I’m very excited to be back here at the Ogun State investment forum because it gives an opportunity for us to take stock of the journey of where the state was in 2015, when it seemed like a dream that we could build more infrastructure and attract more investment into the state and get more growth.
I think the administration of Senator Ibikunle Amosun has done incredibly well in sticking to the template, so it’s yielding results and very visible results but more importantly results in the lives of the people.
They’ve attracted a lot of investment and created a more hospitable business environment. It’s exciting and in terms of the themes of this particular conference, it is very appropriate.
Agriculture is still the mainstay of the state and there are huge opportunities there. Industry and of course technology which is really a game changer, that’s where there’s considerable latent opportunity.
When you look into other states, because I’ve spoken to many and they talk about how some other states can take a leaf out of Ogun State’s book. I mean, when you look at the IGR alone, it’s gone from about N730million to over N7 billion monthly.
So what would you like the State’s to take away from Ogun State?
One of the things that we’ve done is the state fiscal responsibility plan which was a 21 point reform program for states and one of the things state’s were required to do in exchange for help during the darkest part of the recession was to improve IGR.
One of the key metrics was to improve IGR and to come up with a plan for IGR that required things like reviewing obsolete tariffs, taking transactions cashless and improving their receipting, so we’re seeing this replicated across a number of states and it has been quite exciting to see the increases in IGR across the length and breadth of the nation and that is really important in terms of fiscal responsibility for the state’s because when we talk about not relying on oil we’re not saying that the government should cut back we’re saying that government should find another source of revenue and internally generated revenue for any state is a very very important part of that.
Let’s talk on the federal level. The Voluntary Assets and Income Declaration scheme, the deadline is almost here March 31st. Bring us up to speed on the progress so far?
Incredible progress so far. The signs have been very very encouraging. We knew that everyone would wait until the last minute, which was something that we expected I was just speaking to the chairman of Inland revenue here in Ogun and he said look I am at N500million already and there are just a handful of people that have complied so the signs are very encouraging.
For us it proves that the data that we have and the analysis that we did are correct. We analysed the data and saw that people are clearly under declaring on a massive scale and so far I think at federal level just 226 people account for N20 billion so if you begin to extrapolate and think about the thousands of forms that are in circulation we expect that we will bring many many more people into the tax net correctly.
It is not just about paying the arrears of taxes that they should have paid but for us, what is more important is being taxed at the right level going forward.
I know that there are still some people who won’t come forward because they want to see if there’s any bite from the side of the fiscal authorities so come March 31st. What is going to happen are you going to name and shame?
What is going to happen is for personal taxes many of the states are working on using sort of mobile courts to fast track cases. They dont want cases to get caught up in the long legal process because tax evasion is a very easy and straight forward prosecution. They’ve started looking at setting up special courts that deal with tax evasion.
Tax evasion is a crime and of course once people are prosecuted we feel that we should say this is the person that is being prosecuted for tax evasion and this is why so that it acts a deterrent to others. However, I am not sure that this is where our focus is.
Our focus is really on getting everybody to do the right thin. These moneys were made in Nigeria and from Nigeria and it is only fair and right that some of that money is ploughed back into the system to allow some of that to go forward.
So what is going to happen after VAIDS?
We continue the focus on tax collection and we’re going to focus on VAT. We’re also going to focus on getting the number of tax payers up.
According to the latest figures I’ve got from the Federal Inland and Revenue Service, we are now at 17 million and that’s a huge achievement because I believe we were at 13 million Nigerians when we came in.
But, there are 65 million people who are economically active so there’s a long way to go. There is a lot of work still to be done in the tax system.
VAIDS is just one of many reforms. The other reforms that we are working on are constant updates to our tax laws. Some of our tax laws are obsolete. We haven’t updated them or come up to speed with different commercial realities.
For example, we have not got a strategy for taxing e-commerce. A lot of transactions are now happening online. How do we get them into our tax net? SO there is constant work to be done in our tax policy.
But is that in the works already?
Absolutely we have a national tax policy that FEC approved and we have a national committee that pulls together academia, the private sector, the public sector, and the collecting agents and they have policy meetings where they work and look at the tax laws and recommend changes.
The first set should hopelly go to FEC in the next couple of weeks and then from there they’ll go to the national assembly so it is a constant process of upgrading and updating and making sure that our tax laws are not only effective but also ease the convenience in terms of payment.
Now, let’s talk about government debt. Bring us up to speed.
The first thing to say about our core debt strategy is that it remains conservative. In terms of debt to GDP ratio we are at 21. The upper limit for a developing economy is recommended at 40.
Some of our neighbours not too far from here are as high as 60, some are at 80. Our debt to GDP ratio is very low and we intend to stay in the low range.
However, there is a desperate need for investment and that investment has got to be financed and that investment is long term investment. The only way you can finance these things is through long term debt.
Our needs to develop roads and power are prevalent and they are long term assets so we have to match them with long term liabilities.
Our strategy as far as debt is concerned is to have longer term debt, which is why we refinanced treasury bills which mature in 120 – 180 days and moved that to 20 -30 years.
We’re matching the lifespan of the asset with the liability and as you pointed out previously by moving on to external debt we are creating head room for the private sector.
We are also creating head room for the monetary authorities. Hopefully when the conditions allow, they’ll begin to bring down interest rates. It is all part of a comprehensive strategy.