The Minister of Finance, Kemi Adeosun, explained reasons why Nigeria has a low tax-to-GDP ratio.
She also gave reasons why the federal government is focusing its attention on improving the non-oil revenue in the economy.
With the negative impact of the declining global oil prices on the country’s revenue, the minister, in a statement from her office on Wednesday, said that there was need to turn attention to the non-oil sector to provide alternative sources of revenue to grow the economy.
Noting the country’s low tax-to-Gross Domestic Product, GDP ratio as one of the lowest in the world, the minister said the government cannot sustainably grow the economy without improving the current paltry six per cent ratio.
“Our revenue weakness, and the high cost of short term domestic debt are the core cause of our high debt service to revenue ratio”, she said.
Equally, contrary to reports in some quarters that the country’s debt service-to-revenue ratio was above 60 per cent, the reality is that it is about 45 per cent as at the third quarter of 2017, she said.
“We believe that 45 per cent is too high, and we expect this to continue to improve in 2017/18 as our revenue initiatives deliver on target”, Mrs. Adeosun said.
She acknowledged the positive impact of the tax amnesty programme – Voluntary Assets and Income Declaration Scheme, VAIDS, by the Federal Inland Revenue Service, saying it was not only delivering results, but would establish the basis for a more sustainable revenue base.
On economic reforms, the minister said this was delivering the fundamentals for long-term inclusive growth, with 0.55 per cent growth in the second quarter of 2017 and 1.40 per cent in the third quarter.
Other areas of the economy that have also experienced growth, she added, include agriculture and manufacturing, which are showing a positive picture of a diversified economy.
The minister said ”the hard decisions from the recent recession helped establish the basis for sustainable long term growth, by reducing the country’s exposure to oil price and production shocks.”
Insisting Nigeria was not an oil economy, Mrs. Adeosun said the country must set the benchmark against its peers, like Mexico and other oil producers with a diversified economic base.
“Our focus on infrastructure investment is essential to delivering an enabling environment for business, and our population. We cannot abdicate this responsibility. Our debt strategy (will) deliver the capital we need for infrastructure investment”, she said.
On the ”sustained the tempo of change being experienced in the economy”, Mrs. Adeosun urged Nigerians to stay focused, ”as it takes time to make fundamental changes to the country’s economic model.”
“Achieving a full reset will take even longer, but we are seeing strong, green shoots of success. We must think long term to address the fundamental challenges facing our economy.
“Establishing a 30-year financing portfolio provides the basis for long term infrastructure funding, which will, in turn, provide a benchmark for the private sector to extend its own financing tenures. Establishing long term funding will enable us to build the infrastructure that we, and our children, will benefit from for the next 50 years”, she added.