Experts that gathered at the just concluded 2020 Budget and the Finance Act forum, organised by the Securities and Exchange Commission (SEC), in Lagos, at the weekend, have called for review of the entire budget process to ensure meaningful economic growth and improved per capital income as the outcome.
The stakeholders bemoaned the sustained growth in annual budget deficit, caused by weak public revenue. They argued that the anomaly has necessitated that government at all levels should do the right things consistently for sustainable economic growth and development.
Speaking on key initiatives capable of supporting economic growth, during the panel discussion at the seminar, Tax Advisory partner at PwC, Taiwo Oyedele, noted that over the past five years, budget variances have been so significant that some now wonder whether federal and state governments should bother about the annual appropriation bill.
He pointed out that that the Federal Government projected N7 trillion revenue last year, but only recorded N4.8 trillion, leaving the remaining as deficits, while the 36 state governments budgeted N9 trillion cumulatively and could only generate N3 trillion.
Considering the size and recurrence of budget deficits, he said: “Should we take government serious? I have my doubt.”Also contributing, the Chief Executive of the Nigerian Economic Summit Group, Laoye Jaiyeola, regretted that over the past 10 years, the government has recorded N20 trillion deficit, most of which was funded through borrowing out of which only N5.5 trillion went into capital spending.
While acknowledging government’s efforts through the Presidential Enabling Business Environment Council (PEBEC), he however stated that that concentration seems to be on the low hanging fruits, which is why the country is only able to attract portfolio investments. He called for more respect for agreements by government, just as there is need to concentrate on sector where the nation is bleeding, particularly electricity, besides putting in place appropriate policies that would enhance domestic capital mobilisation.
This, he stressed, is necessary to move more people out of poverty.But Oyedele further recalled that there are over 100 amendments in the Finance Act, which has removed incidences of multiple taxes in the country urging capital market operators to stop asking for tax waivers on transactions.He said: “VAT on capital market transactions is so insignificant and should even arise, instead, we should not ask for incentives, but ask government to remove disincentives.
“Government has made it impossible for the capital market to thrive,” stating that the lull in the capital market is a reflection of the overall performance of the economy. Government, he continued, needs to realise that “the effective tax rate for equity investments in Nigeria is highest in the world,” noting that the country’s 30 per cent Company Income Tax is borne by the shareholders, in addition to another 10 per cent withholding tax.“That means, as a shareholder, when you receive your dividend, it has suffered a tax of almost 40 per cent . It is the highest in the world,” he noted.
The expert also called for more focus on Public-Private sector Partnership to reduce deficit financing in the country’s budget.The Chief Executive of Vetiva Capital Limited, Chuka Eseka, urged government to review how the economy is run. On what must be done for the market and economy to thrive this year and beyond, he said the money that government seeks to get from implementing the Finance Act is nothing compared to the $17 billion of illicit flows that leave Nigeria annually.
It is important, he said, for government to put the process in place to ensure such funds are retained within the country.He urged government to stop distrusting the private sector and rather see it as a partner, realizing that only it can generate the much needed jobs in the country.
Also, he expressed surprise that a chunk of the $17 billion idle investible funds across the world is not flowing into the Nigerian capital market as expected, even as he insisted that the nation’s economy is not doing as badly as being portrayed by its capital market.The reason, he believes, is that there is an additional risk element inherent in the market. He urged the government to reduce Nigeria’s 40 per cent corporate tax rate as it is too high, when compared to 15 per cent in the U.S.