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AfDP says debt servicing poses greatest risk to Nigeria’s economy

Debt servicing has been identified by the African Development Bank (AfDP) as posing the greatest risk to Nigeria’s economic well-being.  The bank therefore called on the Federal Government (FG) to take steps to increase tax revenue to make up for the dwindling oil income.

The President of AfDB, Dr. Akinwunmi Adesina disclosed this while speaking virtually at the First Annual National Tax Dialogue. According to the Director of Communications and Liaison of the Federal Inland Revenue Service (FIRS),  Abdullahi Ahmad, yesterday,  Adesina  said  due to the impact of the COVID-19 pandemic, Nigeria’s economy shrank “by 3 per cent in 2020 on account of falling oil prices and the effects of the lock downs on economic activities,” adding, “with shrinkage in oil revenues, debt service payments pose the greatest risk to Nigeria.” The AfDP boss said further that for Nigeria to overcome the pandemic, “taxes must form a significant percentage of government revenue. Digitalization of tax collection and tax administration was critical to ensure greater transparency of the tax system, widening of the tax base, while mitigating compliance risks and encouraging voluntary tax compliance.”

Tax experts and stakeholders at the event also called for the automation of tax collection by the FIRS through data and intelligence in order to ease tax collection, as well as, improve revenue. Executive Secretary, African Tax Administration Forum (ATAF),  Logan Wort, spoke on the place of technology in generating revenue for the country in a post-COVID economy.  Wort, who joined the dialogue virtually from South Africa, stated, “Domestic Resource Mobilisation (DRM) is expected to contribute at least 75 per cent  to 90 per cent  on average per country” in the post- COVID era, adding that Nigeria and other African countries should note, “improved tax revenue will have to take prime position” in the scheme of things. He urged Nigeria to pay serious attention to e-commerce and the digital economy sector where big, trans-national digital conglomerates like Google, Netflix and Uber operate and make huge, tax-free profits as a possible way of increasing tax revenue generation. He said Nigeria should borrow a leaf from Ghana in e-commerce taxation, projected to fetch Ghana $450 million in annual tax revenue.

Ekiti State Governor, Dr. Kayode Fayemi, who was chairman of the dialogue, was quoted as lauding the FIRS “for its performance in the 2020 fiscal year, despite operating in the most challenging period. FIRS did not only collect N4.9 trillion in taxes, achieving 98 per cent  of its target; only 30.6 per cent of this was attributed to Petroleum Profits Tax, from what used to be over 50 per cent”. He urged participants to, “interrogate how Nigeria can further deepen the use of technology to improve tax compliance nationally and across sub-nationals.”

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