24 Nov

Daily Watch – Nigeria 4th worst performer in tax collection, Pressure mounts on Buhari to scrap petrol subsidy

  • According to PWC’s Tax and Regulatory Services Leader for West Africa, Taiwo Oyedele; in collecting taxes, Nigeria performs even worse than Afghanistan, who with a smaller economy and population, collects more taxes than Nigeria’s government. For every dollar that goes into the Federation account, 45 cents is from oil royalties and petroleum products tax combined. The remainder is crude oil sales. Isolating the GDP of the oil sector, from that of the non-oil GDP, and deriving the tax generated from both sectors showed that oil sector tax-to-GDP was 27%. PWC said it discovered that the tax-to-GDP from the non-oil sector was actually an awful 4%. This figure places Africa’s largest economy, Nigeria, at 4th poorest in the world, and the 2nd poorest in Africa, where it claims to be the largest.
  • As the Federal Government prepares the 2016 budget, it has emerged that some ministers have told President Buhari that the petrol subsidy scheme can no longer be sustained in view of the dwindling government revenues. The Minister of State for Petroleum, Ibe Kachukwu, had just last week, stated that subsidy was not sustainable, adding that its retention was due to the President’s “magnanimity”. It appears however, that the President has not yielded to the pressure because of the general impact of the removal of the subsidy on Nigerians. The report however said while that Buhari is not completely opposed to the removal of subsidy, he is of the view that it should be done when the government’s refineries were fully working.
  • With the persistence of dollar scarcity, the Naira fell by 2.17 percent against the American dollar at the parallel market on Monday, trading at 235 to the dollar at the parallel market compared to N230 to a dollar on Friday. This happened because the CBN cut dollar supply to bureaux de change (BDC) operators based on it struggles to conserve foreign exchange reserves. Meanwhile, the CBN will decide today, whether to raise interest rates from its current benchmark 13%; in 2010 the rate was 6%.