The average Nigerian is allergic to paying taxes (tax to GDP ratio in Nigeria is 5.3% as against the SSA average of 22%). This attitude has as its origin the belief that the bulk of government revenue is either stolen or squandered by public servants. In other words, the Nigerian government has historically had a high trust deficit. Whilst this is partially true, there is also a false sense of entitlement of most citizens that oil revenues are enough to run the country and the surplus is to be shared (the oil curse & Dutch Disease).
In reality, Nigeria has a twin tax problem of revenue shortfall and tax administration. The solutions being proposed to address these issues are simplifying Nigeria’s tax administration and expanding the tax base through technological initiatives.
However, there is a strong correlation between the aggregate tax revenue and the rate of economic growth. In the last week, the NBS released two major data points: i) Q4’18 GDP data & ii) Q4’18 Capital Importation. One of the data points confirmed deteriorating external imbalances while the other confirmed positive economic growth. Some cynics have raised doubts about the integrity of the data. However, FDC has unequivocal confidence in both the integrity of the data and the institution of NBS.
In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
Do enjoy your read!