Agora Policy, an Abuja think-tank has urged the federal government to work on boosting oil earnings, stressing that the drastic fall in oil revenue has been as a result of the double whammy of lower oil production and petrol subsidy.
Noting that the government needed to take decisive action to address the two critical issues, the Waziri Adio-led group noted that addressing the drastic fall in oil production requires urgent action to end oil theft in the oil producing areas.
This, it said in a policy paper, would require strong determination from the government and crucial cooperation from host communities and the security agencies.
" The government needs to review the security architecture in the oil producing areas and give clear instructions about ending oil theft. In addition, both the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and Nigeria National Petroleum Corporation (NNPC) Limited should be given clear oil production and exporting targets, and be held accountable when these are not met," it stated.
Agora policy stressed that the use of a strategic communication team to engage the public and other critical stakeholders on the benefits and costs of removing the subsidy would be required for the public to buy into the policy measure.
At the same time, it stressed that detailed plans of how funds are saved from subsidy removal need to be extensively discussed and disseminated to the general public to increase trust as a social capital.
The savings from the fuel subsidy, it advised, could be used to scale up short-term direct cash transfers to the poorest and most vulnerable groups in the country while prices of petroleum products should be market-determined rather that regulated by the government.
As Nigeria prepares to usher in a new administration, it noted that the state of the economy remains a key point of interest, owing largely to the myriad of economic challenges the country faces.
"The key macroeconomic statistics do not paint a rosy picture. The inflation rate rose to 22.04 per cent in March 2023. Real GDP growth rate fell from 3.40 per cent in 2021 to 3.1 per cent in 2022. The latest statistics show that 40.1 per cent of Nigerians are poor, while unemployment is 33.28 per cent.
"Despite favourable global oil market conditions, domestic oil production shocks have dampened oil revenue inflows and have drastically increased the cost of the petrol subsidy, thereby widening Federal Government's fiscal deficit.
"This has led to crowding-out of critical spending on social services and infrastructure," it explained.
It noted that many revenue-generating agencies either fail to remit any revenue, or remit a very small fraction to the government. This , it posited, poses a serious problem that needs to be addressed because it deprives the government of the much-needed revenue.
Moreover, the action of such agencies, Agora said, is in violation of the Fiscal Responsibility Act which mandates revenue-generating agencies to remit 80 per cent of their operating surpluses to the Consolidated Revenue Fund and retain 20 per cent in their reserve fund.
The Independent think-tank group said there was a need to address the nation's dismal tax revenue to Gross Domestic Product (GDP) ratio.
"The Federal Inland Revenue Service (FIRS) has done well in recent times by increasing revenue generated from N6.4 trillion in 2021 to N10.1 trillion in 2022, thereby crossing N10 trillion in revenue for the first time.
"However, for the size of the economy, government revenue and expenditure are grossly inadequate to effectively drive policy, enhance economic growth, lower poverty, and achieve the Sustainable Development Goals (SDGs)," Agora noted.
It further contended that there was an urgent need to broaden the tax net to capture the formal and informal sectors not in the existing tax net.
For the formal sector, it said that a first step would be to properly capture and tax high net worth individuals and large corporations, explaining that FIRS needs to work closely with the National Bureau of Statistics (NBS) to identify small and medium scale enterprises (SMEs) and ensure they pay taxes appropriately.
"Some simple incentives and an amnesty period, following which appropriate sanctions will be meted out, can be given to ensure quick compliance. It would be crucial to continuously communicate the issue of tax reforms to the citizens to gain public confidence in the system. In addition, leakages from taxes collected by non-state actors need to be eliminated," Agora said.
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It added that the Fiscal Responsibility Act should be amended to set strict penalties for agencies that fail to remit their stipulated operating surpluses, noting that there was the need to stop funding revenue-generating agencies from the federal budget.
As for improving the budget implementation framework, Agora noted that this entails strengthening the zero-based budgeting framework by ensuring that budget preparation starts on time.
"There is an urgent need to end 'drip-feeding' which has inhibited the completion of critical capital projects and perpetuated the 'ongoing project' syndrome.
" This comes at zero cost to the key agencies such as the Federal Ministry of Finance, Budget and National Planning and the Budget Office of the Federation. Increased budgetary provisions should be given to capital expenditure," the group added.
