By Henry Boyo

Inspite of the assurances of Okonjo-Iweala, the Finance and Co-ordinating Minister of the Economy that Nigeria is not broke, there are concerns that falling crude oil prices may in fact belie the Minister’s apparent confidence. Indeed, crude oil which accounts for over 50% of Federal revenue has dipped below $90/barrel after remaining stable between $100-110/barrel for over two years.

Although, the current market price still exceeds the 2014 budget benchmark of $77.5/barrel, observers have noted that reduced international demand and regular production shortfalls below budget benchmark of 2.45m barrels/day, as well as alarming massive oil theft and rampant pipeline vandalisation may make revenue projections unattainable.

Certainly, published statistics on oil output and revenue will continue to be controversial as audited authentic figures on production and related sale prices are not readily available public information; indeed, some observers wonder why revenue projections should be a concern, when crude prices exceeded budget projections by up to 30% for over two years; furthermore, Diezani Madueke, the Petroleum Minister had also suggested according to media reports that production exceeded budget benchmark and OPEC quotas for some time.

Okonjo-Iweala, Diezani and Jonathan

Nonetheless, we will have to accept Okonjo Iweala’s assessment, that if the Excess Crude revenue Account which dropped to $4.0bn can be increased to $5bn, Nigeria’s economy would retain its current stability (Guardian Newspaper, 28/10/2014, Pg. 3). This assertion, of course assumes that the current state of Nigeria’s economy is satisfactory; however, even a blinkered apologist of government performance will admit that our economy cannot be described as successful, when government gleefully borrows back its own free funds with double digit interest rates and over 70% of our population live on less than $2 a day, with unemployment at almost 30%, and over 50% of our youths aimlessly idle, while, inflation annually eats up over 8% of the purchasing power of all income earners, particularly the wages of the majority who earn less than the minimum wage of N18,000/month introduced four years ago.

However, if according to Madam Minister, $1bn is all the additional revenue needed to keep the economy afloat, then we really should lose no sleep because of dwindling revenue from crude oil, since our own well endowed chattel, the Central Bank of Nigeria still sits comfortably on close to $40bn, which is inexplicably designated as CBN’s own dollar reserves. Surely, a two percent reduction in CBN reserves should not jeopardise the stability or the strength of the Apex Bank.

Nevertheless, Okonjo-Iweala has suggested that inspite of current revenue contraction, public finance can still be astutely managed to ensure that the balance in the Federal government’s unilaterally designated Excess Crude Account, which incidentally State Governors have rejected as unconstitutional, can still be augmented. Obviously, any such augmentation will inevitably come from deferred or reduced expenditures from some other sectoral budgets. However, since this administration has apparently found it inconvenient to reduce the clearly bloated expenditure budget, the usually relatively paltry votes for capital and infrastructural enhancement may regrettably suffer further decline, with adverse consequences for improved social welfare for the masses.

Nevertheless, in an attempt to shore up its non oil revenue, the Federal government, according to a report in the Punch edition of 30/10/2014, Pg. 38, indicated that it “had raised the revenue targets of the Nigerian Customs Services and the Federal Inland Revenue Service.”

In its reaction to this development, the Lagos Chamber of Commerce and Industry however warned that “there is a risk that best practice principles will be compromised by government’s revenue generating Agencies in their desperation to meet set targets.” The LCCI President, Alhaji Remi Bello, noted that “there were already negative manifestations in the mode of Import Valuation by the Customs Service.” Importers, according to Bello “have been made to pay import duty and other charges that are far beyond what they ordinarily should have paid; many investors have consequently suffered untold hardship as a result of this practice.”

Similarly, officials of the FIRS seem to have also been given a carte blanche opportunity to intimidate and extort payments from companies in the name of revenue drive ordered by ‘Oga at the top’. Regrettably, those companies, which have been victims, unfortunately have no sincere, transparent, effective or timely dispute resolution system in place. Consequently, the LCCI Chairman called on government’s revenue collection Agencies “to concentrate more on the efficiency of collection and the expansion of tax coverage rather than inflicting hardship on businesses that were already in compliance.”

Ironically, in contrast to its directive on aggressive revenue drive, the Federal government, according to Oscar Onyeama, CEO of the Nigerian Stock Exchange, has waived the payment of Value Added Tax on all capital market transactions, since the last two years; Onyeama confirmed that VAT exemption is now effective on all Commissions applicable to capital market transactions. According to the NSE CEO, “the elimination of VAT on stock market transaction fees will ultimately reduce the cost of transactions for investors and will encourage investments in the Nigerian capital market.”

Onyeama further urged government to also implement the stamp duty waiver which was earlier announced along with VAT exemption in 2012. Curiously, VAT exemption on commissions and stamp duty waivers are in addition to a debt forgiveness of about N22.6bn by AMCON to stock brokers who contravened the provision of the Investment and Securities Act by their flagrant involvement in margin trading; a case of waivers for the rich and hard labour for the poor, one might say.

In the light of the above, we should be concerned that any responsible administration will subject its wealth creating real sector to a harrowing experience of harassment by government’s revenue generating agencies, while actively excluding commission income from a “casino market” such as the stock market from any form of taxation. The question is, what percentage of Nigerians directly profit from commissions on Stock Exchange transactions compared with the majority whose livelihood would be directly positively impacted by the activities of productive and social welfare supportive subsectors which are under the aegis of the LCCI and Manufacturers Association of Nigeria respectively? Why must government penalize those who lay the golden eggs while featherbedding the interest of plain rent seekers and criminals in the economy?

Besides, we should similarly be concerned that despite alleged dwindling crude oil revenue, government obviously has no answer that would redeem the wasteful expenditure of over N1500bn (about $7.5bn) for subsidising fuel annually. Worse still, there is no hope that government appears capable of plugging the gaping holes of massive theft of crude oil in order to shore up our dwindling revenue base.

Save the Naira, Save Nigeria.