Nigeria: Spending VAT Proceeds On Recurrent Expenditure Counter-Productive - ActionAid Nigeria

28 October 2019

A civil society organisation, ActionAid Nigeria (ANN), has said it is counterproductive to spend the proceeds of the value-added tax (VAT) on recurrent expenditure in Nigeria.

In a statement it issued on Saturday, the organisation also said the current VAT collection system is ineffectual and porous.

The group decried the high cost of governance in Nigeria and lent its voice to the call for a unicameral legislature and the reduction of the ministries, departments and agencies.

It also lamented that the 2020 federal budget allocated more resources to debt servicing than to infrastructural and human capital development.

Read Full Statement

Text of a Press Release Issued by the Board of Trustees of ActionAid Nigeria, after a review of the State the Nation on the 26th day of October, 2019 in Abuja, Nigeria

ActionAid Nigeria has followed with keen interest the various developments in Nigeria within the third quarter of 2019. Not discarding the efforts of government in improving the economy, we believe that much more can be done to make Nigeria better and safer for the citizens.

We have therefore reviewed the happenings in government, economy and issues of security within the last quarter, particularly as it affects vulnerable groups: women, children, Persons with Disabilities (PwDs), and the youths. Below are some of our findings and recommendations.

OBSERVATIONS:

- Cost of governance in Nigeria is disproportionately high relative to productivity and there is need for urgent action if government really wants to improve the situation.

- The current VAT collection system is ineffectual and porous. Spending VAT proceeds on recurrent expenditure is counter-productive.

- The 2020 proposed budget has huge provisions for debt servicing and does not address the high need for infrastructural development given the growing population.

- The growing insecurity and volatile environments in different parts of the country will make it very difficult for development programmes to be implemented if not promptly dealt with.

- Climate change is perhaps the most serious environmental threat to the fight against hunger, malnutrition, disease and poverty in Nigeria, mainly through its impact on agricultural productivity.

- The rights of communities where mining take place in Nigeria are not adequately protected. There are gaps in mining laws and investors do not comply with regulations.

- Nigerian universities lack gender-specific mechanisms to tackle violence against students, particularly females and their peculiarities.

RECOMMENDATIONS

1. To cut running cost, Nigeria must reduce the number of Ministries, Departments and Agencies as a matter of urgency. Government also must liaise with the Revenue Mobilization and Fiscal Commission (RMFAC) to slash salaries of all lawmakers and political office holders in order to save money for the infrastructural development of Nigeria especially now that funding the 2020 budget poses a huge challenge. The Senate or the House of Representatives should be scrapped as a bi-cameral legislature increases the cost of governance.

2. There is need for more consultation with stakeholders, as the proposed VAT increase will hike inflation and put more economic burden on the masses. Rather than increase VAT, AAN calls for broadening of the Nigerian tax base. We insist on a thorough appraisal of the current VAT regime and ask FG to account to the people how the proceeds are spent.

3. The 2020 budget should capture adequate funding of Agriculture, Health and Education sectors given their strategic importance. Agriculture employs up to 80% of the population, especially in the informal sector, where the majority of the small-scale food producers are women farmers. The health sector requires improved funding. Our health centers, maternities and hospitals lack basic essential facilities and drugs and evidences have shown that increased investment in these pro-poor sectors has strong impact on poverty and inequality reduction, while simultaneously creating employment opportunities.

4. While we acknowledge that the police alone cannot deliver on security, we charge the Inspector General of Police to take the battle to the criminals' doorsteps by re-evaluating and implementing new operational strategies to stem the tide of kidnapping, armed robbery and banditry. We urge the federal and states' legislatures to strengthen Nigeria's legal framework in order to have stiffer sanctions that will deter people from engaging in criminal activities.

5. All hands must be on deck to cut down on carbon emissions as a way of combating global warming. We urge leaders to show courage in combatting entrenched interests in fighting climate change and also show commitment in investing in the opportunities of the future. Massive and aggressive tree planting campaign should be embarked on to reduce the effects of global warming/climate change. In addition, there should be an explicit national agricultural policy framework, adequate provision for irrigation, drainage, weather forecasting and other agricultural technology infrastructure. Furthermore, to boost agriculture, the following should be prioritized; incentive for training in agriculture, participatory capacity building for farmers, drought resistant and short duration high yielding crops development, integration of indigenous and modern knowledge on climate change adaptation, strengthening of the extension services, and encouragement for the nurturing of existing farmer groups.

6. AAN supports the Federation of Nigerian Mining Host Communities in demanding a review of laws that regulate the mining sector. We demand that the communities' rights must be protected in the process of issuing licenses for mining. We also call for a robust mining audit to ensure fairness and transparency as well as making legal provisions for artisanal mining.

7. The 9th National Assembly should revisit and prioritize the Sexual Harassment in Tertiary Education Institution Prohibition Bill and Nigerian University Authorities across the country should take preventive measures and protect students, particularly female students by setting up safe systems that protect survivors and encourage them to report and get justice.

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