stimulate the economy. At least, let's learn our lessons from the past. Alternative sources will be a key way to go. Mining and, to a limited extent, cash crop agriculture may be medium to long term. But we cannot get rid of oil as it were because we need oil for us to expand and create other alternative sources of revenue.
It is just about reducing our foreign exchange exposure and looking at other sectors. They are many, like tourism. Some colleagues came from South Africa and decided to spend the weekend here for the first time. They said that the potential we have in terms of natural resources available for tourism was far superior to what they have in Cape Town. And when we look at it, maybe four million people visit Cape Town and here we have less than half a million coming into the country. There are different areas cutting across the country. It is just for us to improve security, infrastructure and power, then leave the rest and we will thrive.
What is your view on the nation's growing foreign debt?
When you look at our population and the ratio in terms of our ability to repay these funds, we still have strong capacity to borrow. The most important thing with borrowing is that we should utilise it for value-added projects and infrastructure. And if you are doing it on the platform of a government that is seen to be more transparent, then our chances of leveraging those investments or getting absolute returns over a long period will be more possible.
Nigeria is an ongoing concern. You don't look at Nigeria and say we need this in the next three to four years. We will be here in a hundred years; so we need those investments that are sustainable so that when people look at the country in 50-year time, they will see the giant strides because we made an investment of N30bn today. If you sit back and say we won't invest in the real sector, that the money we put there will be detrimental to the people, then we are not building a sustainable economy.
How significant is the PwC alumni dinner?
This year is particularly symbolic because we just moved to a new office and it is an opportunity to tell our alumni family that we will continue to do those investments to sustain the PwC name itself as it relates to the quality of services and ethics in business conduct that we are noted for. - Punch.