The government also tied the ongoing debt deals to the quest to speed up development plans and avoid impending massive job losses in the midst of 85 per cent slide from the country’s major revenue earner.
The Minister of Finance, Mrs. Kemi Adeosun, made the comments while addressing a joint press conference of the ministry and the Central Bank of Nigeria (CBN) at the conclusion of the World Bank Group-International Monetary Fund (IMF) meetings in Washington, United States yesterday.
She said the situation was either to cut public infrastructure spending, leading to massive job losses or borrow in the short term and generate revenue.
According to her, government felt that laying off thousands of persons was not the best way to stimulate growth, as about 27 states could not pay salaries when they took office, adding that if the situation had been allowed, there would have been depression till now.
“So, we took the view as a government that the best thing to do was to stimulate growth and spend our way out of trouble, get the state governments to pay salaries, make sure Federal Government pays and invests in capital infrastructure.
“Once growth is restored, you begin to systematically reduce your dependence on borrowing. Now, we are talking about tax and what we are saying is that people should be aware of their responsibilities to their nation,” she said.
According to Adeosun, the solution to the ongoing borrowing is for all to embrace tax payment, while there is the responsibility on the part of government to be more responsible and efficient.
“We don’t have the power we need, we don’t have the roads yet and there is a lot of money required to fund these projects. If we are able to move our tax to GDP from just six per cent, where it is now, to 10 per cent, borrowings would be significantly reduced.
“This would have a wider effect on the economy, reduce borrowing and bring down interest rate. It will also create head room for the private sector to borrow, because they are currently being crowded out,” she said.
As a way of increasing non-oil earnings to support government, the planned tax is being finalised now after delays, as the processes cut across the ECOWAS, with legal processes that must go through, including the customs union.
According to the minister, the problem in the country is not just that the tax system needs to be overhauled, the people are not complying and this is because there is no consequence.
“We have just started with Voluntary Assets and Income Declaration Scheme as a measure to tackle that, and the response is impressive. In fact, people have started declaring and I have had a number of approaches from high net worth people asking me to speak on their behalf to state governors to allow them time to comply.
“Whether taxing the rich will increase public revenue or not, it is all about public revenue to which they are obligated for public services. In any tax system, the burden must be borne by anybody whose income can bear it, so those with higher income should by definition bear a greater part of the burden.
“If the man in the traffic control, with little income will pay at source, why would we not pursue the billionaire or the trillionaire to pay out of the income? We need to change the mindset in the country with regard to tax system,” Adeosun said.
Meanwhile, the CBN Governor, Godwin Emefiele, has affirmed that the country’s rebounding growth and several engagements with correspondent banks and foreign investors would soon lead to the improvement of the country’s banking sector.
He said the CBN was keeping its eyes on the banking system to ensure that there was no destabilisation, because anything that would destabilise the system naturally would have adverse effects on the economy.
According to him, it is gratifying that while the global economy is now growing, Nigeria is acknowledged in the trend by what is being done, as a show of signs of recovery, especially the turnaround in the Gross Domestic Product (GDP).
“We held meetings with a couple of correspondent banks and it is interesting and nice to see them making some positive comments. They are more confident in the economy and making commitments that they would make credit lines available to Nigerian banks, even in larger size.
“Some foreign investors, not just portfolio investors, but direct investors, are interested in investing in infrastructure and others to participate in agriculture,” he said.
