The Nigerian Paradox of Declining Income and Increasing Taxation, By Ehireme Alexis Uddin
Is tax important? Yes. But not when it always comes in the form of a money grab. You cannot raise taxes when incomes are not increasing and when government expenditure is not transparent and is riddled with corruption.
I remember being in primary school when I read in the newspapers that Dunlop was leaving Nigeria after reporting billions of naira were recorded in losses. Slightly wiser, I now know that Dunlop had problems with the operating environment in 2008. We’re currently in 2020 and the operating environment has not improved. One can argue that it has only deteriorated, just like everything that exists in Nigeria, with the exception of those who get fancy allowances, fat pay cheques and those that continue to undermine the core of our democracy. But that is a conversation for another day.
At the heart of the matter today is that 12 years since Dunlop departed, why are we still having the same conversation? A 2018 Forbes article by Kenneth Rapoza explains it simply: “If you want to lose money in one of Africa’s biggest markets? Put it to work in Nigeria.” Sure, Nigeria has the highest nominal GDP in Africa, but that is because of its commodity exports. As a nation, it is riddled with corruption. It has a very unfavourable tax system and poor infrastructure, especially when you consider Nigeria has the largest gas reserves in Africa, but about half of its population have no access to electricity.
Corruption needs no introduction, especially when you are Nigerian, so let us talk about tax. When you talk about tax in Nigeria, people get upset and I am one of those people. I read newspapers and articles talking about how Nigeria as a country is under-taxing its citizens and businesses, and I wonder if they have been to seen Nigeria. Because as one who did a year of the National Youth Service Corps (NYSC) and earned N30,000 from my job and N19,800 from the government and struggled to save, even with my parents housing me and feeding me, I wonder how much tax you can get out of a country whose monthly minimum wage is N18,000.
For businesses, it is no better. Whilst bike hailing became a booming business thanks to Fahim Saleh and Deji Oduntan, the Lagos State government immediately set up a plan that would see them paying an annual licensing fee of about N25 million in the name of regulation. In 2019, it was a US$2 billion claim for back taxes against MTN and a few weeks ago it was NIPOST trying to force a licensing fee on domestic courier services. The same NIPOST that “lost” my ASOS orders in 2018 and has consistently been a thorn in my side every time I bought something from outside Nigeria?
After a while the Nigerian government, state governments and their agencies begin to resemble vultures. Our state waits for hardworking people to figure out the solution to a problem it has created and refuses to resolve, watches them thrive in this and then swoops in to take a huge chunk after the innovators have barely started to thrive.
After a while the Nigerian government, state governments and their agencies begin to resemble vultures. Our state waits for hardworking people to figure out the solution to a problem it has created and refuses to resolve, watches them thrive in this and then swoops in to take a huge chunk after the innovators have barely started to thrive. Is tax important? Yes. But not when it always comes in the form of a money grab. You cannot raise taxes when incomes are not increasing and when government expenditure is not transparent and is riddled with corruption.
In 2019, in supposed retaliation for xenophobic attacks in South Africa, which resulted in Nigerian run businesses being burgled and destroyed, Nairametrics reported that Shoprite Nigeria lost 8.1 per cent of sales. Fast forward to August 2020 and Shoprite is leaving Nigeria; and I am having an existential crisis because that is probably my most visited place in Lagos. And before anyone says, “but there’s Spar”, I am very big on consumer loyalty, so let me grieve in peace. To be fair, Shoprite has been struggling outside South Africa and has experienced a 1.4 per cent decline in same store sales, which it blames on the lockdown. But at the moment it is only pulling out of Nigeria and not the other countries it is operating in. Why, you might ask? I think it is the same reason one might end any relationship; it is not worth the stress.
What I find laughable and somewhat interesting is the idea that some people have that the exit of the retail giant is somehow an opportunity for Nigerian businesses to step in and take their place. Sorry to break it to people of that school of thought, but in my opinion, feet don’t grow that fast and if anyone was going to be as big as Shoprite so fast, they would have already done it. Their exiting the market does not suddenly create the capital for such a large-scale expansion. And although I like the idea of a giant domestic supermarket retail chain, let us sit for a minute and think about how feasible that might be in a few months. On this note I am going to end by saying call me a pessimist but just as Rome was not built in a day, neither were Zimbabwe and Lebanon destroyed in 24 hours.
Ehireme Alexis Uddin is an Economics graduate with a penchant for writing.