Hours after Nigeria Bureau of Statistics (NBS) released the 2020 third-quarter economy report indicating that the country has technically entered into another recession, Nigeria’s former Vice President, Atiku Abubakar, has recommended that the Federal Government impose a luxury tax and poverty alleviation tax to get the country out of its current challenge.
Atiku also suggested that the apex government should review the 2021 budget to cut non-essential lines including a strict reduction of cost of governance, and terminate all plans to borrow funds either local or international as it would further inflict more blows on the already fragile economy.
The former presidential candidate stressed that rather than borrow to fund white elephant projects, the President Muhammadu Buhari-led administration should concentrate on investing in human development, and increasing the purchasing power of the vulnerable population in the country.
Following figures published by the National Bureau of Statistics (NBS), which showed two consecutive contractions in second and third quarters and the depth of the contractions said to be the worst in decades with the cumulative Gross Domestic Product (GDP) for the first nine months of the year (January- September) indicate growth of -2.48 percent.
With the latest performance, the country has officially gone into a second economic recession, after the first in 2016, though it expects a quick recovery by the first quarter of 2021 but Atiku argued that for such to occur, the country’s leadership must admit it deficiencies and seek help from different sources to address the issue.
The former vice president, who offered the recommendations in a statement titled ‘We Must Exit This Recession With Precision’, and made available to newsmen on Sunday, stated that the recession could have been avoided had the current administration taken heed to patriotic counsels given by Nigerians including himself, on cutting cost of governance, saving for a rainy day, as well as avoiding profligate borrowing.
According to him, the COVID19 pandemic has exacerbated an already bad situation, however, we could have avoided this fate by disciplined and prudent management of our economy.
“For a start, the proposed 2021 budget presented to the National Assembly on Tuesday, October 8, 2020, is no longer tenable. Nigeria neither has the resources, or the need to implement such a luxury heavy budget. The nation is broke, but not broken. However, if we continue to spend lavishly, even when we do not earn commensurately, we would go from being a broke nation, to being a broken nation.
“As a matter of importance and urgency, every non-essential line item in the proposed 2021 budget must be expunged. For the avoidance of doubt, this ought to include estacodes, non-emergency travel, feeding, welfare packages, overseas training, new vehicle purchases, office upgrades, non-salary allowances, etc.
“Until our economic prospects improve, Nigeria ought to exclusively focus on making budgetary proposals for essential items, which include reasonable wages and salaries, infrastructural projects, and social services (citizenry’s health, and other human development investments).
“Additionally, we have to stimulate the economy, by investing in human development and increasing the purchasing power of the most vulnerable of our population. Only a well-developed populace can generate enough economic activity for the nation to exit this recession.
“We must invest in those most likely to be impacted by the effects of the recession, the poorest of the poor. As well as stimulating the economy, this also ensures that they do not slip further into extreme poverty.
“For example, a stimulus package, in the form of monthly cash transfers of ₦5000 to be made to every bank account holder, verified by a Bank Verification Number, whose combined total deposit in the year 2019 was lower than the annual minimum wage.
“Now, how will this be funded? By more profligate borrowing? No. I propose a luxury tax on goods and services that are exclusively accessible only to the super-wealthy. A tax on the ultra-wealthy to protect the extremely poor.
“A practical approach to this is to place a 15 percent tax on all Business and First Class tickets sold to and from Nigeria, on all luxury car imports and sales, on all private jets imports and service charges, on all jewellery imports and sales, on all designer products imported, produced or sold in Nigeria, and on all other luxury goods either manufactured or imported into Nigeria, with the exception of goods made for export. The proceeds of this tax should be exclusively dedicated to a Poverty Eradication Fund, which must be managed in the same manner as the Tertiary Education Trust Fund, or the Ecological Fund.
“I further propose that a 1 percent poverty alleviation tax should be legislated by the National Assembly on the profits of every International Oil Company operating in Nigeria, and international airlines doing business in Nigeria, which should also go towards the proposed Poverty Eradication Fund.
“It is inhumane for us as a nation to increase the cost of goods and services that affect the poor, while keeping the cost of luxuries fairly stable. We must flip this, and flip it immediately.
“And above all, Nigeria must stop borrowing for anything other than essential needs. Again, for the avoidance of doubt, borrowing to pay salaries, or to engage in White Elephant projects, is not an essential need. This is particularly important as we need cash at hand because the world and our economic and development partners are also focused on helping their home economies overcome effects of COVID19. We must be our own saviours.
“The more we borrow, the more we will need cash to make interest and principal payments, and the less cash we will have to make necessary investments in our economy and our people. If we keep borrowing, we stand the risk of defaulting, and that will make the recession a child’s play because we will lose some of our sovereignty”.
It would be recalled that the NBS said the performance reflected residual effects of the restrictions to movement and economic activity implemented across the country early in the second quarter of 2020 in response to the COVID-19 pandemic.
During the review quarter, aggregate GDP stood at N39.09 trillion in nominal terms, compared to N34.34 trillion in the second quarter, while real GDP stood N17.82 trillion, compared to N15.89 trillion in the preceding quarter.
Growth in the third quarter of 2020 was boosted by the non-oil sector, which contributed 91.27 per cent to growth in real terms, higher than the 91.07 per cent in the second quarter, and 90.23 per cent in the third quarter of 2019.
On the other hand, the oil sector contributed 8.73 per cent to total real GDP in the third quarter of 2020, down from 8.93 per cent in the second quarter. Real growth of the oil sector contracted to 13.89 per cent (year-on-year) in the third quarter, indicating a sharp contraction of 20.38 per cent relative to the rate recorded in the third quarter of 2019.