The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, and other top government officials will exploit the opportunity of the ongoing annual meetings of the International Monetary Fund
(IMF) and the World Bank in Washington DC, United States of America to firm up discussions on the planned $3 billion facility targeted at addressing current challenges confronting Nigeria’s power sector.
Confirming the move in an interview on the sidelines of the ongoing meetings, Ahmed said the facility could actually be up to $3 billion, to be released in tranches for a period of about five years, adding that the planned facility will be designed to address current transmission and distribution problems facing the nation’s power sector.
She said: “There is a proposed $1.5 to $3 billion facility for the power sector development programme in Nigeria. This will include the development of the transmission networks, development of the distribution networks as well as removing the challenges that we have currently in the electricity sector. We are fully going to discuss the power sector recovery programme. We are going to have a direct meeting with the World Bank to design how it will be implemented.
“We have an opportunity now to have a direct meeting with the leadership of the bank on the funding; to tell them this is what we have, this is how much we need from now to five years. The funding could be as much as US$3 billion. We are going to look at it to be
provided in phases, may be $1.5 billion first. The funding could be in phases of up to five years.”
However, the minister who also reacted to concerns over Nigeria’s burgeoning debt stock, insisted that the country does not have debt problem but that of revenue, which she said, is being addressed through a multifaceted approach.
On worries that the 2020 Appropriation Bill is designed to increase the tax burden of Nigerians, the minister described such as not reflective of the reality, adding that there was never an attempt to introduce any new form of taxation apart from the proposed increase of Value Added Tax (VAT) from five per cent to 7.5 per cent.
She argued that it was abnormal for Nigeria not to use tax as source of financing its budgets, adding that a country’s budget is supposed to be based on taxes it is able to generate.
“It is an abnormality in Nigeria that our budget has not been focusing on taxes. What we are trying to do in the 2020 budget is to try to harness the potential of revenue mobilisation within our country . The only tax increase in the 2020 budget is just that VAT; everything else is just maximising the potential of the existing tax base that we have, to be able to move our tax-to-GDP ratio from the current 7-8 per cent to 15 per cent.
“We can only develop in a manner that is sustainable when we are using tax revenue to plan our national and subnational budgets. It is an abnormality that we are depending largely on oil and gas revenue, which is a resource that is finite; it’s going to go out of existence
before we know it. So, we have to develop a domestic tax,” the minister said.
She disclosed the Finance Bill sent to the National Assembly has several proposals, one of which is to legitimise the proposed hike in VAT from 5 per cent to 7.5 per cent.
“We believe that the National Assembly will do justice to the bill. Our hope is that the finance bill is passed within the same period that the budget will be passed, so that we can have the capacity to be able to fund the 2020 budget,” Ahmed added.
On efforts to shore up the nation’s revenue base, the minister said: “You would recall that in January this year, we launched the Strategic Revenue Growth Initiative which is an initiative put together by all the revenue generating agencies. Our objective is to be able to harness the existing revenue streams that we have by ensuring that enforcement is guaranteed and to expand the tax base and also to identify new revenue streams that we can add to expand the revenue base.
“So, in expanding the new revenue bases, we have proposed the increase in VAT but there are also other revenue streams that we have and some of them include the introduction of excise duties on carbonated drinks. But there is a process in doing this—any tax you are introducing will involve a lot of consultations as well as the amendment of some laws for the introduction of a new legislation.
“We are also working together with all the agencies to ensure that we collaborate—that the works of the agencies are complementary to each other as opposed to the past where everyone was working in silos. We have also found out how we can improve the monitoring and performances of the revenue generating agencies, especially the government-owned enterprises.
“We now have a rigorous monthly reconciliation of revenues and that is ensuring that leakages are limited. There are also other cost cutting measures in the SRGI.”
Again, commenting on concerns over what analysts see as over-ambitious annual revenue targets, the minister said the fact that revenue generating agencies are not meeting targets should not be a justification to set lower targets, adding that doing such would amount to endorsing under-performance.
She argued that revenue targets usually set in annual budgets were never the making of her ministry, but those of the agencies, which normally come up with such benchmarks and are requested to justify how realistic they are before being accepted.
According to her, there will be improved governance, not just in the Nigerian National Petroleum Corporation (NNPC) but government-owned enterprises because of poor governance results in under-performance, whether it is in revenue or other operational agencies.
The minister disclosed that new measures had been introduced to enhance the monitoring of revenue generating agencies, adding President Muhammadu Buhari had said targets will be set for ministers and heads of agencies.
Ahmed disclosed that when targets are met, there will be commendations, and when they are not met, there will be consequences, adding that what had been missing was that when agencies underperformed, there were no consequences.
On whether the recent border closure was a revenue generation strategy, the minister responded in the negative, saying the federal government needed to close the borders because Nigeria was not getting the cooperation of neighbouring governments.
“We have over the years committed to some alliances, bilateral agreements and our neighbours are not respecting them. And this time when the president had signed Nigeria up to AfCFTA (Africa Continental Free Trade Area) , it is more important for us to make
sure that everybody compliments what is in the agreement.
“If it is something that is disturbing our local businesses, we have to make sure that it is stopped. That’s the purpose; not generating revenues. It’s just to ensure compliance to the commitments that we made between ourselves,” she added.
The minister stated that there was no timeline on when the borders will be reopened, but stressed that doing so would be tied to “when neighbouring countries commit to complying with the commitments that we signed.”
She explained the hope that at some point, “there will be decisions at the level of presidents where we expect strong commitments.”
On what Nigeria’s participation at the ongoing meetings of the IMF-World Bank seeks to achieve, she said: “Apart from statutory meetings, we have some special discussions that will ensue. Few of them are important to us in Nigeria. There are many meetings that are
important to us in Nigeria. One, I am participating in a governors’ corner meeting where we are discussing on domestic revenue mobilisation. There are a few other finance ministers that have been selected to participate at the event.
“There is also a debt transparency panel to be chaired by the World Bank President, David Malpass where I will also be speaking as a panelist. There is also be a panel on human capital development and job creation where I will also be participating.”
She added that besides, participation would afford Nigeria the opportunity to interface with heads of multilateral financial and credit agencies with a view to harnessing both financial and other resources to create jobs and stimulate development.