The Governor of Ekiti State and Chairman of the Nigeria Governors’ Forum (NGF), Dr. Kayode Fayemi, yesterday lamented the devastating effects of the COVID-19 on the Nigerian economy in 2020, saying that it led to a N43.15 billion or 3.4 percent drop in states’ internally generated revenue (IGR).
Fayemi spoke as the Guest of Honour at the seventh NGF Annual IGR event that brought together stakeholders, policymakers, and professionals to discuss and proffer innovative strategies to assist states to achieve their revenue projections.
The event also fosters peer learning amongst states on associated reforms.
He said the marginal growth in states’ IGR recorded year-on-year from 2016, peaked in 2019 and recorded a decline of N43.15 billion (3.4 percent) in 2020.
The NGF chairman said: “States recorded a compound annual IGR growth of 12 percent, from N687 billion in 2015, to N1.21 trillion by 2020,” due to various reforms.
“These reforms comprise legal revisions, policy directives, institutional restructuring, and technological innovations to improve tax administrative processes and procedures.
“Still, the marginal growth in the IGR of states recorded year-on-year from 2016, peaked in 2019 and recorded a decline of N43.15 billion (3.4 percent) for 2020,” the chairman of the governors forum explained.
He added: “Although, the COVID-19 pandemic contributed strongly to the decline recorded, our tax effort (tax-to-GDP) as states is estimated to be less than three percent.
“Advancing beyond our current revenue levels will warrant more systemic reforms to address low tax morale and voluntary compliance by taxpayers.
“The growing wave in tax avoidance and evasion especially among the informal sector is not unconnected with their belief that such cognitive dissonance is right.
“Such justification is often predicated on the principle of reciprocity and economic exchange for which they fault government’s commitment.
“Thus, where these recalcitrant taxpayers perceive a weak social contract, they call to question the legitimacy of taxes imposed on them by the law,” Fayemi declared.
He explained that whilst the governors remained resolute towards delivering their mandate as elected officials, they are confronted with economic and socio-economic challenges beyond the fiscal space that they have.
Thus, he said: “This is what has caused us to aim for as close to even development as we can deliver, a compromise non-beneficiaries will continue to fault us for. This is despite social intervention initiatives, programmes, and projects we have introduced to service various disadvantaged spectrums of the population including the poor, vulnerable and unemployed.”
Nonetheless, the Ekiti State governor said: “We must stand up to the trust placed in us as chief executives of our states and devise a more equitable social minimum, sustainably funded to strengthen our social contract with the citizenry.
“To this end, this learning event and the tax-for-service (TfS) initiative is timely and strategic to our desire to achieve universal health coverage for all Nigerians.
“Health financing has remained a challenge not just for us as government, but for citizens, who periodically pay huge sums out-of-pocket for healthcare. This is the situation, as less than five percent of our population is covered by any form of prepayment mechanism for healthcare.
“High out-of-pocket payments for healthcare has proven to be highly regressive and a major barrier to seeking treatment for many,” he added.
In his speech, the Chairman of the Federal Inland Revenue Service (FIRS), Mohammed Nami, urged the governors to pay more attention to tax as a source of revenue.
He said: “Taxation remains the most veritable tool in addressing the imbalance between the haves and the have nots of the society. Beyond the use of taxation for balancing the social-economic standing of citizens, it is contribution that members of the society make in order for their leaders to provide them with social amenities in appropriate quantity and quality. In short, it is the price paid in anticipation of decent living conditions.
“Tax-compliant citizens can legitimately expect their leaders to provide necessary amenities for a good life. This expectation is confirmed by the constitution of the Federal Republic of Nigeria (as amended)
“Government at various tiers must in view of the constitutional provisions, imbibe the culture of value-for-money or put in proper perspective, value-for tax-money.
“The citizens should not just hear budget figures but must, within their immediate living quarters, feel, see and experience effects of tax revenue.
“This, going forward, should be the norm and not an exception. Nigeria over the years has been dependent on revenue from crude oil.
“This source of revenue is no longer sustainable as the market for fossil fuel continues to deplete due to complications arising from the impact of the COVID-19 pandemic, the shift from fossil fuel to other cleaner sources of energy,” he stated.
Chuks Okocha and Adedayo Akinwale,
This Day