Investors Chart Roadmaps For Federal Government Of Nigeria To Improve Non-Oil Sector’s Revenue Drive
LAGOS – Investors in the nation’s economy have called on the Federal Government to consider reform for key non-oil sectors of the economy to intentionally ensure price stability and economic growth.
They said that the recent Company Income Tax (CIT) collectibles from the Oil Sector, Offshore Operations, Oil Marketing, Oil Producing and Petro-Chemical and Petroleum Refineries, released by the NBS, which remained dismal in the two quarters of 2021, points to the fact that non-oil sector still remains a critical sector for improved growth and development of the economy.
They also believe that Federal Government policy direction towards addressing resultant high cost of production linked to the massive infrastructural deficit which compels investors to provide required infrastructure at their own expense, high costs of funds and dearth of long term funds, low technological base, dumping of imported goods, multiple taxation, frequent changes in government policies, low government patronage of Made-in-Nigeria goods is needed to optimise both the domestic and regional market of these sectors, for improved non-oil revenue generation.
They told Daily Independent that for Nigeria to be positive in terms of price, production volume and export volume, there is need for Federal Government to increase the tax net for improved revenue and less dependent on sales from oil sector.
The investors further implored the policy makers to appreciate the peculiar challenges of the various sub-sectors and for a strategic plan to ensure that all groups are given the necessary support to survive.
According to the Company Income Tax (CIT) data for Q2:2021 published by the NBS last week, gross CIT realised by the Federal Government grew 20.2% q/q (or 17.4% y/y) to print at N472.1bn.
This holds positive for Federal Government’s non-oil revenue projection in 2021, given that the segment already attained a 99.7% pro-rated target in the 5-months between January and May.
The improvement in gross CIT was driven mainly by the domestic CIT component as it grew 174.2% q/q (or 66.3% y/y) to N417.7bn.
This is attributable to the improved performance to the full reopening of economic activities post-2020 lockdown.
But, the foreign CIT component moderated 72.0% q/q (or 56.8% y/y) to N51.6bn.
The investors insisted that the reduction was due to collection reporting time-lag (by the assigned foreign bank), as global economic activities gained further traction over this period, to the benefit of Nigerian-owned businesses in the diaspora.
While the CIT generated through online tax channels such as Remitta, E-Transact, and E-tax pay, moderated by 95.1% q/q and 91.3% y/y respectively to N2.7bn, the investors linked the moderation to technical exigencies (from FIRS), which preceded the full adoption of E-filling of CIT and Value Added Tax (VAT), effectively, June 7, 2021.
Relative to Q1:2021 (with 11 sectors), 18 of the 28 activity sectors recorded growth in CIT payment, led by professional services (up 616.0% q/q to N130.1bn), other manufacturing (up 436.9% q/q to N87.3bn), banks and financial Institutions (up 548.3% q/q to N60.0bn), and commerce & trading (up 75.2% q/q to N23.7bn) with a combined share of 72.1% of the total CIT.
Segun Ajayi-Kadir, Director General of manufacturers Association of Nigeria (MAN), told DAILY INDEPENDENT that government, in collaboration with the manufacturers, should select strategic products, particularly those with high inter-industry linkage, for backward integration support and upscale the drive for the resource-based industrialisation agenda
He said: “We call for more intentional actions from Government, focused on supporting productive activities to drive better performance in the remaining quarters of the year.
“Federal Government should give priority allocation of forex to manufacturers to import inputs that are not locally available and for which there are no immediate plan or resources to produce locally. Since policies are dynamic, they could change as soon as we develop local capacity.
“Also, there are quite a number of moribund industries in the country. There should be an industrial clinic to engender their resuscitation in order to boost output and ultimately achieve price reduction”.
Ambassador Tunde Adetunji, CEO/President Africa Heritage Foundation (AHF), Atlanta Georgia, USA in a chat with DAILY INDEPENDENT, called on fiscal and monetary authorities to partner with the private sector on policies designed in the short, medium and long term to address those growth factors that would focus more on interventions that will make the biggest impact within the shortest possible time.
He added: “It is also important for the policy responses to be complementary and coordinated from the fiscal, monetary, trade and investment perspectives. For instance, interventions in the area of impediments to capacity utilisation by firms especially in labour intensive sectors, reducing regulatory hurdles and addressing multiple taxation facing small businesses will improve productivity which in turn will reduce inflation and enhance job creation.”
Dr. Timothy Olawale, Director General of Nigeria Employers’ Consultative Association (NECA), told DAILY INDEPENDENT that the private sector is expected in any country to create employment, conduct trade, provide goods and services and pay taxes to fund essential public services like health and education.
He said: “Achieving these and many more depends hugely on policies in place by Government in oiling the sector adequately. It is important for policy makers to appreciate the peculiar challenges of the various sub-sectors and for a strategic plan to ensure that all groups are given the necessary support to survive”, he said.
He said the recent data on Company Income Tax released by the National Bureau of Statistics, reflected an improvement of 20.23% in Q2, 2021 (which was N392.64bn to N472.07bn) over Q1, 2021.
He said: “We call on Federal Government to embark on policy direction towards improving and sustaining contribution of sectors will include, addressing resultant high cost of production linked to the massive infrastructural deficit which compels investors to provide required infrastructure at their own expense, high costs of funds and dearth of long term funds, low technological base, dumping of imported goods, multiple taxation, frequent changes in government policies, low government patronage of Made-in-Nigeria goods
“These conditions have also discouraged FDIs in manufacturing sub-sectors. Apart from the banking, oil and gas and telecommunications, the level of FDIs in other industries in the sector have been low.
“Furthermore, to improve the contribution of the non-oil economy, there is need to increase the tax net for improved revenue and less dependent on sales from oil sector. While we applaud giant strides by the Federal Inland Revenue Service (FIRS) and the Federal Ministry of Finance, Budget and National Planning with various interventions through the Finance Act as regards bolstering tax revenues in the country.
“However, more can still be done by reducing the burden on the already captured companies within the tax net by widening the tax base using modern technology methods”.
Engr. Ralph Ndigwe, national coordinator of the Civil Resource Development and Documentation Centre (CIRDDOC) Nigeria told Daily Independent that: “Government should intensify its intervention initiatives and follow through on the cost reduction aspect of ease of doing business.
“There is urgent need to create a friendlier operating environment and deliberately support the productive sector in a strategic manner. Setting priorities along the line of improved infrastructure, competitiveness and stronger industrial linkages”
Mr. Friday Udo, South-South Coordinator of Institute of Chartered Economists of Nigeria (ICEN), in his comments, called on the Federal Government to deliver on specific mandates irrespective of the prevailing uncertainties and disruptions in the Nigerian economy to address the current high cost of production linked to the massive infrastructural deficit
He said: “If policy challenges with exchange rates, insecurity, among others, are addressed effectively, the country would start seeing some positive projections into 2021 and the beginning of 2022”.
Dr Muda Yusuf, Economist and former Director General of Lagos Chambers of Commerce and Industry (LCCI) told DAILY INDEPENDENT that the best practice in most parts of the developing world is to create frameworks to generate revenue outside of the normal budgetary allocations for the development of road infrastructure.
AFRIVEST in its weekly report on Q2:2021 CIT Data: Recovery of more Activity Sectors Boost Performance, stated that the improved performance of the economy was due to the full reopening of economic activities post- 2020 lockdown. However, the foreign CIT component moderated 72.0% q/q (or 56.8% y/y) to N51.6bn.
The analysts said: “We suspect that the reduction was due to collection reporting time-lag (by the assigned foreign bank), as global economic activities gained further traction over this period, to the benefit of Nigerian-owned businesses in the diaspora.
On why the CIT generated through online tax channels such as Remitta, E-Transact, and E-tax pay, moderated by 95.1% q/q and 91.3% y/y respectively to N2.7bn, the analysts said: “ We link the moderation to technical exigencies (from FIRS), which preceded the full adoption of E-filling of CIT and Value Added Tax (VAT), effectively, June 7, 2021”.