By Olakunle Olafioye
As the controversy between the Federal Government and states over which of the two tiers of government should be responsible for the collection of Value Added Tax (VAT) rages on, an economic expert, Dr Tayo Bello, has said that Nigeria stands to benefit immensely if states in the country get the judicial nod on VAT collection.
Dr Bello said that no state in Nigeria is economically fragile as being speculated in some quarters, adding that the fear of possible collapse of some states as a result of the development is unfounded.
Dr Bello who is an Associate Professor in the Department of Private and Commercial Law, Babcock University, Ogun State, outlined what the states must do to stay afloat, should the court rule in favour of state’s collection of VAT. Excerpt:
The Federal Government is in tango with states over which of the two tiers of government has the right to collect the Value Added Tax. What is the likely implication should the states win the right to collect VAT?
Let me start by saying that the development will help both tiers of government – the federal and the state governments. Most state governments have been relying on arm-chair way of generating revenue, but with the latest imbroglio over the VAT, I see many of the states being gingered to explore other avenues to generate and raise their revenue base. Constitutionally, the states are empowered to collect VAT. Initially, when VAT started it was 50 per cent to the Federal Government, 35 per cent to the states and 15 per cent to local governments. But this later changed to 50 per cent to states, 35 per cent o local governments and 15 per cent to the Federal Government. In my own opinion, I see the latest controversy moving us toward proper fiscal federalism. If you are saying restructuring, it’s not possible, there is fiscal restructuring that all along has been embedded in the constitution; this is what is coming to manifestation.
What would you attribute the fear and the intensity of antagonism that has trailed the VAT controversy to?
The Federal Government is not being sincere about the whole issue as it is seen to be backing some states at the detriment of others. For example, VAT contributed about N1.5 trillion or one per cent of our GDP in 2020. Take Lagos, for an instance, the state generated about N49 billion and was given 4 point something trillion naira; Rivers State generated N19 billion, how much was given to the state out of that. The government is saying states will collapse if the states are allowed to collect VAT. They can never collapse. Everything has been centred in favour of the centre. There are mineral resources, if you want to get the license, you go to Abuja, you want to construct roads, You have to go to Abuja, is that the way federalism is being practiced in civilized climes? We borrowed federalism from America but is this the way they practice their own federalism? No; things are not done the way we do them here.
How do you think states that are tagged vulnerable states can survive should the matter be decided in favour of the states?
There is no state that is economically weak in Nigeria; it is the leadership of the state that is weak and docile. There is no state that is weak in the country. Do you know the quantity of gold that is mined illegally in Zamfara State? It is alleged that the money is being shared by some individuals in the state. Is that not a veritable source of revenue? There is no state that is weak and vulnerable economically. Majority of the states that are claiming to be weak need to get their governors on their toes and get them think and work harder on how to generate revenues for their states. They need to digitalise and automate their means of generating revenue. When el-Rufai came to power in 2015 he closed all the state government accounts, about 54 accounts. At the end of the exercise about N50 billion that had been idle was realised. There should be backward integration and inward looking. There should be new ways of doing things. At the end of the day, it will mean that anybody that is willing to be governor must be ready to work and not only to go to Abuja and collect money. Before Asiwaju Bola Tinubu came to power, the monthly revenue generated in the state was around N700 million, Tinubu came onboard and revolutionize revenue generation in the state. Today, Lagos State generates about N40 billion monthly. If Tinubu was complacent with what the state was realizing before he came onboard, do you think Lagos would be realizing what it gets as revenue now? In addition to that before Lagos automated means of paying salary there were lot of loopholes and leakages. There are a lot of things that can be done by the states to raise their revenue generation. The states only need to think very well; there is no state that is economically weak. People should stop pushing people who don’t know anything about how their lots can be bettered to leadership positions. There are people who have been in politics for over 20 years without contributing anything meaningful to the lives of their people, this has to stop.
The Federal Government is again seeking another external borrowing. What would you say make it difficult for the government to explore domestic means of mobilizing resources?
I am sure I am not the first person that will condemn borrowing and over-borrowing. If you are borrowing for the sake of infrastructural development or investment that can repay the loan, there is no problem. But if you are borrowing to construct railway from Daura to Niger Republic how is that beneficial to Nigerians? Most of the borrowings that are centred on political reasons must be discouraged. We cannot continue to borrow to the extent that almost 90 per cent of our earnings is now being used to service loans. It is annoying. I have never seen this type of Senate in my life that approves all borrowings without blinking the eyes. This current generation and generations unborn will continue to pay these loans. I don’t think Nigeria deserves to be lent money in the next 15 to 20 years. If the country wants to collapse, let it collapse.
The truth is that Nigeria is still neck-deep in recession. Nigeria is an import-oriented country; we don’t produce anything for export. Before December, Pound Sterling will climb to N980 and dollar will go up as high as N700. The pressure on these foreign currencies is just too enormous. Go to market and see the difference between now and when the minimum wage was N18, 000.
The Federal Government is planning to return tollgates to our highways. What do you make of this?
It is better tollgate returns, if it can be successfully managed. The money that will be realised from toll can be used to repair our roads. It is one of the ways the government can explore to carry out certain projects. The poor state of the roads is causing Nigerians a lot more than they will have to pay to have the roads fixed and rehabilitated. I will suggest that it should be automated and the money realised from it should be used for proper maintenance of those roads.