Amid President Tinubu’s decision to suspend specific taxes temporarily, analysts are casting doubt on the efficacy of such measures.
Instead, they advocate for a total reversal of these taxes, citing their detrimental effects on some key sectors.
Experts argue that a mere suspension may not be sufficient to address the challenges faced by the sector, urging the government to take a more decisive step by permanently abolishing the taxes to revive growth and stimulate investment.
Tax payment, considered a burden by many Nigerians, remains an essential obligation to the government for the improvement and maintenance of Nigeria’s infrastructure.
However, the increasing frequency of tax rate hikes has blurred the lines of taxation for citizens. President Bola Tinubu, who assumed office last month, has embarked on Nigeria’s most ambitious reform agenda in decades.
The President aims to tackle the country’s debt burden, low economic growth, double-digit inflation, and mounting insecurity.
The African Development Bank (AfDB) has criticized Nigeria’s focus on an import substitution model instead of prioritizing wealth creation through export market development and product diversification.
Official data from the World Bank indicates that Nigeria’s Gross Domestic Product (GDP) was valued at $477.39 billion in 2022.
Addressing the Nigeria Employment Summit organized by the Nigeria Employment Consultative Association (NECA) in Abuja, Adewale Oyerinde, the Director-General of NECA, called on the Federal Government to abolish taxes on carbonated drinks.
Oyerinde argued that the suspension of these taxes by President Bola Tinubu for three months is insufficient. He urged the government to consider a complete reversal, stating that the taxes introduced during President Muhammadu Buhari’s administration have had a detrimental impact on the manufacturing sector.
Lamin Barrow, the Director-General of the Nigeria Country Department at the African Development Bank Group, emphasized the need for Nigeria to diversify its non-oil exports.
He highlighted that Nigeria’s heavy reliance on oil exports has exposed the country to the uncertainties of global oil markets, resulting in adverse effects on fiscal space and limited development spending.
Barrow further pointed out that Nigeria’s manufacturing sector, which contributes approximately seven percent to the GDP, has experienced a decline in performance over the past five years.
In an effort to cover its budget deficit, Nigeria has announced plans to borrow 8.8 trillion naira ($11.81 billion) in 2023. Additionally, the country has converted temporary overdrafts worth 23 trillion naira into long-term bonds this year.
However, the Nigeria Debt Management Office cautioned that the country’s total public debt could rise to 37.1% of its GDP this year, approaching the government’s self-imposed limit of 40%.
Barrow highlighted that Nigeria’s revenue-to-GDP ratio, standing at approximately eight percent, is among the lowest globally and falls behind the West African average of 13 percent. Nigeria currently faces significant fiscal deficits, estimated at six percent of GDP, primarily due to high public expenditures and declining revenues from crude oil exports.
Barrow emphasized the need for improving tax collection and administration, plugging leakages in revenue collection, and enhancing the efficiency of public investment programs.
President Bola Tinubu recently signed four Executive Orders, marking a significant step in his reform agenda. These orders include the suspension of the five percent excise tax on telecommunication services and the escalation of excise duty on locally manufactured products.
Additionally, the President has deferred the commencement date of the 2023 Finance Act from May 28, 2023, to September 1, 2023. Tinubu’s comprehensive reform agenda aims to address Nigeria’s economic challenges by tackling the debt burden, stimulating economic growth, curbing inflation, and enhancing security.
The success of these reforms will be crucial for Nigeria’s long-term development and prosperity
