By Grace Chigbu
Abuja, October 9, 2023 – Nigeria, a nation grappling with economic challenges, has suffered a staggering loss of over N40 trillion in revenue due to questionable tax incentives, according to the Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), Auwal Ibrahim Musa Rafsanjani. Musa’s call for robust legislative action to curb these losses comes at a critical juncture for Nigeria’s economy.
Musa made these remarks during the commencement of a two-day sensitization and capacity-building workshop titled “Identifying and Strengthening Legislative Pathways for Reforming Tax Expenditure Governance in Nigeria,” jointly organized by CISLAC and the National Institute of Legislative & Democratic Studies (NILDS).
In a straightforward and passionate statement, Musa highlighted the gravity of the issue: “Nigeria is hemorrhaging billions of naira due to suspicious and dubious tax waivers, concessionaires, and tax holidays. Regrettably, these resources are not being used for their intended purposes but are instead being diverted or stolen.”
Musa emphasized that Nigeria’s fiscal responsibility laws were not being effectively enforced, leading to a situation where borrowed funds often failed to materialize into tangible projects. He expressed dismay that despite having significant funds domestically, Nigeria continued to accumulate debt. “N40 trillion is a colossal sum of money. There is no valid reason for Nigeria to continue borrowing when we have the potential to utilize these funds for development.”
He also pointed out that rampant oil theft, coupled with a lack of action by authorities, was exacerbating the issue. Money laundering and illicit financial flows were contributing factors, further crippling the economy.
The economic ramifications of these losses are profound, as Musa explained: “Numerous factories have shuttered due to power shortages, and corruption is undermining the business environment. Job losses are mounting, poverty is increasing, and unemployment figures are soaring. As responsible citizens, we must support the government’s sincere efforts to plug these leaks.”
Musa acknowledged that taxation remained the most reliable fiscal policy tool for financing development sustainably. He stressed that tax incentives, waivers, and exemptions could be beneficial tools when applied appropriately, fostering growth and attracting foreign direct investment.
However, he noted that Nigeria’s implementation of tax incentives faced significant challenges, including abuses that were evident to the public. Citing data from the Global Tax Expenditure Database 2020, Musa revealed that Nigeria’s tax expenditure reached a staggering N5.84 trillion, equivalent to 3.8% of its GDP, representing over half of the 2020 budget. Furthermore, in 2021, the Federal Government reported tax expenditures of N6.68 trillion, amounting to roughly 4% of the Gross Domestic Product (GDP).
In principle, tax waivers, concessions, and exemptions were conceived as sound and effective mechanisms to stimulate economic growth, particularly in pioneering industries and to attract foreign investment. However, the Nigerian experience has been marred by mismanagement and abuse, leading to significant revenue losses.
As Nigeria grapples with these fiscal challenges, the call from CISLAC’s Executive Director, Auwal Ibrahim Musa Rafsanjani, for comprehensive legislative reforms to address tax expenditure governance is timely. The nation stands at a crossroads, where effective measures to curtail these losses could lead to a brighter economic future for Nigeria and its citizens.
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