A number of public policy initiatives have been put in place by the federal government to strengthen the nation’s economy. One of such is the introduction of the finance bill to boost the financial standing of the country. How far can the bill go in attaining this objective? A close look into this piece of legislation shows that it is really worth examining in the sense that it has wide applicability and can make the desired impact. Recently, some stakeholders did justice to this discourse by sharing concerns about the bill with a view to making it a virile tool for economic rejuvenation.
In recognition of the potential impact of the 2022 Finance Bill on the operations of various organisations operating in different sectors of the economy, a major stakeholder that took part in the analysis of the bill was the Lagos Chamber of Commerce and Industry (LCCI). The body revealed that recent statistics have indicated that Nigeria had struggled to attract investments into the oil and gas industry while investments in the country’s oil and gas sector had declined significantly in the last few years. The operations overheads of oil and gas companies remain above 40% above the global benchmark and that in line with Federal Government of Nigeria (FGN) priorities and ongoing initiatives to incentivise gas production while several sections of the Petroleum Industry Act (PIA) clearly show the determined efforts by the government to limit gas-flaring and contain very steep penalties.
Furthermore, gas flare fees and costs are treated as a penalty and as such, a non-tax-deductible item while oil and gas companies in Nigeria have reduced flaring by 70% since the year 2000 while nearly doubling overall gas production and commercialised volumes in four-folds. The Director-General of LCCI, Dr. Chinyere Almona also informed that with the plan to exit some large enterprises from the Pioneer Status incentives, the government can save about N6trillion tax expenditure in the forms of waivers, exemptions, incentives granted by the government. The body has urged the government to tread conservatively in raising tax rates premised that there are new ways of rescuing some tax expenditures to add up to government revenue in the new year.
Leaving rates at their levels would not lead to a loss of revenue going by the oil sector’s contribution to Gross Domestic Product (GDP) for last year that was just around 5% even though this sector accounts for over 85% of foreign exchange earnings and about 50% of total government revenue. The implication is that this sector requires a sensitive regulatory environment to avoid disruptions to investments in the sector.
With the divestments from the oil and gas sector, there is the need to reposition the industry through a steeply implemented Petroleum Industry Act (PIA) to pave way for new investments and also encourage indigenous companies to reflate the sector with required investments even though industry statistics revealed that indigenous companies contribute about 30% of crude oil and 20% of the country’s gas production, as well as 40% and 32% of oil and gas reserves, respectively.
Based on the reality on ground and the vantage positions of major stakeholders from operators in the oil and gas sector and the business community, a number of suggestions should be looked into that can boost our economy such as the retention of the Tertiary Education Tax (TET) rate at 2.5%, which was just increased from 2% to 2.5%. At the proposed rate of 3% Nigeria’s corporate income tax rate would rise to about 36% which is one of the highest rates in the world.
Other areas to look at are the retaining of 30% Corporate Income Tax for all oil and gas companies, amending the Petroleum Profit Tax Act with the same provision in the PIA section 104, gas flares-out projects should be incentivised to ensure monetisation of the resource for the benefit of Nigeria while finance bills should be properly presented for extensive stakeholders’ consultations before being passed by the National Assembly.
On what to do to promote the realisation of revenue targets for the fiscal budget, the Ministries Departments and Agencies as well as government-owned enterprises should intensify their revenue mobilisation efforts at an enabling environment where the private sector thrives and to achieve the laudable objectives of this year’s budget, it is imperative for the government to sustain current efforts toward the realisation of crude oil production and export targets by creating an investment-friendly oil and gas industry.
This is because public-private partnerships are the best models to fast-track the pace of our infrastructural development, if given the right position in the scheme of things. In the final analysis, a major factor that would make these happen is the human element or factor. What should be done? We need to instill discipline, political will, eschew graft, and be focused. The truth is that Nigeria and Nigerians are not bereft of ideas and solutions to national problems. Over the years, the human element has become a big issue that requires serious and rapt attention for us as a nation.
