“E fe pa is kétékété ni?” is the way the Yoruba would ask if a taskmaster intends to add the last straw to finally break a camel’s back. This question is patently necessary now, because it appears that both the state and Nigeria Inc. seem intent on piling unending burdens on hapless Nigerian citizens.
Sometime in November 2019, the Federal Government found a way to raise Value Added Tax from five per cent, to 7.5, per cent. A burden that need not be, if government were more effective in dragging in all those who evade extant statutory taxes into the tax net.
The Voluntary Assets and Income Declaration Scheme, which government introduced with fanfare, to enable tax defaulters declare, and pay, outstanding tax liabilities without penalties, appears to have quietened.
You probably know that the three-year tax clearance scheme introduced by the military government headed by Gen Olusegun Obasanjo to compel Nigerians to pay at least three years of Personal Income Taxes, at a time, in the late 1970s has failed in the most part.
The Central Bank of Nigeria consistently fails in its statutory assignment of controlling inflation, interest, and exchange rates. When it does, it is usually to the detriment of the citizens. Whereas the CBN can control interest and exchange rates by fiat, it cannot do the same to inflation rate.
Failure to effectively lower these rates leads to the deficiency, and the ability, of the naira to deliver good value to Nigerians. And if you don’t know, then be informed that inflation rate is standing at 12.5 per cent, which of course, leads to lower quality of living standards of the people.
Maybe you should also know that that phylum of the Nigerian realm known as the middleclass has been squeezed nearly out of existence by the weak political structure and the inappropriate economic regime operating in the country.
Nowadays, Nigeria only has the rentier and super rich political class, most of whom are public office holders, and their friends, who have unbridled access to the commonwealth, and then the poor toiling masses, most of whom live below the poverty line. With more than 70 million poor, Nigeria became the poverty capital of the world in 2017.
The slew of hardships visited on ordinary Nigerians in recent times includes the restriction of investment in Treasury Bills to corporate players, and at lower rates, by the CBN. The latest onslaught on individual citizens is the new CBN regime which reduced interest rate on savings accounts from 3.5, to 1.5, per cent.
But this, the CBN hopes, should divert funds from the money market to the real sector. Which is a good gesture actually, but of no use to a merchant class that has taken so many losses on account of continously failing government economic policies.
The CBN fails to appreciate that a majority of citizens who invest in money market securities are retirees, who would rather invest returns on their unearned income, and not the principal, in the real sector, in an environment that is not well supported by realistic macroeconomic policies and adequate infrastructure.
The foreign exchange rate was further depreciated (from N195 in 2015), now to the American dollar, under the Goodluck Jonathan Administration, to N380. And worse: Apart from the parallel market rate, the CBN maintains multiple exchange rates that make nonsense of its effort to stabilise the naira.
If energy cost (to purchase diesel to run electricity generators and steam boilers) is more than 45 per cent, and cost of raw material is relatively lower than the cost of energy and other overhead costs, you already know that a manufacturing business is not going to make profit very soon.
Government recently allowed the ex-depot price of petrol from a cap of N143 per litre, to climb to a floor of N151.50, with the claim that it is reflecting current cost of crude oil in the international market. That may be true.
Government must realise that things would be better if the Nigerian National Petroleum Corporation, currently the sole importer of petroleum products, (because of its failure to efficiently run its refineries), is excused from an assignment that it has consistently failed to perform.
By its own account, the revenue generated by the NNPC refineries is always lower than the money that the Federal Government spends on them. That, if you haven’t guessed, means that the refineries are running at a loss.
If government is serious about removing subsidy from any of the petroleum products, a fundamental step it has to take is to completely remove itself from the downstream sector of the petroleum industry, even if it prefers to remain in the upstream sector (for now).
Some argue that if the refineries of the petroleum industry’s downstream sector produce petroleum products locally, at least the cost of transport of imported petroleum products would have been eliminated, if nothing else is shaved off. That makes plenty of sense.
Economists think that if government excuses itself from refineries and distribution of petroleum products, in the same way government has vacated the telecommunications industry, the efficiency derived therefrom should result in relatively stable, and possibly lower, prices.
Government’s recent approval of increase in electricity tariffs further worsens the situation of the poor masses. From N22 per kilowatt, the tariff was increased by 200 per cent, to N66 per kilowatt.
Yet, there is no guarantee that power outage will be eliminated, or substantially reduced. Now the government is brewing a Water Resources Bill that will even tax boreholes that citizens dig in their homes, because the municipal waterworks have woefully failed to deliver pipe-born water to their homes.
Playwright and Nobel laureate, Prof Wole Soyinka, is already wondering if rain water is going to be appropriated into the Exclusive Legislative List, and possibly taxed to raise revenue for a government that is increasingly presenting itself as almost totally bereft of working macroeconomic ideas.
The season of impunity has spread so much that even television cable networks have picked up the pluck to increase their tariffs even after the House of Representatives initiated steps to prevent them from increasing the tariffs.
Before COVID-19, that had become every lazy government’s excuse for poor performance, the growth rate of Nigeria’s Gross Domestic Product was anchored to the lower single digits; about 2.5 per cent, if you want to know the numbers.
There is evidence that whatever policies the government evolved is not migrating the economy away from what former Minister of Finance, Kemi Adeosun, described as a “technical recession,” in 2016.
Whenever you are told that the Nigerian economy goes into recession, it only means that the price of crude oil has gone south, and it is going to be difficult to finance imports; the Nigerian economy is import-oriented.
The final straw that will break the Nigerian camel’s back is the debt burden that has now been compounded by the COVID-19 pandemic. Before the pandemic, about 70 per cent of Federal Government revenue went into servicing the national debt. It is worse now.
The global reduction in the demand for crude petroleum, caused by the COVID-19 pandemic, further strains the debt burden, largely acquired to finance a needlessly overblown government structure.
After seeking refuge in market forces, government must also reduce the size and cost of governance.
END
Be the first to comment