As Coronavirus disease (COVID-19) continue to jolt economies across the world, Nigeria is equally battling to find the right balance between revenue drive and rising poverty occasioned by effects of the pandemic on the productive sector of the economy.
Stakeholders under the auspices of the Organised Private Sector (OPS) have urged the Federal Government and state governments to focus more on stimulus to aid the recovery of the productive sector, and improve household incomes rather than intensify its revenue drive from taxes.
According to them, many businesses are already over-burdened and may cease to be operational if the tax drive remains aggressive.
This is as the Federal Government intensifies measures to generate revenue with consumers largely affected.
From an increase in VAT in February to stamp duties, an adjustment in fuel price, consumers have had to deal with other soaring costs from the private sector like POS levy, USSD code levy, a levy on deposits, or withdrawal over certain thresholds and inflation.
This perhaps, explains why the opposition Peoples Democratic Party (PDP) has accused President Muhammadu Buhari, and his ruling All Progressives Congress (APC) of overburdening Nigerians with taxes and tariffs, stressing that the government cares less about relieving the suffering poor of their plight.
With the real GDP growth of the manufacturing sector falling in the first quarter of 2020, local manufacturers have expressed worries that reduction in household incomes, occasioned by the loss of jobs and salary cuts due to the pandemic, alongside inflation, will further affect consumption and capacity to purchase goods.
According to the stakeholders, if the outbreak persists, there would be dire economic outcomes for the country. The decline in oil revenue due to reduced demand from key foreign customers, fall in forex reserves among others would sure have dire consequences.
They equally noted that the cost of imports from key trading partners such as Italy and China is likely to spike, resulting in cost-push inflation, while the rate of unemployment may increase due to slowdown in economic activities.
The stakeholders added that a potential fall in tax revenue and soaring debt, which would impact developmental outcomes is inevitable, while the potential decline in aggregate GDP due to slowdown in economic activities should be expected.
While the World Bank recently warned of the imminent recession that could be the worst experience in almost 40 years, the International Monetary Fund (IMF) urged Nigeria to slow down on its aggressive tax drive due to the impact of COVID-19 on businesses and households.
The Bank predicted that there would be 95.7 million Nigerians living below the poverty line by 2022, aggravated by the effects of the virus.
“With real per capita GDP growth forecast to be negative in all sectors in 2020, poverty will deepen for the current poor, while those households that were just above the poverty line prior to the COVID-19 crisis will fall into poverty”, says the World Bank.
The fund, however, told the Federal Government to continue to push for policies that are supportive of its citizens, even as it commended monetary policies initiatives that have been introduced by the Central Bank of Nigeria (CBN) to cushion the impact of the pandemic on the people.
In its reaction, the Lagos Chamber of Commerce and Industry (LCCI) said that what the country needs is a combination of appropriate stimuli, the right policies and an environment that facilitates wealth creation.
According to the Director-General of the LCCI, Dr. Muda Yusuf, the Economic Sustainability Plan announced by the Federal Government is a step in the right direction.
“The total value of the stimuli in the ESP is N2.3t. If we get the implementation right, it would have a positive impact. Concurrently, the response actions against the COVID-19 pandemic has to be reinforced. This is necessary to free the economy from the shackles and restrictions of the COVID-19 containment measures.
“It is important to recognise the measures already taken by the monetary authorities to inject liquidity into the economy and provide some succour to businesses.
“The reality is that it will take some time for investors and citizens to recover from the shocks of the pandemic. Business models would have to be reviewed, spending behaviour by corporates and citizens would have to change. Businesses have to reckon with changing consumer preferences. There are response strategies at government level, corporate level and household levels,” he added.
On his part, the Director-General of Nigeria Employers’ Consultative Association (NECA), Olawale Timothy, stated that while businesses are hard-pressed to pay taxes at this critical period, it is necessary that the government supports the real sector and other sectors with capacity to pull the economy out of recession to remain sustainable.
He stated that attention should be given to sectors like manufacturing, construction and others that have the potential to create large-scale employment, adding that with the economy working and productive activities increasing, the nation could slow down or avoid recession.
“Government should explore strategies to include the outright sale or lease of the four national refineries in order to enhance efficiency and effectiveness; stoppage of the petrol subsidy regime and total deregulation of the downstream oil sector; quick diversification of sources of foreign exchange; and deliberate curbing of waste and leakages in government,” he added.
An economist, business and policy consultant, Dr. Vincent Nwani, urged the government to look away from cheap loans and explore other diverse ways of attracting investments into the economy.
He urged managers of the economy to commit to improved fiscal discipline and transparency at all levels, adding that it has become imperative for the country to set a specific framework that aligns with its risk appetite, economic growth drive, revenue profile and “ability to pay” realities.
The opposition party, which spoke through its national chairman, Prince Uche Secondus, yesterday, lamented that while other world leaders were raising stimulus in the form of palliatives to cushion the biting effects of COVID-19 on their citizens, President Buhari is busy heaping more burden on the populace with his endless taxes and tariffs.
He lamented that the failures of the Buhari-led administration are strangulating the nation’s economy, killing small and medium enterprises (SMEs), and causing investors’ flight to other neighbouring countries where business environments are conducive and friendly.
“I find it laughable and contradictory that a regime that multiplies people’s taxes and hikes prices indiscriminately during this pandemic is talking of lifting some Nigerians out of poverty with such draconian and insensitive policies that earned the country the ignoble title of ‘poverty capital’ of the world.”
Secondus listed some of the taxes that have further impoverished the people to bank charges, stamp duty by CBN, increased VAT, charges on cash deposits and withdrawals above N500, 000 for individuals and N3m for corporate accounts, as well as fuel price increase among others.