‘Revenue projections possible but we can do better’

Eben Joels is Senior Partner of Stransact, a professional services firm in Lagos. In this interview with Ibrahim Apekhade Yusuf the chartered accountant and management consultant speaks on the projected N18 trillion revenue target of the federal government and sundry business related issues. Excerpts:

 

The federal government plans to generate N18trillion revenue by 2023, which is about 15% of the GDP, through oil and nonoil sector due to depletion of oil receipts and other revenue streams. Some schools of thoughts believe this revenue projection is not feasible in the medium to long term. Do you share these sentiments?

The revenue projection is feasible and if we are ambitious we can do even better. The figure is based on a direct proportion of GDP. The minister says government is currently doing a revenue of 8% of GDP and the plan is to move this to 15% without telling us how.

However, in an ideal scenario the GDP itself should not be static and you can raise about the same billions by getting the same take that you do now from a compound growth of GDP over the same period.

Government should focus on telling us how the GDP will expand to yield this new figure. That is the more important issue for some of us.

One of the major planks of the planned revenue projection is taxes. Recall that the federal government announced payment of 6% stamp duty on rents in addition to the subsisting taxes and tolls. Are Nigerians not been taxed out of existence?

Imposing stamp duty on every electronic transactions, taxing sms, using so-called consultants to harass tax payers are all from the same template of increasing national revenue by squeezing the already impoverished Nigerians.

This kind of thinking is what you get from con men running around as consultants. The yield from this kind of approach is very small when compared to the yield you will get from taking decisive actions to open up the economy for gargantuan growth.

We have a young population, one of the youngest in the world, put them to work! Create enabling environment for foreign investors, show that government exists by eliminating organised criminality, unpunished murderers which we have conveniently called bandits and kidnappers. Growth is a process. It is a direct result of certain intentional acts to spur it. Increasing stamp duties etc. will not spur growth.

 

Taking a cursory look at Nigerian state governments’ internally generated revenue (IGR), why do you think there’s been, over the years, emphasis on federal allocation and what do you proffer as solution?

The level of governance in Nigeria is decaying faster than that of an active radioactive element. The basic duty of most people holding government offices continue to be how to corner allocations for themselves and their cronies.

It is difficult to increase the size of a pot if you are only focused on stealing the pot. Most states in Nigeria are run by small-minded individuals whose primary purpose is to steal every valuable object, kill unprotected individuals who oppose them and destroy whatever value system remains in the society.

They transform themselves into tin-gods demanding worship in exchange for a morsel. It seems this country rewards thieves by giving them increased responsibility in thievery.

There are few people who have maintained a prolific career in politics that have ever run genuine businesses in their lives.

The other day, a Minister boasted that he thanked God he never found a job after school because he later found a career in politics that have seen him access federal government funds for over 16 years now.

The solution is not far-fetched. Where there is no vision, there can be no leadership. State governments should seek visioning help where necessary.

It is difficult to describe certain things to a blind person who is unlettered and is not even ready to use his imagination. Most states can now access funds through the capital market.

This means large projects can be easily financed by ambitious state governments. For example, what is stopping Kogi State from wholly acquiring Ajaokuta Steel complex, except a lack of foresight? It is not so difficult for a state government to acquire or create a major enterprise, take it public and exit the investment in 8 years – the average time a politician is in office.

As exchange rate falls to N472/$1 at black market, dollar scarcity worsens, yet CBN’s MPC keeps rates unchanged amid rising inflation. What is the impact of this on the Nigerian economy, trade and investment?

The more worrisome issue is that the gap between the various exchange rates operating in Nigeria creates arbitrage opportunities for highly connected individuals.

No less a person than Sanusi Lamido Sanusi told us some people do not need to work to make a billion naira because they can simply obtain foreign currency at the official rate and sell on the black market.

Some people are cleaning out of this situation. The spread between the black market and the official market is back to about NGN100 on a dollar.

It is not that rate that is the issue right now. We need to move to a single unified exchange rate. For all you know, the Naira may be underpriced artificially because of the quest to “defend” the Naira.

Using purchasing power parity, I believe the Naira is underpriced and the so-called need to defend the Naira by operating several tiers of official exchange rate is part of the systematic theft of national resources going on as we speak.

Do you think the CBN’s Monetary Policy Committee (MPC) expectations and projections are realistic, within the context of the present realities?

The CBN is rightly focusing on inflation, by adjusting lending rates and bank currency ratios. I do not think I am adequately schooled to comment on the technical logic of that decision.

However, I am more concerned with the bank’s role in promoting ethical banking in Nigeria and I think they can do better.

Today, banks continue to earn more from non-lending activities than they do from lending to genuine businesses.

You still need an arm and a leg to get financing. The only objective of the average bank CEO is to own the largest home in Ikoyi. Banks are still led by gods and goddesses. The CBN can do better in ensuring ethical banking, really.

The consequences of the Covid-19 pandemic on financial statement reporting and audit engagements are complex and have resulted in challenges for audit management, those charged with governance (TCWG) and auditors. What are the implications? Do you think this poses practical challenges for audit management and how do you think the industry would meander through this professional curve?

Nigeria’s Financial Reporting Council (FRC) has issued timely guidelines to help auditors navigate the current difficulties.

The Council referenced the requirements of the International Standard on Auditing on Terms of a new Audit Engagement and advised strict adherence as much as practicable.

There were similarly copious guidance on how auditors should deal with difficulties in completing relevant audit steps during Covid-19 restrictions.

Auditors will do well to adhere to guidance published by both the FRC and the Institute of Chartered Accountants of Nigeria.