Huriwa To Finance Minister: Tell Nigerians Why You Can't Stop Frivolous Borrowings:

A Statement By the Prominent Civil Rights Advocacy Group; Human Rights Writers Association of Nigeria (HURIWA) juxtaposing The Revenues Claimed to Have Been Generated Officially By The Federal Inland Revenue Services And The Budgets of The Federation on Infrastructure of Roads, Water, Education and Health Vis-à-vis The Rationale for The Continuous Borrowings By The Federal Government.

BACKGROUND:
Government Revenues, which refer to all receipts the government gets, including taxes, custom duties, revenue from state-owned enterprises, capital revenues and foreign aid are part of government budget balance calculation.

Since 2016, Nigeria has continued to provide expansionist budgets, with its budget having risen from the N4tn mark in early 2010s to above 6tn since 2016. While there have been significant improvements in the Company Income Tax, Value Added Tax, Customs and other revenue lines, the Federal Government of Nigeria has resorted to large unfunded deficit through large borrowings, which has raised its debt on a continuous trajectory.

A statement from the Federal Inland Revenue Service (FIRS) revealed that in the first quarter 2020, the agency recorded N1.12 trillion revenue up from N1.04 trillion recorded in the first quarter of 2019 as a show of commitment towards achieving its 8.5 trillion Naira revenue target for the year, in spite of turbulence in the global economic system, especially the sharp fall in the price of Nigeria’s major export and top earner crude oil.

A breakdown of collections for period under review shows that Capital Gains Tax soared 568 percent from N96, 408,740.90 in the first quarter of 2019 to N643, 935,849.06 in the first quarter of 2020.

According to figures obtained, the Service recorded a 522 percent increase in collection from the NITDEF to bag N690, 532,855.85 in Q1 2020, compared to N111, 037,797.16 in Q1 2019. Also in the period under review, Gas Income Tax increased by 286 percent in Q12020, which amounted to N11, 491,627,575.89 compared to N2, 977,345,332.31 raked in in Q1 2020.

Similarly, Company Income Tax (CIT) collected in Q1 2020 soared135 percent to N95,733,194,644.91 from the corresponding figure of N40,696,980,658.52 recorded in Q1 2019, while Stamp Duty collection in the period at N4,602,037,497.81 up from N3,386,648,663.85 in Q1 2019.

In the area of Education Tax, FIRS recorded an 81 percent increase in Education Tax, N13, 102,045,604.74 in Q12020 compared to N7, 229,644,397.68 in Q12019. Both NCS and Non-Import VAT also increased by 11percent in Q12020 N63,296,684,819.79 and N261,245,617,218.98 respectively from the Q1 2019 figures of N57,008,866,617.53 and N236,030,481,054.83 respectively.

In 2019, the FIRS achieved total tax revenue collection of N5.263 trillion against a target of N8.802 trillion which translated to about 60 per cent target achievement for the year.

The performance was slightly lower than the 2018 collection of N5.32 trillion by N57 billion. Oil tax collection for the year was N2.111 trillion which was 49 per cent achievement of its annual target of N4.301 trillion and accounted for 40 per cent contribution to the total collection.

On the other hand, non-oil tax collection for the year was N3.152 trillion which was 70 per cent achievements of the annual target of N4.501 trillion and accounted for 60 per cent contribution to the total collection.

THE ISSUE:
The Senate not too long ago passed the revised 2020 budget of N10, 805,544,664,642 that was sent by President Muhammadu Buhari, premised on the increase in VAT rate from 5% to 7.5%. Between 2013 and 2018, when the VAT rate was pegged at 5%, VAT revenues only financed an average of 3% to 5% of recurrent expenditure. Therefore, it is expected that the increase in VAT will cover a small fraction of the proposed recurrent expenditure in 2020.

With the revelations brought about by the Covid-19 pandemic; neither the original budget nor the revised one paid attention to the gaping need for improved healthcare system in Nigeria. For instance, the projection for healthcare in the original budget was N441b, a meagre 4.2% of the budget. This is in contrast with the situation in South Africa and Rwanda, where they have complied with the World Health Organisation recommendation that countries should not spend less than 15% of their annual budget on healthcare.

Nigeria, which is expected to lead the way in Africa, is shamelessly in breach. On education, the expenditure allocations budgeted N686b or 6.5% of the total figure in the original budget. This is far below the UNESCO recommendation of between 15% and 20% of budget allocation for education in developing countries. It is disheartening that the percentage allocation to education in Nigeria has instead continued to drop on a yearly basis. Starting from 2015 when it was 12.3%, it dropped to 9.2% in 2016, 7.3% in 2017, and 6.5% this year.

More so, The Federal Ministry of Power Works and Housing capital expenditure allocation, which stood at N444.646 billion leaves growing concerns about the government’s commitment to improve the state of roads across the country which is necessary to drive the much needed economic growth. The failure of the government to fund road projects and maintain the dilapidated ones have hindered the economic prosperity needed to transform the country and has shown a significant effect on the underperformance of the transport sector.

Secondly, is the issue of the persisting debt overhang. Our total debt as at the end of December 2019 stood at N27.74 trillion. This includes N21.7trillion owed by the Federal government and N5.6 trillion owed by state governments. In order to fund the revised budget, we need not less than $15b, in additional loans. The big questions are: can we afford to service additional loan if we already set aside close to N3trillion to service the present outstanding balance? Who would lend us that money and at what price, both in financial and political terms? If we believe we are going to meet the shortfall by printing money, has anybody bothered to consider the inflationary implications?

Thirdly, is the structure of the budget and therefore our government. No matter what we do, we seem to be stuck with 70% of our budget going into recurrent expenditure. In the revised budget, 73.5% of total expenditure will go into salaries and debt servicing, while only 26.5% will go into capital expenditure. What does that mean for both physical and social infrastructure development?

What can we do to reduce the cost of governance at both the executive and legislative arms of government? Again, if for any reason we are unable to fund the budget completely like has been the case in the last few years, it is Capital Expenditure that bears the brunt. The implication is that there are chances that the meager allocation to infrastructure may not be implemented in full.

Of the total proposed 2020 budget, non-debt recurrent expenses accounts for 47.6% (N4.9 trillion), while capital outlay represents 20.7% (N2.1 trillion). The cost of governance remains a cause for concern, as recurrent expenditure continues to grow annually. By 2020, cumulative FG personnel costs, pensions and gratuities (from 2011 to 2020) will be over N20 trillion.

As at 2018, the federal government’s workforce was reported to be about 400,000 in total, signifying that about 0.2% of the country's population consumed about one-third (33%) of the national budget. This figure is expected to expand further in coming years, especially given the low staff turnover in the federal civil service and the new minimum wage.

OUR POSITION AND DEMANDS:
A study conducted by experts on Nigeria’s infrastructure requirement revealed that for the country to bridge the wide infrastructure gap, approximately N11.25 trillion ($31 billion) has to be invested annually over a period of 10 years.

Key sectors such as industry, trade and investment, education, healthcare, labour and employment, power, works and housing, and transportation are catalysts for growth.

With the budgetary allocation of political officials and some low impact sectors almost four times that of key sectors, is Nigeria growth inclined? Are the budgetary allocations reflective of the description of the 2020 budget by the President? Time will tell.

Again, Federal Government of Nigeria has said that it would finance the N5.36 trillion budget deficits through domestic, foreign loans and proceeds from privatisations. It is not good to keep on borrowing on a yearly basis to finance deficit budget when a lot of very valuable national assets are lying fallow and moribund. Proceeds from outright privatisation or concession of the moribund assets should serve as the best alternative in funding yearly budget deficits since the assets are more or less becoming national liabilities.

There are about 600 state-owned enterprises in the country which gulp not less than $3 billion on a yearly basis with little or no returns into the public purpose.

Furthermore, it is important to ensure that we do not waste the awareness and opportunities created by this pandemic crisis. We advocate here that Nigeria must declare a medical emergency immediately. We must invest heavily in healthcare, for the sake of everybody, whether rich or poor.

We are also of the firm belief that we should use the opportunity provided by this crisis to renegotiate our debts. In fact, we should be asking our creditors for outright cancellation and debt forgiveness. We are already in a debt crisis and from every indication; we cannot meet our debt obligations and still provide basic resources for our people. We cannot afford to devote close to 60% of our revenue to service debt. There is no better time than now to declare that we cannot pay.

Closely related to that is that the time has come for us to reduce the size and change the structure of government to reflect our current realities. We should discourage anything that puts money in a few hands as that will further weaken the economy. This may sound harsh, but we cannot afford to live in what is clearly a fool's paradise.

Most importantly, we demand that the Federal Ministers in charge of Finance should explain the rationale for the continuous borrowings and where these Revenues officially generated by the Federal Inland Revenue Services in the last five years went to and what they were used for? Nigerians need to know.

Long live the Federal Republic of Nigeria. Long Live the good people of the Federal Republic of Nigeria.

COMRADE EMMANUEL ONWUBIKO:
NATIONAL COORDINATOR.
Miss. Zainab Yusuf:
Director, National Media Affairs.
HUMAN RIGHTS WRITERS ASSOCIATION OF NIGERIA (HURIWA).

10th August 2020.