Nigeria must find its path to speedy economic recovery and speedy national development, participants in the PriceWaterhouseCoopers (PwC) Executive Roundtable have said.
The proposal was made during the PwC Nigeria executive roundtable on the Finance Act 2020 and Economic Outlook for 2021 held on Monday.
For the country to achieve these objectives, the experts said some innovative ways to consider include unlocking Nigeria’s vast dead assets to stimulate growth, harnessing the power of the Diaspora, driving export growth through services and spreading growth across the country, and not concentrating in just a few urban centres.
Other points to consider include improving on the country’s low investment and gross capital formation; moving its thriving informal sector to the formal sector; improving on the business environment, and ease of doing business.
In her keynote address on the economy and government’s policies towards the recovery, the Minister of Finance, Budget & National Planning, Zainab Ahmed, said the administration was committed to enabling economic recovery and stimulating inclusive growth through policies and interventions designed to foster economic resilience and business sustainability.
The Country Senior Partner PwC Nigeria, Uyi Akpata, said that considering the impact the pandemic was having on Nigeria’s economy, it was important for businesses to understand the forces shaping Nigeria’s economy in 2021.
Mr Akpata said such a knowledge would help in minimizing potential risks and take advantage of the fiscal policies the government had enacted to stimulate the recovery of the Nigerian economy.
Also, the experts said addressing Nigeria’s big three distortions (exchange rate, power, and subsidies) could expedite the country’s economic recovery, while shifting the focus of the economy from being Gross Domestic Product (GDP) lens to Sustainable development Goals.
With Nigeria holding as much as $900 billion worth of dead capital in residential real estate and agricultural land, the experts said finding the political will to act and unlock Nigeria’s dead real estate assets would have a transformative impact on the lives of Nigerians.
“The value of the Federal Government’s abandoned properties alone, according to the Nigerian Institute of Builders, is projected to be about N230 billion. About a half of Nigeria’s population live in cities, of which almost 80% of them are living in substandard conditions.
Out of the 10 themes, the experts urged the government to consider Nigeria’s Gross Fixed Capital Formation, which in 2019, stood at less than 20 percent, with PwC estimates showing that the country would need an investment rate of at least 26 – 28 per cent of GDP to achieve 7 percent growth.
Nigeria’s economy, the Economist noted, was distorted by the exchange rate; fuel subsidy regime; and the power sector.
To address these three big thing distortions will be taking the giant step to restructure the country’s economy holistically; achieve the 7 per cent GDP growth, and improve the lives of the average Nigerian.
Taiwo Oyedele, Fiscal Policy Partner and West Africa Tax Leader PwC Nigeria, shared insights on how the Finance Act 2020, and other significant changes made to existing laws, would shape Nigeria’s tax environment in 2021.
Mr Oyedele said there were no easy choices or a silver bullet given the limited fiscal space for incentives and to deliver on counter-cyclical measures.
He commended the policy direction of the government not to introduce new taxes or increase the rate of existing taxes.
On government’s decision to reduce the minimum tax rate, the tax expert advocated for a permanent removal of the tax which often tax companies that are vulnerable, especially when they are making a loss.
On the results of the survey conducted by PwC, Mr Oyedele revealed that respondents were also asked to indicate which changes in the Act they did not agree with.
Over half (about 59.7 percent) of the respondents said they did not agree with the idea of transferring unclaimed dividends and dormant account balances to a Trust Fund, while 31.2 percent did not agree with
the plan to introduce excise duty on Telecommunications services. This was followed closely by 30.3 percent of respondents who did not agree with the deployment of Technology by the Federal Inland Revenue Service (FIRS) to plug into taxpayers’ systems.
Respondents were also asked to indicate which three initiatives they would support the government, to fund the budget deficit and cater for the various tax reliefs.
About 67.8 per cent voted for the use of technology to catch tax evaders and aggressive tax avoiders, which appears to contrast with the small, but significant percentage of respondents who did not want technology deployed into tax payers’ systems.
About 62.2 percent of respondents would support public procurement efficiency and fiscal responsibility by Ministries, Departments and Agencies of government, while 46.3 percent of respondents said they would support the taxation of foreign companies under the Significant Economic Presence and new VAT rules.
Although only 36.9 percent of respondents agreed that the Act addresses their business challenges, with an overwhelming majority (92.2 percent) supporting the Finance Act 2020.]
On the changes to existing laws from the Finance Act, the majority of respondents were most excited about the reduction of minimum tax from 0.5 percent to 0.25 percent of turnover.
Businesses considered technology and tax intelligence as the most efficient for the government to catch tax evaders and raise revenue, adding that the transfer of unclaimed dividends and dormant account balances to a Trust fund was not a good move.
The Finance Act 2020 was aimed at supporting vulnerable households and businesses, while improving fiscal discipline and procurement efficiency, enhancing economic competitiveness, encouraging domestic investors and enhancing macroeconomic stability amid the challenges posed by the COVID19 pandemic.