By Abachi Ungbo
Restructuring has been loudly touted as a panacea to the many wrongs afflicting Nigeria. In light of this, the opponents of the system of government in operation, have described it as an aberration and need to be tweaked to reflect the federalism we profess. And, they have succeeded in whipping up conversation on the vexed issue with different ideas on the form it should take.
The Value Added Tax (VAT) brouhaha is the latest subject in accentuating our many fault lines. Many daggers have been plunged into the heart of our national unity since the judgment was passed. In effect, the unintended consequence was the pitting of Nigerians against themselves.
So many states are unsure of what to make of the ruling. I think many are biding their time to weigh what has just hit them or more appropriately waiting for the outcome of the legal challenge. While Lagos has hurriedly toed the path of River state preparatory to receiving VAT, a domino effect is expected to follow.
The revenue from VAT is too seductive to keep still. The total collected in 2020 was about 1.5 trillion Naira. In the first quarter of 2021, it was 496.39 billion Naira while it grew to 512.25 billion Naira in the second quarter.
Effectively, the major contributors to VAT are savouring the victory in hushed celebration. The rationality of starving them of huge revenue from VAT gathered in their domain is beyond them; after all, it is location specific. The idea of the strong propping the weak rings hollow to them. They need the revenue to run their states the scales have fallen from their eyes.
We can decide on the pattern or nature of our fiscal federalism which should be embraced as freedom from been appendages of the centre but ‘freebies’ have a way of keeping you enslaved especially when you’re not cognisant of your power to provide for self. States have failed to exercise their power under a federal setting instead they chose to remain content with converging in the capital with their baskets.
To preclude a financial apocalypse that will envelope the ‘weaker states’ amidst the present parlous financial state the proposal put forward by Lagos Chambers of Commerce and Industry (LCCI) in using factors of population 30%, equality 20%, and derivation 50% against the prevailing formula of population 30%, equality 50% and derivation 20% should be given serious thought in the distribution of VAT revenue for the states and LGAs
Granted, we’re not equitably endowed but remaining unimaginative in being independent financially is the major problem which the current awakening would help in addressing.
Sadly, Northern Nigeria is the object of critical bashing for been the acclaimed major beneficiary of VAT that is raked in, preponderantly from the South. Though, convincing arguments by analysts abound to pooh-pooh this claim.
For Lagos, it enjoys unique advantage of being home to the nation’s formal economy. Essentially, hosting big businesses with branches scattered across the country which remits VAT receipts through their head offices. Imagine the hit the state will endure if each state will begin collection of its VAT. Remember, agriculture an area of comparative advantage is not taxed for food security reasons.
However, the spectacle of destruction of alcoholic beverages in some ‘puritan states’ which is taxed and receipts pushed into the VAT pool for onward distribution needs to be resolved. It rankles a lot of Nigerians.
The North has no reason with it size and potential to remain so attached to the purse at the centre like their counterparts. It is sad that it stands at the foot of the ladder of every socioeconomic indicator with little effective efforts at turning the corner.
Angling for political ascendancy has only empowered a greedy hand full while others are left in the lurch. Human development drive and building the region’s economic backbone is in complete limbo.
To gain cheap popularity leaders deflect their ineptitude by simply lashing at anything perceived as been anti- North and oftentimes they display reactionary attitudes. Then the big one- whip up religious or ethnic sentiments. The North is a metaphor of how diversity has been squandered in the country.
Imagine the hemorrhage of productive population and businesses as a result of being a notorious tinderbox leaving it a graveyard of once thriving industries.
The ability of Kaduna state to build an IGR bigger than that of Kano known to be the north’s commercial hub and home to a huge population further dramatizes weakness and depth of leadership.
I think Nigeria is on the cusp of major changes. This is an auspicious time to be creative in generating wealth. The region must work to support businesses, respect diversity, work for peace and improve on IGR, area of comparative advantage and quality of leadership.
Ungbo writes from Kaduna via
Kaduna
