Godwin Emefiele, the Governor of Central Bank of Nigeria, CBN, is one official who has my total sympathy. He is the victim of economic circumstances absolutely beyond his control, yet, he is looked upon to provide solutions to problems well outside the mandate of the CBN. Unjustifiably, he had become the target of attack from all sides – manufacturers, importers, exporters, BDCs, domiciliary account holders, banks, oil companies,
Nigerian Labor Congress, media commentators etc – who hold him responsible for whatever predicament they face at the moment. This is a classic case of blaming the victim. The problems Nigeria is experiencing now started long before Emefiele and will remain, in one form or another, long after he had turned 80 or more. They will remain, that is, if we fail to accept reality, take the painful economic medicines we must, like any sick nation or person, and learn from the mistakes of the past.
One horrible mistake we have made since 1999 is related to the absence of a comprehensive and sustained fiscal policy by every government since the return to civil rule. As the price of crude oil went on an upward-bound elevator – going from $20 per barrel to, at one time $145 per barrel, Obasanjo, Yar’Adua and Jonathan, as well as their Finance Ministers dispensed with the need to take the tough measures which would have saved our foreign reserves, earned mostly from crude oil, and position the economy to be less dependent on crude exports.
Even World Bank Managing Director, Dr Ngozi Okonjo-Iweala, who had made statements in that regard failed to push the governments she served to avoid the consequences of resource curse which now stares the country in the face. Diversification of the economy to reduce dependence on crude was written into every budget, routinely, promotion of medium and small scale enterprises was also mentioned frequently; banks were expected to provide credit for SMEs and agriculture and tourism was touted as a major foreign exchange earner.
All the right noises were made but there was no articulated policy; neither was there any plan of action. Banks annually fail to provide the credits expected to agriculture and SMEs and there were no sanctions for their failure to do so. Like all entities (human, organisation or nations) which fail woefully, we failed to plan and to act. For almost fifteen years crude oil stood like the Rock of Gibraltar, against which our economy could lean – indefinitely.
That was the most unfortunate aspect of the current debacle in which we find ourselves. “Those who do not remember the past are condemned to repeat it”, said George Santayana, 1863-1952. Less than twenty years after we experienced the OIL DOOM, which lasted from 1983 to 1997, we were again mesmerized by the rising price of crude and failed to implement all the fiscal policy measures which were outlined during the Structural Adjustment Programme, SAP, introduced by President Babangida, IBB.
That government had laid out a comprehensive agenda aimed at ensuring that fiscal policy was complementary to monetary policy. The Executive branch is always responsible for fiscal policy; while the semi-autonomous CBN handled monetary policy. No economy can long operate with either fiscal or monetary policy alone. Unfortunately, this is what has happened in Nigeria and is still happening now. We have no fiscal policy in place. That has put all the pressure for economic stability and GDP growth on the CBN. It won’t get us anywhere because crude prices are unlikely to reach $110 again in at least ten years from now.
It is for that reason that the recent announcement by the Vice-President, Professor Yemi Osinbajo, is most welcome. According to the VP the Federal Government is looking towards changes in the tax regime as an option to shore up dwindling revenue. It is an indispensable option for the simple reason that previous Nigerian governments had treated tax collection or legislation as a nuisance they would rather not touch – as long as crude dollars keep flowing into our accounts. Taxes have now taken centre stage as the illusion of perpetual high inflow of crude revenue fades and Nigeria must face reality.
However, identifying increased tax collection as a viable option is one thing determining what and who to tax is a different thing because tax regimes that are not properly articulated can do as much damage as good. Furthermore, without the iron will to ensure that the taxes are collected, the entire effort can end up as a paper exercise. Nigeria is a large country and the mechanisms for tax collection have not reached every part of the country. Thus, a lot of transactions which should be taxed escape the tax net.
Take Value Added Tax, VAT, for example. Introduced since the middle 1980s by IBB administration, VAT is still not collected by all the economic units which should collect and not all the collectors remit the taxes collected on behalf of government…
Vanguard
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