Nigeria’s Restructuring Has Already Began

A greater percentage for the state, a smaller percentage to the FG
  1. It is possible to achieve at least, parts of desired restructuring by challenging the status quo in courts. This is very important considering how the attempt to achieve restructuring has so far been unsuccessful, which I see as a result of not defining in specifics what restructuring means, assuming that it can be achieved all at once, and a total lack of strategy — especially when you see people with the political capital to initiate the process for new laws or amendments to achieve some restructuring more content to call on the President to do it. It now remains for interested parties to challenge the parts of the law which the FG has overstepped in its assuming that it is exercising certain powers legimately.
  2. It ties into my belief that the better way to achieve restructuring on the fiscal front is to go at it in parts. While many advocates of restructuring believe all should be done at once (such as states should live entirely on their own revenues immediately, whether it be income taxes, VAT or oil royalties), I believe such a cold turkey approach will hurt the vast majority of states and will still make them dependent on some kind of aid to survive. In allowing states to collect VAT, it allows the states to start working towards some sort of financial footing by generating more revenues. Perhaps the next one after this will be allowing for states to retain the bulk of royalties from mining in their states before we can come for the elephant in the room: oil royalties.
  3. This is perhaps the most important purpose this judgment could have: it will could bring about a change in the behaviour of state governments, perhaps even a radical one, as they will look to increase their revenue from VAT. How? States can now make more effort to attract businesses to their domains, or possibly tinker with their VAT rates, or make certain kinds of businesses VAT-exempt to stimulate growth in those sectors. They also now have an incentive to work towards bringing the informal businesses in their domains into the formal economy and begin to properly tax them. With only 35% of the Nigerian economy in the formal economy, there is plenty enough informal economy to go round and bring into the formal economy.
  4. Although states currently have taxes and rates that they collect from businesses, they often employ a predatory and rent-seeking approach where they try to increase their revenues without increasing economic activities i.e. they are increasing the tax burdens of those already paying a lot of taxes and levies. However, being able to collect VAT will likely force the approach to tax collection by seeing how it can impact economic activities and not just try to engage in rent-seeking.

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Mark Amaza

Mark Amaza

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Strategist: Business, Communications and Branding ||@MINDcapitalNG || Entrepreneur ||