The Federal Inland Revenue Service (IFRS) intends raising Nigeria’s tax ratio of six per cent of gross domestic product (GDP) to 17 per cent by 2023, according to Muhammad Nami, executive chairman at IFRS
Nigeria is in a race to develop its infrastructure coupled with other financial commitments, and it is increasingly turning to tax to raise its revenue.
Zainab Ahmed, finance minister, emphasised the necessity of the Nigerian government to broaden its revenue base. “We need to invest on roads, rails and to be able to grow at a rate better than we are growing now,” Ahmed added.
Babatunde Fashola, minister of works, explained that there were a total of 524 ongoing road projects across the country but no money to execute them.
To bridge the deficit gap, the Nigerian government is borrowing externally and internally. The executive had asked the parliament to approve an external debt of US$22.718bn.
Fashola added, “We have had deficit budgets for a long time and so we have to borrow. Over four years, we have never received full funding for any budget. There is a deficit and we cannot finance it. We must find a way to finance these assets. We will be spending today’s money to secure tomorrow’s assets.”
Nigeria’s total public debt rose by US$9.2bn in one year to US$71bn at the end of June 2019, said Nigeria’s Debt Management Office (DMO), the government agency established to centrally coordinate the management of Nigeria's debt.
The nation’s public debt, which stood at US$62bn as of June 2018, increased to US$67bn in December 2018 and US$69bn in March 2019. Out of this, the central government owed US$56bn as of June 30, 2019, while the 36 states and the Federal Capital Territory had a total debt portfolio of US$15bn.
The debt stock is made up of US$27.16bn external debt and US$48bn were borrowed from domestic sources, said the DMO.
However, the Nigerian government said that it did not have a debt challenge, but that of generating enough revenue. Hence, the efforts by the IFRS aim to increase generated revenue and broaden the tax base.
Zainab Ahmed and other Nigerian government officials had stressed, “Our debt is still very much within a reasonable fiscal limit.”
According to the DMO, Nigeria’s debt ceiling is 25 per cent on the total public debt stock to GDP and the ratios for 31 December 2018 and 30 June 2019 were 19.09 and 18.99 per cent respectively.
