CISLAC Urges Bold Tax Reforms as Nigeria Grapples with Revenue Strain
In the face of a noticeable decline in federal funding for vital economic sectors, the Civil Society Legislative Advocacy Centre (CISLAC) is pushing for comprehensive tax reforms to compel affluent individuals and organizations to contribute more to Nigeria’s national revenue.
Speaking passionately at a press conference in Abuja, Auwal Ibrahim Musa, the Executive Director of CISLAC, shed light on the economic challenges exacerbated by a significant portion of revenue being channeled towards debt servicing.
“The implementation of a net wealth tax or wealth tax policy could be a game-changer, significantly boosting revenue from high net-worth individuals and organizations,” Musa asserted.
The dwindling revenue, he highlighted, has adversely impacted critical sectors such as education, poverty alleviation, and health. Musa underscored a concerning decline in budgetary allocations to these essential areas, dropping from 5.97 percent in 2012 to a mere 3.3 percent in 2019.
“The 2021 fiscal year witnessed a budget of N13.6 trillion, with only N514 billion, or 3.7 percent, allocated to health. Although there was a marginal increase to 4.3 percent in 2022, the highest allocation recently reached 5.7 percent in the 2023 budget,” he explained.
Musa highlighted the stark contrast between the allocation for debt servicing and crucial sectors in the 2024 budget, where Nigeria is set to spend six times more on servicing debts than on building new schools and hospitals.
The 2024 budget allocates only 7.9 percent, 5 percent, and 4 percent to education, healthcare, and social development and poverty reduction, respectively, despite the administration’s self-praise for increased funding in social services.
Musa emphasized the importance of assessing budgetary allocations to social services in dollar terms due to Nigeria’s dollar-denominated economy. A comparative analysis between the 2023 and 2024 budgets showed a 36 percent drop in the education expenditure budget, from $56 billion to $36 billion.
The 2024 budget, totaling N28 trillion, continues to exhibit patterns of bloated recurrent spending, new borrowings, and unsustainable debt servicing costs. Debt servicing is allotted N8.25 trillion, with the president projecting it to be 45 percent of total income, although it currently stands at 98 percent. The World Bank projects this to escalate to 160 percent by 2027.
A deeper analysis of Nigeria’s debt sustainability reveals alarming figures, with the debt-to-Gross Domestic Product (GDP) ratio at 45.4 percent, surpassing the self-imposed limit of 40 percent. Furthermore, the debt servicing-to-revenue ratio has soared to 73.5 percent, significantly higher than the recommended 50 percent threshold, according to Musa’s insights
