Report: Raise VAT, pay off older civil servants… governors advise FG on averting economic crisis

Nigerian governors have asked the federal government to raise value-added tax (VAT) to 15 percent and offer public workers older than 50 years a one-off retirement package to avert the looming economic crisis.

The federal government raised VAT from 5 percent to 7.5 percent in 2020.

According to Premium Times, the governors made the recommendations at a meeting with President Muhammadu Buhari in July.

The proposal, according to the report, was part of coordinated efforts to instil fiscal discipline and prevent the nation from imminent economic collapse.

TheCable had reported that the balance in Nigeria’s excess crude account had depleted significantly from $35.37m to $376,655, leaving the nation with no buffers to stabilise the economy.

In the first four months of 2022, debt servicing also surpassed revenue.

As part of the recommendations, they also urged the government to start implementation of the updated Stephen Oronsaye Report and reduce expenditure by eliminating petrol subsidy and NNPC-funded projects. 

The governors, according to Premium Times, also asked the government to reduce duplications (e.g. empowerment programmes) and waste, reduce 1 percent granted to NASENI to 0.2 percent, amend the 2022 Finance Act, reduce personnel costs of federal government MDAs, and expedite privatisation of non-performing assets like the NDPHC power plants.

On foreign exchange and reserves, the report added that the governors suggested that foreign trips by MDAs, including budgetary-independent agencies such as FIRS, NPA, NIMASA and NCC, be put on hold for at least one year to conserve foreign exchange and grow the reserves.

They also urged the ministry of foreign affairs not to issue requests for visas to foreign embassies for federal government officials and their families, unless express approval is granted by the presidency.

On taxes, they recommended the introduction of a 3 percent federal income tax while state-level profit income tax (PIT) should be abolished. 

Similarly, they suggested that state sales taxes (flat rate of 10 percent) should be enacted for the 36 states and FCT, and VAT levels increased to 10 percent with a timeline to raise it to between 15 percent and 20 percent as well as re-introduction and passage of VAT into the exclusive list.

The VAT position is coming despite a pending court case dispute between the Rivers state government and the Federal Inland Revenue Service (FIRS).

“The governors also suggested centralisation of the collection of all federal oil and non-oil taxes in one agency, the FIRS, while Customs, NPA, and others assess and issue demands,” the report said

“They suggested that the Federal Government improve crude oil and gas production, resolve lingering issues of ownership of gas in PSCs (eg Nnwa-Doro, OML 129) to help position Nigeria to take advantage of the gas needs in Europe, and provide incentives to expedite development of vandalism-resistant deep offshore fields like Bonga SW (Shell), Preweoi (Total), Zabazaba (ENI) and Owowo (Exxon).

“The governors equally advised the government to encourage (and pre-finance, if necessary) Dangote Refinery to early completion to reduce massive future outflows of foreign exchange.”