The recent alarm raised by the Federal Government over imminent fiscal crisis is timely but worrisome. More worrisome is the fact that government has lost much revenue due to drastic shortfall in revenue collection. As a result of the drop in revenue collection, the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, was recently asked to explain why revenue collection fell below expectations from 2015 to 2018.
He was also directed to submit a detailed variance analysis, and to explain the reasons for the gap in budgeted revenue collection during the period under review. In his reply, the FIRS boss attributed the shortfalls and variances between budgeted revenue collection and actual collection since the inception of the present administration to recession, fall in oil prices in the international market and the agency’s lack of control over oil revenues. He also explained that non-oil revenue collection grew by N1.304trn or 21 per cent within the period 2016-2018, and added that total budget collection figure from 2012 to 2014 stood at N12.19trn compared to N16.77trn for the period 2016-2018.
The alarm over the looming fiscal crisis should be taken seriously by all tiers of government. We believe that the shortfall in government’s revenue can be traced to many factors. The government has refused to heed advice of the International Monetary Fund (IMF) and the World Bank on how to revamp the economy. For instance, the IMF and the World Bank Group had urged the government to broaden its revenue base, reduce debt profile and diversify the economy. The government has also refused to operate fiscal federalism that will ginger economic development of the country.
It is not clear that government took the counsel seriously, even when the economic outlook calls for urgent concrete actions to ensure sustainable economic growth. It is expected that policymakers should come up with strategic fiscal plans that will complement the monetary policy of the Central Bank of Nigeria.
We also think that the implementation of the government’s Economic Recovery and Growth Plan (ERGP) is yet to be given the required verve. Last year, the CBN predicted a gloomy outlook for the economy and urged government to embrace fiscal reforms and diversification. The alarm over the looming fiscal crisis should be a wake-up call on the government’s economic team to put the economy on the path of growth.
One of the ways to avoid the impending fiscal crisis is to plug the loopholes in the operations of the various revenue-generating agencies. Some of the agencies were accused of circumventing laid down procedures for collection and remittance of revenues into government’s treasury. In 2016, the Federal Ministry of Finance alleged that some of the agencies frustrated efforts to meet projected revenues for public expenditures. In this period of declining revenues, government should design a robust framework that will guard against fraudulent practices in these agencies.
Last year, the National Economic Council (NEC), ordered the Nigeria National Petroleum Corporation (NNPC), the Nigeria Customs Service (NCS), the Nigerian Ports Authority (NPA), Nigerian Maritime and Safety Administration (NIMASA), and other revenue generating agencies to refund unremitted funds totaling N8.526trn to the Federation Account.
With the inauguration of the new cabinet, government should embark on aggressive structural reforms and give priority attention to the diversification of the non-oil sectors. We believe that boosting the non-oil sectors will raise export revenues. There is need for a growth-friendly fiscal and monetary policy instruments that would enhance the production of goods and services. Good enough, the CBN is reportedly doing well in this direction by the restriction of foreign exchange for food importation.
There is no doubt that the forex ban on food importation will help conserve our external reserves and create employment opportunities. To avert the fiscal crisis, all government revenue-generating agencies must work in concert to meet the budgeted revenue collection. We also enjoin the state governments to deepen their Internally Generated Revenue (IGR). They should also realise that the era of overdependence on federal allocation is over.