Untapped public revenue sources – TheNigerialawyer

Eze Onyekpere

Nigeria at the federal, state and local government tiers of
governance is challenged by very low revenues that have failed to
keep pace with growing governmental obligations. This phenomenon
did not start today. It only escalated after the collapse of oil
prices a few years ago and has refused to go away even after the
reasonable recovery of oil prices. This discourse raises a few key
areas that could get in additional resources to the treasury if
properly managed.

Oil has been the mainstay of the economy for so many years. But
we have not fully explored and expounded the frontiers of the
revenue available from oil and gas. The National Assembly has just
amended the Deep Offshore and Inland Basin Production Sharing
Contracts Act (Cap. D3, Laws of the Federation of Nigeria, 2004).
The bill is awaiting harmonisation and forwarding to the President
for his assent to become law. It is expected that this will fetch
additional $1.5bn revenue to government on a yearly basis. Before
this amendment, year after year, the Nigerian Extractive Industries
Transparency Initiative had reported on the loss of revenue
occasioned by the failure to review the fiscal terms of production
sharing contracts under this law. But no one seemed interested.

It is therefore expected that President Muhammadu Buhari will go
ahead and assent to the bill to become law. But it should not end
there. There are other reforms needed in the Petroleum Industry
which can free up and raise much more resources. The National
Petroleum Policy states as follows: “The existing petroleum
industry legislation in Nigeria dates back to 1969. There are also
several other disparate pieces of legislation on petroleum, some of
which are no longer relevant or applicable to Nigeria’s
circumstances. Significantly, the Petroleum Act 1969 did not
legislate sufficiently for gas as a hydrocarbon and industry in its
own right, nor for a mid and downstream gas industry. The
government will promote new legislation to overhaul and modernise
the Nigerian petroleum sector by addressing a broad range of issues
including sector governance and institutional framework, fiscal
regime, corporate structure of state–owned enterprises,
transparency and accountability, environmental issues”. Thus, the
Petroleum Industry Bills on governance, administration, community,
environmental and fiscal reforms should be next and the bill(s)
should be passed by the National Assembly with the same speed and
dedication with which they attended to the amendment of the Deep
Offshore and Inland Basin Production Sharing Contracts Act. What is
needed in the National Assembly is bipartisanship and down-playing
the petty regional and ethnic politics that had attended the
consideration of the PIBs on previous occasions. The enactment of
the PIBs and assent by the President could throw up not less than
N6tn annually in extra income to the Federation Account and this
will be available for sharing by the three tiers of government.

This discourse is being written at a time when Saudi Arabia’s
Aramco has been shown to be the most profitable company in the
world returning $111bn in profits in the outgone year. Aramco’s
profit is much more than that of giants like Apple and Microsoft.
So, what are we waiting for at a time we are running huge deficits
and borrowing money in an unsustainable manner? Recalling that
petroleum may likely go out of fashion and will be overtaken by new
energy forms in the near future, we need to get as much as is
possible from this natural resource before investments in petroleum
become stranded assets.

Is it not possible for Nigeria to actually look for investors
and negotiate a proper gas supply and processing contract with
every plan and intent to fulfil its part of the bargain? The type
of contract it entered into with the Process & Industrial
Development for Nigeria to supply natural gas (wet gas) at no cost
to the investor via a government pipeline to the site of the
investor’s production facility. The investor being required to
construct and operate the facility, process the wet gas and return
to the government of Nigeria, lean gas to be used for power
generation at no cost to the government of Nigeria – while the
investor is entitled to other derivatives stripped from the wet
gas. With improved electricity supply, the country is bound to
improve production of goods and service to grow the economy. This,
of course, will create the avenue for more government revenue
through taxes in the long run. There must be some foreign and or
local investors ready and willing to put down their resources if
the government shows greater sincerity of purpose.

The Medium Term Expenditure Framework 2020-2022 and the 2020
budget estimates project the sum of N200bn as revenue from stamp
duties. They are however silent on accruals from previous years
which have not been accounted for. Nigerians suffered deductions
from their bank accounts and the money seems to have been lost in a
black hole as no one accounted for the previous years. For the
authorities to simply state that this is all that will be due
creates a series of questions. What is the number of transactions
that attract this N50 charge on a daily basis? Which government
agency is following up to ensure that the treasury is not
shortchanged by rampaging banks and their officials? A batch of
transactions could be grouped together and short-reported instead
of reporting individual transactions for which bank customers
suffer deductions. Whether it is the Central Bank of Nigeria or the
Federal Inland Revenue Service, etc. that is charged with
collecting the remittance from the banks, it must introduce
technology that sweeps every stamp duty payment automatically as it
leaves the customer’s account. At a time of poor revenues, the
country can ill-afford this humungous leakage of funds. The
National Assembly must insist on full accounting of all previously
accrued stamp duties. It is projected that from past unaccounted
for stamp duties, the nation can raise not less than N5tn while a
proper projection for 2020 can fetch not less than N1.2tn. The
Senate in approving the MTEF had earlier recommended that proper
investigations be carried out on the electronic collection of stamp
duties domiciled with the Central Bank of Nigeria to ensure
accountability and increase in the revenue base.

Who is actually following up on the Value Added Tax deductions
and remittances? With the wide array of goods and services subject
to VAT, especially with the recent increase, if up to 80% of due
VAT is collected, there is no reason why its revenue should not
exceed the trillion mark. All that is needed is a system and
process that automatically sweep every due VAT into the appropriate
government account. It is not about formal talks about introducing
technology by the FIRS; instead, it can challenge young Nigerians
in the technology sector to come forward with appropriate devices
that will put an end to these leakages. It will not cost billions
but a few millions.

It just takes a little looking in-between the lines for the
federal and state governments to raise more revenues- if and only
if they are ready to work as well as block leakages.

The Ministry of Labour and Employment takes this business of
unclear expenditure to ridiculous heights when it provided for
“capacity building on local studies in line with the administration
of criminal justice system”. Pray, what is the meaning of this
jargon and what has the ministry got to do with the administration
of criminal justice? It goes on to ask for money to “equipping of
all shortfall in equipment and resettlement in 36 states and the
FCT for immediate job creation”. Then the demand for skills
acquisition, upgrading and development, adoption and implementation
of international labourconventions, recommendation and protocols.
The purport of these estimates is only known to the key officials
of the ministry. This is wrong and stands condemned.

The National Productivity Centre is asking for N7bn for Special
Sustainable Development Goals without any details. This is aside
from the SDG votes in the Service Wide Votes that have no details.
This is the trajectory of votes for the Millennium Development
Goals and now the SDGs, from the Obasanjo presidency till now,
nothing substantial in terms of impact and achievements but the
money gets spent. Nigeria cannot continue with this budget opacity
and expect to make progress. So, the centre expects Nigerians to
clap for it for proposing to spend our money for purposes that no
one knows what they are all about. The implication is that the
proposers of this madness are taking Nigerians for a ride. They
hold everyone in contempt because if they believed we are humans,
they would have been more reasonable with their approach to
budgeting.

The Ministry of Agriculture has for a long time believed that
opaque and unclear budgeting is a virtue. Every year, they vote
billions of dollars for value chains of separate crops and animals,
from maize, cassava, rice, etc. what is a value? What exactly are
the votes for? Which projects, activities and their locations? The
National Centre for Agricultural Mechanisation in Ilorin proposes
N500m for construction of feeder roads in Lagos State. Pray, what
is the mandate of this agency for it to be involved in road
construction, not even within its immediate catchment area but in
Lagos, the commercial nerve centre of Nigeria?

Virtually all the MDAs asking for vehicles are asking for
specific foreign brands of vehicles contrary to the provisions of
the Public Procurement Act which only demands functional
specifications in the budget. Again, this is happening despite the
local content policy of the Federal Government.