If Nigerians took the Tinubu government with any seriousness, this week would have been abuzz with anticipation and hope.
The Federal Executive Council had a chance to consider what would be its response to the scorched earth it has so far visited on the country in its first 16 months.
The Presidential Fiscal Policy and Tax Reforms Committee, headed by Taiwo Oyedele, briefed the government and a major announcement was expected. The committee was inaugurated on August 23, 2023, and it had the responsibility to produce the main plank upon which the government’s Accelerated Stability and Advancement Plan would rest.
Oyedele, as reported by Punch newspaper, leaked the elements of the report of his committee and the main elements include:
* Income tax amendment to promote global competition and tax relief for companies involved in incremental job creation, the benchmark being new jobs for at least three years.
* Zero-rated Value Added Tax and improved incentive regime for exports.
* Foreign exchange reforms that would strengthen the hands of the Central Bank, enhance liquidity, strengthen the Naira and sustain rates convergence.
* Collaboration with state governments to suspend certain taxes targeted at small and medium enterprises and vulnerable members of the public. Such taxes include road transport and goods haulage taxes.
* Expanding the tax base by the introduction of a “Tax Identification Consolidation and Collaboration (TICC)” initiative, which will also create a level playing field for businesses.
For a policy which the government hopes would define the regime, the silence with which it has been received speaks volumes. Whereas it ought to be a climax in the government’s economic management, it has been so far ignored. It was like nothing happened.
This president introduced himself to the populace with a horsewhip, without a honeymoon, when he verbally cancelled the petrol subsidy on the grounds where he was inaugurated. After cancelling the subsidy, he made a vague promise of some palliatives for the resultant hyper-inflation. Sixteen months on, hardly does anyone remember what the promises were.
The government has been riding the population roughshod, staring down a nationwide protest and practically telling us that we are masochists who derive pleasure from pain. How else would you describe electoral wins by this party?
Having proven to the masses that they are nothing and amount to nothing, the masses have lost even the right to be expectant. Otherwise, the media space would have been brimming with hope and expectations on a week like this. But impudence rules the spheres and citizens starved to the bones have retreated into their shells awaiting their quickened exits.
For a platform on which it would hang its bragging rights and legacy, this leaked document stole the thunder for its apparent lack of depth. Whereas governance is not rocket science, something profound in either substance or application to tackle the deep mess in which Nigeria has found itself, not mere topical cream is needed.
What’s in this recommendation that has not appeared in newspaper editorials in the past six months or even last quarter? Isn’t it an anticlimax that Nigeria waited for over a year only to get this level of report?
Taking it in bits, who doesn’t know that tax reforms are necessary instruments in managing cash flows? Given that SMEs which populate the informal sector of the economy are the biggest employers, do we need consultants to tell us the need to nurture them first in a tax-exempt environment before knocking on their doors? Don’t we know about deferred gratification?
It is however, the export bit that I have my biggest grouse with.
This theory about devaluing one’s currency in order to boost exports has flown about for decades.
When Ibrahim Babangida took Nigeria on the Structural Adjustment Program route, that was the basic argument. But what did we experience? A devalued naira gave cocoa farmers a greater quantum of the local currency, which they spent in marrying new wives and holding memorials for long-gone ancestors. But their greater output fetched them less on the international market as it amounted to surplus supply and hence lower equilibrium price. Though the farmers had a greater quantum of local currency, they found out the very next season that they could not afford farm chemicals, which were priced in foreign currencies. As it was with cocoa, so it was with other primary commodities, all of which had delicate price equilibrium. That was how the commodities which had thrived under the controlled commodity board system of the government went into near-extinction.
Stung by the experience of getting less for more exports, the Nigerian government made a wise decision to promote value-added exports. The National Economic Reconstruction Fund (NERFUND) was set up and a major plank was to fund processed exports.
One of NERFUND’s beneficiaries was a firm of cocoa processors located on an expansive ground at Sagamu. I’m not sure the plan had run for a year when disagreement over repayment terms grounded all the beneficiaries in the early 1990s. The forex rate was about N18 to the dollar when the loan was taken. Not long after, the naira was devalued to about N32 to the dollar, and the government insisted that the loans must be repaid in forex, no matter what the rate was. Of course, all those enterprises went down. The grounds of the cocoa processors are today occupied by a children’s hospital.
So, here we go again, promotion of exports. Sure, Nigeria needs to export and participate well in global trade. But how? Where do we think we are going if we don’t answer the questions that yesterday posed to us?
Are we going for primary products exports like we did 30 years ago and burnt our fingers? Of course, Nigeria has de-industrialized since the 1990s and hence there’s no need talking about value-added exports. Even if we have processing enterprises, how would they compete in the market when their cost of funds is over 30 percent and their power cost is right in the stratosphere?
In the 1990s when I edited Export Gazette, the atomized Nigerian exporters had a roasting from European criminals. They would open letters of credit for Nigerian exporters for at best 95 percent of the value of their commodity and the remaining percentage would be subject to confirmation of quality at destination. I didn’t know a single Nigerian exporter who got that remaining value. And their exports were good. Is that where we are going again?
The government had better thought this through before embarking on a project bound to failure again.
