How Nigeria can survive current economic challenges – Okupe

Says FG should increase VAT to 15% but…

By Ikenna Asomba

Former Senior Special Assistant to ex-President Goodluck Jonathan on Public Affairs, Dr, Doyin Okupe, on Tuesday, advised the President Muhammadu Buhari-led Federal Government to increase Nigeria’s Value Added Tax (VAT) to 15 per cent, following the fall in the price of crude oil.

Okupe, however noted that for this increment to happen, FG must apply justice and equity, where each state of the federation must benefit only from its own contribution.

Okupe who took to his Facebook page said: “I am always amazed when people including very knowledgeable and highly placed persons speak of diversification of the Nigerian Economy whenever there is a threat of fall in revenue from crude oil sales as it is presently.

“For the avoidance of doubt the Nigerian economy has hither to been significantly diversified to a commendable level. About a decade ago the contribution of revenue from sale of crude to Gross Domestic Product (GDP) was in excess of 60 per cent while its contribution to National income was well over 90 per cent.

“However by January 2015, the contribution of revenue from crude to National income has come as low as 68 per cent, while that to GDP was less than 20 per cent. This is the truest incontrovertible evidence of the fact that the economy has been substantially diversified.

“This truth is evinced by the fact that the total income from crude sale was about $73billion. (2million barrels×365×$100/barrel). With a revised GDP of $500 billion, the actual contribution is approximately 15 per cent. Diversification does not directly increase government income proportionately as does direct income from sale of crude oil.”

VAT increment

Continuing, he said, “Since governments worldwide do not do business, increase in government income or revenue can only come from taxation,
Royalties,Bonds,licenses and sale of assets.  In our present situation, therefore, while we must continue to encourage growth of the real sectors of the economy, government must pay serious and special attention to maximising efforts at tax collection. The The Internal Revenue Service (IRS) collected over N4 trillion in 2015. Many believe this is just about 60 per cent of what is due.

“We may also in view of current realities, need to actually increase our Value Added Tax (VAT) to 15 per cent. But here, justice and equity must apply. Each state of the federation must benefit only from its own contribution. That is if N100 billion is collected from Kano, it stays in Kano and 50 per cent is remitted by Kano state to the federation account.”

“Our country is blessed with great human resource. We now need to invest in human development programmes, encourage entrepreneurship and encourage small and big businesses to pay correct and due taxes. Nigeria can and will survive in spite of current economic challenges,” Okupe advised.

He called on government to pay serious and special attention to maximizing efforts at tax collection.

Dr. Okupe, in a post on his Facebook wall, said the government made N4 trillion from tax through the Federal Inland Revenue Services.

“In our present situation therefore, while we must continue to encourage growth of the real sectors of the economy, government must pay serious and special attention to maximizing efforts at tax collection.

“The FIRS collected over N4trillion in 2015. Many believe this is just about 60 per cent of what is due. We may also in view of current realities, need to actually increase our VAT to 15 per cent.

“But here justice and equity must apply. Each state of the federation must benefit only from its own contribution. That is if N100billion is collected from Kano, it stays in Kano and 50 per cent is remitted by Kano state to the federation account,” he said.

He explained that Nigeria’s economy had always been diversified in his post.

Okupe argued that diversification does not directly increase government income proportionately as does direct income from sale of crude oil.

According to him, since governments worldwide do not do business, increase in government income or revenue can only come from taxation, royalties, bonds, licenses and sale of assets.

“I am always amazed when people including very knowledgeable and highly placed persons speak of diversification of the Nigerian economy whenever there is a threat of fall in revenue from crude oil sales as it is presently.

“For the avoidance of doubt the Nigerian economy has hither to been significantly diversified to a commendable level.

“About a decade ago, the contribution of revenue from sale of crude to GDP was in excess of 60 per cent, while its contribution to National income was well over 90 per cent,” he stated.