Since they say that we are now a middle-income country, let us recover our pride and design and implement a holistic exit strategy from dependency on donor funding for social sector programmes, while generating domestic resources to ensure sustainability.
This week, I facilitated a workshop of National Assembly members jointly organised by the House of Representatives Committee on Appropriation in conjunction with the Civil Society Legislative Advocacy Centre (CISLAC). Also in attendance were the House Committees on Finance and on the Sustainable Development Goals (SDGs), as well as the Budget Office. There were about 60 participants, including from civil society, the media and development partners. The retreat was aimed at providing a platform for the parliamentarians to interact in proffering holistic solutions to the current trends and challenges confronting adequate and sustainable social sector financing, coupled with the need to harness and strengthen domestic resources for the financing of this sector, in the face of dwindling donor funding.
Nigeria has a relatively low level of donor support – less than 10 percent of the national budget, in a context in which many other African countries depend on donor support for between 30-50 percent of their national budgets. Although the level of support is low in Nigeria, it is strategic for the country because it covers critical sectors, mainly health, where key areas such as HIV/AIDS care and vaccinations are almost entire dependent on donor support. Currently, the level of donor support is around $3 billion annually, and over the next five years we will lose about one third of the grants we receive and the Nigerian government would have to cover the difference through gradually more expensive concessional loans and raising the tax base to cover the difference. One of the support systems we will be losing is the vaccination programme, which has so far saved over one million lives, pointing to the fact that the issue is quite serious.
One of the resource persons, Professor Ode Ojowu challenged the Bill and Melinda Gates Foundation for spending millions of dollars each year to import vaccines into Nigeria, while the resources could have been used to revive and expand the local production of vaccines within the country. He recalled that in the 1970s and 1980s, we had a local vaccine production industry, which had been allowed to die. The legislators, especially the chairs of the Appropriation Committee (Hon. Mustapha Dawaki) and Finance (Hon. Babangida Ibrahim) got very interested in this argument and they immediately resolved to engage with the Executive in orienting Nigeria towards a policy shift that would lead to a revival and expansion of our vaccine industry.
…the greatest Nigerian tragedy is that we have the worst income-to-revenue relationship in the world. This means that the richest people in Nigeria hardly pay any tax, while the large number of people living below the poverty line cannot pay tax.
The reduction of the inflow of foreign aid into Nigeria is a consequence of the rebasing of our GDP in 2014, which led to the elevation of the status of the country from a low to lower middle level income country. By their policies, bilateral and multilateral developing partners reduce aid from richer to poorer countries, and that is happening to Nigeria currently. The irony, according to Professor Ojowu, is that Nigerians did not suddenly become richer on the day that we announced the rebasing of our GDP. The grim fact, he argued, is that over the past two decades, income inequality has been galloping in Nigeria, as we produce more billionaires while the poverty levels amongst ordinary Nigerians has, in reality, been deepening.
For Vishal Gujadhur, another resource person, the greatest Nigerian tragedy is that we have the worst income-to-revenue relationship in the world. This means that the richest people in Nigeria hardly pay any tax, while the large number of people living below the poverty line cannot pay tax. Professor Ojowu made the point that most of what we call tax is from the “Pay As You Earn” (PAYE) stream by public servants, which means that government is simply double counting, as it has a service to collect back some of the money it has paid its workers, hence this is not really tax because its not new money coming into government. Government, he said, should stop this nonsense of claiming that it is collecting tax from civil servants and simply cancel the PAYE for them. I disagree with this proposal because if indeed we want to raise taxes from the private sector, we may lose the argument if we say government workers do not also have to pay tax. It is interesting that the minister of Finance recently announced that only 214 Nigerians pay tax of up to 20 million naira, indicating that they have an income of at least 100 million a year, while the realty is that we have tens of thousands of Nigerians with billion naira incomes. This elusive category should be the focus of our tax collection drive.
Nigeria also needs to critically analyse and address the impact of the country’s transition from lower to middle income status and proffer proactive, robust and holistic solutions to the problems this is generating. All the specialists are agreed that rebasing of Nigeria’s GDP does not truly reflect the status of the economy.
Moving forward, Nigeria must become more committed and efficient in raising more taxes from the rich and using the income to provide more adequate and sustainable financing for the social sectors of health, agriculture and education. That is the path to achieving a healthy, secured and developed Nigerian society. Nigeria also needs to critically analyse and address the impact of the country’s transition from lower to middle income status and proffer proactive, robust and holistic solutions to the problems this is generating. All the specialists are agreed that rebasing of Nigeria’s GDP does not truly reflect the status of the economy. This is due to the wide level of income and social inequality that leaves the majority of Nigerians in absolute poverty. Nigeria’s revenue to GDP ratio, which stood at approximately six percent in 2016, ranks the lowest in world. We have remained a mono-product economy and failed to expand non-oil revenues, and that is the explanation for the growing funding gap we are experiencing.
Since they say that we are now a middle-income country, let us recover our pride and design and implement a holistic exit strategy from dependency on donor funding for social sector programmes, while generating domestic resources to ensure sustainability. This would require enhanced synergy among the Ministries of Budget and National Planning, Finance and other benefitting ministries and agencies to promote cohesion in the implementation of intervention projects to enhance efficiency, curb wastages and therefore minimise the impact of the decline in donor funding in Nigeria. These ministries would also have to learn to work closely with the National Assembly during the planning phase of their work so that we avoid the annual quarrels as the National Assembly rewrites the budget submitted by the Executive. Finally, the key proposal from the workshop, of commencing plans for the local production of vaccines, must not be allowed to die.