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Why Nigeria’s dependence on Petroleum for Revenue is no Longer Relevant

Why Nigeria’s dependence on Petroleum for Revenue is no Longer Relevant

It should be obvious to us that the path to sustainability of this economy can no longer go through the slippery slope of petroleum. Granted, we must increase investment in petroleum, but the future and sustainable path must be a non-oil driven economy. We simply have no choice in the matter. One area that can generate more revenue for us as a nation is through taxes and levies.

According to the World Bank, tax revenues above 15% of Gross Domestic Product (GDP) is a key ingredient for economic growth. An analytical look at the top 10 economies in Africa will make you shake your head for Nigeria and how far we are from the mark. Despite the fact that Nigeria tops at the GDP and population, it is far behind in tax to GDP.

This indicates the need for us to look inward to generate more revenue via tax. In 2021, FIRS generated N6.4Trillion. If we add IGR from States which is around N1.6Trillion, it gives us a total of N8Trillion ($19bn & 4.5% of GDP) of tax revenue generated. This is far behind the world recommended 15% of GDP. This means that at the very least, we need to generate N27 Trillion ($64.5 bn) of tax revenue. I believe that this is not only possible, but we can actually do better. With N27 Trillion, FIRS can quadruple its contribution to the Federal Budget which will reduce the budget deficit.

Nigeria really needs money to power its economy. We are extremely short of revenue and I support the need to urgently look for global investors and wealth managers. The government alone can’t raise money to be used for our infrastructural need. 

There are still large number of people in FIRS tax net, and if properly harnessed can increase our revenue base accrue from tax which is key source of revenues for most advanced countries. If South Africa with a lower population and GDP can achieve a tax to GDP of 26%, surely we should be able to achieve 15% and even more.

With more revenue, It means there will be more money to meet recurrent expenditures and capital expenditures of both the Federal and States government – Key ingredients in economic growth, development and reduction of poverty.

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That said, the talents leaving the country in droves know they are going to climes where they would not be spared in terms of taxes. But they do not mind because they can see evidence of tax compliance in social and economic benefits. I do not think Nigerians will mind paying tax if they can see the sincerity of the government at national and subnational levels, using their tax to benefit the people and not their pockets and cronies. Fashola did it in Lagos. Many Lagosians without prompting did their self assessment and paid their income tax. It can still be done with sincerity of purpose from the government at all levels.

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