Analysts have predicted a worse economy for Nigeria in 2016 and these various predictions are not unfounded given our mono economic over reliance on Petro-Dollars for the past thirty-something years. The oil boom of the 70’s arguably contributed to the non-diversification of the Nigerian economy and to the boom of public sector corruption. For a country with the amount of oil exports Nigeria had during the oil boom, considerable infrastructural developments and socioeconomic improvements were reasonably expected but denied the greater Nigerian citizenry.
The Nigeria of 2016 is desperate; desperate to raise revenue from any source at all. The government is ashamed to tell the governed that the over-flooding of the oil market with US and Middle East oil will result in lower foreign reserves and public servants being owed salaries. State governments are consistently pleading for bailout funds from the CBN to enable them pay salaries. Due to lack of information, Nigerians still blame the CBN Governor whenever the price of a Naira to the Dollar skyrockets but still use the Dollar excessively to buy commodities online without correlating same.
The Nigerian 2016 budget screams “non-reliance on Petro-Dollars”. The tune of diversification is now a popular Nigerian tune having been recited by past governments but with little or no commitment to implementation. It is pertinent at this point to note that Nigeria’s non-diversification of its economy is not due to a lack of viable areas but as a result of poor economic planning, poor governance and oil induced corruption.
The unfortunate economic situation of the oil market has imposed a compulsory mandate on the government to either diversify or face a severe economic crunch. The highlighted areas are majorly agriculture and taxation. Below are my recommendations.
Diversification of the average Nigerian’s mindset
The bitter truth is that after a longtime attachment with Petro-Dollars, Nigerians have come to see oil as a sole source of revenue. The average Nigerian is averse to recourse to the agricultural sector believing that individuals in the oil sector realize more revenue and work under better conditions. An average young Nigerian would prefer to work in Shell or Exxon Mobil than start a poultry farm and seek funding from a financial institution. Diversification of the average Nigerian’s mindset entails a vigorous sensitization program targeted towards educating Nigerians to explore non-oil sectors for revenue.
Introduction of New Taxes isn’t Diversification
Nigeria’s tax regime is well positioned for foreign direct investment but on the other hand, it harms government internally generated revenue. While Nigeria’s Corporate and Personal Income Tax regime are at relatively low rates considering the rates of other countries, the understandable introduction of additional avenues of taxation such as the CBN Stamp duties, the Abuja one-percent mansion tax and proposed increase of Education Tax to 4% to supplement our low tax rates may be commendable. But the low level of efficient and effective administration and collection of said taxes is an attempt at fertilization after vasectomy. The introduction of the Abuja Internal Revenue Service is a step in the right direction and other steps directed towards tax administration and collection should be implemented. The revenue authorities should consider informal sector taxation and ensuring that non-PAYE individuals pay their personal income tax.
Proper Regulation of the Nigerian Business Environment
The World Bank’s “Doing Business Report” for 2016 has been released and Nigeria continues to perform badly in the ease of doing business index, ranking 169 out of 189 countries. It is trite that a properly regulated business environment breeds a stronger economy. The regulation and procedures for starting a business should be easier to encourage entrepreneurship and foreign investment. Also, the regulation on getting credit for venture capitals, small businesses and already healthy companies should be in a way to encourage easy funding for business. A particular improvement would be the introduction of ICT and computerized systems for registration of businesses and registration of charges on assets.
Nigeria should harness its enormous Gas Reserves
Being a strong advocate for a direct focus on our gas sector, 2016 might be the year we need our gas reserves the most. Unfortunately, the Petroleum Industry Bill which had wonderful provisions geared towards improving the gas sector has been unbundled; Nigeria still has gas policies and laws aimed at harnessing our gas reserves and punishing gas flaring. Although the gas sector is capital intensive, Nigeria should invest in this sector and watch the revenue roll.
Nigeria must make hay while the sun still shines. The government can write down diversification in its policies and budgets, but the stage where we only ‘’talk the talk’’ on diversification has since passed. The economic situation of 2016 makes it compulsory to diversify or watch our economy crumble.
by Odoemenam Chidi
originally posted on www.linnkedin.com