Minister of finance, Mrs. Kemi Adeosun recently had an update with the media on pressing issues bothering on the nation’s economy recently, MARK ITSIBOR was there.
Why do you think Nigerians should not continue to worry over the nation’s rising debt stock?
Nigeria’s debt to GDP ratio is 20 per cent. It’s one of the lowest in Sub-Saharan Africa. Ghana is 60, Ethiopia: 50; China has about 250 per cent of tax to GDP. They have a particular strategy, which is ‘go and borrow, sort out your infrastructure and sort out how to pay.’
There was room in the global economy for them to do that and become an industrial hub and to grow their economy that way. We are not pursuing that strategy. We were running a deficit budget, we were in recession to reflate the economy. But you are seeing the size of that deficit come down now. With 20 or 21 amount of tax to GDP, no! Nigeria is not among the countries that IMF is worried about. They said they are worried about Sub-Saharan Africa. Some countries are having a GDP of 60 to 70 per cent.
Well, we do have challenges of debt service to revenue. That is because the interest cost is quite high. And that’s a function of two things; most of the debts were short-term. So we are paying interest and compounding. What have we been doing to address that? We are refinancing treasury bills and issuing bonds; refinancing treasury bills in domestic market and replacing them with long-term debt in the international market – and that’s reducing our cost of borrowing. This time last year, we borrowed at 18 per cent; it’s now 13 per cent. So, we are working very hard on the debt service cost.
Of course, the other leg is revenue. Debt service is a percentage to revenue. You reduce your debt service and increase your revenue. That links us to what we are doing today around tax.
Am not concerned about the levels. When you should have been concerned was when debt doubled when oil prices were very high and gross capital formation very low. Right now, even the borrowings are tied to capital projects. There is a massive investment in infrastructure. Those are roads and rails that will be here for the next 30-years. We are matching long time assets with long time liabilities. And the construct is that the economy will grow. We will improve our tax collection and be able to service and repay the debt. I think this is the right way to go. We don’t have infrastructure. And we cannot afford to wait for oil to go back to $140 before we fix power; before we fix roads, before we fix rails.
Nigeria needs growth now, and you can accelerate job creation and growth and in an economy by providing the enabling infrastructure, improve the ease of doing business, and encourage the private sector to thrive. Increase your tax base so that you have more money for the public sector , then invest in education and health and create jobs in all sectors. That in itself has a multiplier effect on growth. No! There is no cause for alarm as far as Nigeria is concerned. It’s a well-managed, very conservative debt strategy and we will continue to be very focused on concessional borrowing – where possible it’s concessional. Anywhere there is concessional money, that’s where we will go first to help keep our debt cost down and be sure that we get the cheapest possible money to help our development.
The senate in a motion wants the federal government to halt the proposed increase of excise duties on beverages. Will you do that?
We extensively consulted with stakeholders before we came up with that proposal which the President approved. And those stakeholders included MAN, NASIMA, and members of the private. We’ve had a lot of stakeholders’ engagement before we came up with that policy. It’s been widely accepted by industry. What we eventually recommended was lower than when we started. We engaged with the stakeholders and assessed the possible impact on jobs and growth; we don’t want to lose jobs. That’s why we took a three-year stage approach, rather than overnight increase in the rate. I’m seeing that advice from senate, but we have already interacted with stakeholders.
It is believed that the federal government is not actually serious about tax collection.Enforcement seems too soft especially when influential people are involved?
Again, I think it’s a two-way thing. FIRS and the tax authorities are doing a lot of enforcement because I do hear stories of properties and businesses being sealed for non-payment of tax. There is a lot of enforcement. Be mindful of the fact that there is another side to it; If we allow them to just go and be sealing and destroying properties, it will discourage business. There must be a process. In some cases, the tax officials get it wrong and may have to retrieve. And in some cases, they get it right. In some cases when you see a property sealed up and later unsealed, it’s because they’ve paid. So, it doesn’t necessarily mean there is soft pedaling. I think the FIRS are doing quite an excellent job of driving the enforcement narrative.
We softened a little during the amnesty period. But now, we are actively preparing cases for prosecution. Once the VAIDS window expires, there will definitely be an increase in enforcement action.We did have to slow down a little but from June you will see a mighty increase in enforcement action on tax matters. We are very serious. With the tax to GDP of 6 per cent, we can’t go anywhere – it’s just not possible. We are deluding ourselves if we think we are going to grow with that kind of tax to GDP. No country has done that. We have to drive up compliance. A lot of salaried workers are paying their taxes. But a lot of self-employed people who run businesses are able to evade. A lot of high networked people are able to evade. We have to get them into the tax net. Everybody has to pay their fair share.
On two occasions, FAAC meeting has ended in stalemate on account of NNPC. What is the true situation?
With the oil price up at $78, you can compute and have an expectation of how much you think should come into the FAAC’s account. If it’s less than that, we need to know why and understand those variances. And so, that process is very robust. The governors, the commissioners and the ministry of finance are involved. Sometimes there is a standoff. But I think that is the healthy part of the process. It is better for us to ask questions now and resolve them than leave the situation to fester and then we end up in three or four years saying, NNPC should have remitted so many trillions.
What we are doing now is trying to resolve issues when they come up.I don’t like the fact that we have stalemates. I would have preferred if we are able to solve these issues before FAAC. Every now and then, you have a situation where really and truly both sides feel they are right and we are unable to find solution. But we end up coming back to resolve them. It gives you the level of scrutiny and oversight over NNPC.
We are not going to allow leakages build up again. We have to plug those leakages and work very closely with NNPC to do so. The relationship is a healthy one.
It is our responsibility to ensure that the monies we are expecting to come into the federation account actually come in and we account for them properly.
Are you worried that the delayed passage of the 2018 budget will have negative implications on its implementation?
Of course there will be some. It will be insincere of me to say the delay in the budget passage will have no impact. Of course it does because the cost of money in the markets changes. And so, there will be an impact. But we are going to try and mitigate that impact as much as possible. I remain optimistic that the budget will be passed. What helped us is the fact that the 2017 budget was passed late last year – we just carried on. We will close this year’s budget with capital expenses in excess of N1.5 trillion, higher than last year. I saw provisional figures last week of N1.467 trillion and there were some postings still to come in. Am quite confident we are closing the year with about N1.5 trillion of capital expenses. Many of these projects are multi-year projects. So, hopefully there won’t be too much disruptions.
How much has been received so far under VAIDS?
We are still collecting numbers. We had a meeting on Tuesdway with the chairman, FIRS, JTB and chairmen of the states’ internal revenue collection agencies. They are still collating. We are still getting applications on a daily basis. But so far, the number of applications has been in thousands. When we finish, we will be able to give some ideas of the final figures. It’s a continuous process. When the deadline expires on June 30, we will be able to know what the figures are.
What is the impact of the extension?
People have continued to apply. People are taking advantage of the window to regularise.
What is government doing on prosecutions of those who were discovered to have evaded taxes?
Am probably the wrong person to answer that question because our job in the ministry of finance is to get the evidence, recover the money and refer the cases to the investigative authorities.
We have referred many to ICPC, EFCC and the others. We have some that are already under prosecution. Unfortunately, we don’t control the judicial process. But the approach for us has been very pragmatic – let’s get there first because sometimes you can be in court for years. Our approach is just bring the money first and we then pass the case to the investigative authorities to prosecute.
What do you make of the difference in the projections by World Bank and the federal government for the nation’s economy?
Unless it is the same person that came up with the projection, it is very unlikely that the projections align completely. But where everybody is in agreement is that Nigeria is experiencing growth. How much growth and how fast the growth is, is where the differences lie. I suspect that we will end up surpassing some of the estimates.
We’ve seen heightened level of activities in certain sectors. We might surpass the numbers that are projected. We saw some figures on tax collection. It will change our tax to GDP ratio. There is significant improvement. We haven’t seen yet everything we need to see, but the level we’ve seen is encouraging us to get on board and pay our taxes. The number of taxpayers has gone up from 14 million to 19.3 million. We are quite encouraged by what we’ve seen.
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