President Bola Tinubu, in an address delivered yesterday during the inauguration of the presidential committee on fiscal policy and tax reforms, pledged to put an end to Nigeria’s excessive reliance on borrowing as a means to fund public expenditure. Tinubu expressed his concern over the escalating national debt, which surged by a staggering 501% over an eight-year span, reaching N72.55 trillion in March 2023 from N12.06 trillion in March 2015. This debt growth was primarily driven by heightened borrowing, compounded by the impacts of the global pandemic and economic recessions in 2016 and 2022.
According to data from the Debt Management Service (DMO), the total public debt of N75 trillion encompasses N19.64 trillion in foreign debt, N30.21 trillion in domestic debt, and N22.7 trillion in Ways and Means lending from the Central Bank of Nigeria (CBN) to the Federal Government.
Furthermore, Nigeria allocated N3.36 trillion to service its debts in 2022, which marked a 14.68% increase from N2.93 trillion in 2021. Of this, N1.07 trillion was directed toward servicing external debts, while N2.56 trillion went towards servicing domestic debts.
Citing data from the World Bank, it was noted that Nigeria dedicated a substantial 96.3% of its revenue to servicing debts in 2022, up from 83.2% in 2021, with projections suggesting this debt service-to-revenue ratio could rise to 103% in 2023.
The Presidential Committee on Tax Reform, established on July 7, 2023, and chaired by tax and fiscal policy expert Taiwo Oyedele, was introduced as a response to the challenges. The committee, composed of specialists from both public and private sectors, aims to address tax law reform, fiscal policy design, tax harmonization, and revenue administration.
Tinubu emphasized that the committee’s formation aligns with his commitment to removing obstacles hindering business growth in Nigeria. He highlighted the necessity of shifting focus from taxing poverty and production to emphasizing returns, income, and consumption. The President emphasized that the ongoing failure of the current tax regime has led to over-reliance on borrowing for public expenditures, ultimately constraining economic development.
Tinubu’s vision for change encompasses tax reform, fiscal policy coordination, and tax revenue enhancement. He set a target of achieving a minimum of 18% Tax-to-GDP ratio within three years and urged the committee to deliver a schedule of rapid reforms in thirty days, with critical reform measures to be recommended within six months and fully implemented within a year.
In concluding remarks, the President directed all government agencies and departments to cooperate fully with the committee’s efforts. Taiwo Oyedele, the committee’s chairman, stressed the need for change in dealing with tax evasion and stated that Nigerians are willing to pay taxes if they understand the benefits.
The World Bank’s Country Director for Nigeria, Shubham Chaudhuri, praised the elimination of fuel subsidies, which increased the nation’s revenue-to-GDP ratio by approximately two percent, highlighting the potential for further growth toward the target of 18%.
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