Malaria taxes or basket water?

Tunde Fowler

Tunde Fowler

A few days ago at an event in Ghana, Tunde Fowler, Nigeria’s chief tax collector, said that a tax of N5,000 was enough to save a child suffering malaria from death. It is refreshing and indeed heartwarming to hear the FIRS boss use persuasion to make the connection between taxes and life outcomes for Nigerians. It is certainly a welcome change from the way the FIRS has been going around terrorising businesses and shutting them down for owing often spurious taxes.

But making such a connection between taxes and human development raises some interesting questions. Shall we run through some numbers?

According to the former finance minister, Ngozi Okonjo-Iweala, the federal government spent N857bn on salaries in 2009. The current finance minister, Kemi Adeosun, has said it on several occasions that the APC government inherited a monthly wage bill of N165bn – that is N1.98trn per year. In other words, the cost of paying people to run the Nigerian government has more than doubled in less than 7 years. Did the performance of the Nigerian government, in terms of delivering services to Nigerians, double in the same period? Of course not. Recently at the Nigerian Small Business Summit, Dr. Henrietta Onwuegbuzie of the Lagos Business School, reminded the public that in 2010 the percentage of Nigerians living in poverty was 69%. By 2015, the poverty percentage had increased to 75%. That is, the more the government spent on running itself, the poorer Nigerians were getting.

Why did government spending increase in that manner without a corresponding increase in performance? The answer is oil. Prices were high and the money was pouring in, the government had no choice but to activate its long running policy of lau lau spending. This is nothing new by the way – between 1969 and 1977, the price of oil quadrupled while the amount of oil produced by Nigeria also increased by 380%. Government revenues rose from $4.9bn to $21.5bn. The Nigerian government was awash with money. What to do with it? Almost overnight, the infamous ‘Udoji Awards’ increased salaries of civil servants by up to 130%. In just 3 years, the government had increased its spending by 6 times what it was spending before the oil boom. This is how the Nigerian government has always behaved when it suddenly finds itself with a lot of money. It is the same reason why government spending on salaries shot up astronomically in the last 5 years. Oil prices were consistently around $100 per barrel for 4 years.

But here we are today. The last time oil prices were $100 per barrel was in August 2014. Since then it has even dropped below $30 per barrel at one point. Adding insult to injury is the activity of militants in the Niger Delta who are doing their best to shut down Nigeria’s oil production. Oil prices have crashed before but this time around, a big reason for the crash is technology – production of shale oil in America has gotten cheaper and more competitive. Has anyone ever successfully fought against technology and won? I don’t think so. The machine that the Nigerian government built on the back of $100 oil cannot be sustained by $40 oil. Something has to give.

The logical next question to ask is if anything has changed? Well, Kemi Adeosun regularly reminds us that the current government has reduced that monthly wage bill by N6bn through the elimination of some ghost workers who were unfortunate enough to be smoked out. The bill that went up by 130% in 6 years has now come down by 3% in one year. At that rate of reduction, we are stuck with the high bill for a long time which means that what was paid for with oil money now has to be paid for with money from somewhere else.

So back to Tunde Fowler. When oil money entered the Nigerian system in the past, it did not come out as treatment for malaria. It came out as salaries and all manner of wasteful spending akin to fetching water with a basket. As we can see, that system has not changed – it is merely looking for a new source of funding for its old ways. So, by what logic is Mr Fowler telling Nigerians that if they pay their taxes today, the money will be used to treat malaria in children? Talk is cheap. It is better to show workings.

All of this perhaps explains the desperation with which FIRS has been hounding businesses to pay taxes. It is not looking for money to treat malaria in children. It is looking for money to pay salaries. It is true that the current budget has the largest capital spend on record but this was achieved by dramatically increasing the size of the budget. That is, it did not take money away from unproductive spending designed based on high oil prices, it just added the capital spending on top of the old system. You can see how dangerous this is – we are now looking for money to pay salaries as well as to build roads and treat malaria while oil prices have crashed. But why should taxes be used to pay salaries that have done nothing for Nigerians?

Please pay your taxes – it is the good and proper thing to do. But oil money is different from tax money. So if you want your taxes to go towards building roads and treating malaria in children, do as my friends at BudgIT say you should do – Ask Questions. Or else your money is going into a leaking basket.

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  • idak

    Well,some of us have been asking questions but no answers.
    The vagueness of this ghost workers for a start
    The figures and amount therein seem to be manufactured by Ms. Adeosun et al as they go along. What is the guarantee that my taxes will not be used for funding more ghost workers salaries?
    Who has been prosecuted for these ghost workers thus far?
    Like you, I believe and practise tax compliance bit no government deserves tax avoidance schemes as much Nigerian governments at all levels.

  • Wanna-Be-Economist?

    Good One!
    As Seun Onigbide said “We are not Fighting Corruption – We are only Fighting corrupt Persons. If we are sincere about the fight of Corruption, we need to open Datas and Budgets of MDA for closer scrutiny.

    But Feyi, dont you think we have a different Sherrif in Town? Things might be different? Or Maybe Not?

  • Tomiwa Aladekomo

    Here’s a question though? How do you effectively pressure the government on these issues as a citizen? There’s such a generalized sense of outrage at the inflated salaries and outrageous expenditure but how does a citizen actually go about influencing a government that’s cavalier enough to establish and maintain these figures in the first place?

    • ” How do you effectively pressure the government on these issues as a citizen?”

      Boot them out of office, though with the priorities of the Nigerian electorates, that likely will involve a ton of hardwork on your part.

      • CeekayToo

        When you pay something you care more and like someone said earlier you’ll probably boot them out next time if they had disappointed you, period!

        • a. The majority of Nigerians are outside the group that’ll get squeezed, so they won’t pay more.

          b. The Nigerian electorate has consistently shown itself to be a visceral voter. Going with how young the population is, we’ll have to hope we luck into good leadership. The odds of it coming by informed electoral choice is slim.

  • Seun

    Well written. The questions have been asked many times. Where will the answer come from?

  • Idowu Akinwande

    Tunde Fowler, like a typical salesman, is simply responding to pressures from his ‘ogas’ to increase IGR in the face of the dwindling oil proceeds. But is that the solution? NO. If our leaders can demonstrate unprecedented level of accountability, then the people will respond with patriotism. PATROTISM, to me, seems to be the way out. But it is so sad that even the leaders prefer to even die in foreign lands!

  • CeekayToo

    Brilliant and on point! You ended up the article, to me, very well – please pay your taxes- because that will be your voice and a force backing it. The Iron Lady, Margret Thatcher, once said, “When people pay nothing, they care nothing”. Now Nigerians will not only ask questions about their tax money, they will also care about it. Fowler, thanks for making Nigerians care, though taxation.

  • Ikedichi Okpani

    So in your view sir, the salary increments rarely granted civil servants is somehow responsible for the recession?
    You seem to suggest that the millions of teachers, doctors, soldiers, police officers, etc, on government service are overpaid!
    The thing with economics is that the discussion of it always seems disconnected from real people.
    I’d argue that given the pay and working conditions of these workers, it’s nothing short of miraculous that they get anything done at all.
    At the heart of the situation is a failure of ‘experts’ to realise that as it is, Nigeria is a poor country. Even if 100% of our budget goes into capital projects, it will still be a drop in the ocean.
    For perspective, the UK’s annual health budget is more than £100 billion. That’s more than our entire national budget for 10 years put together. There are 180 million of us vs 65 million of them.

    • Opemipo Ogunkola

      but a lot of this salary stuff is National Assembly and support for our political system. So the point stands, the goal shouldn’t be just increased salaries but increased productivity and paying it back as salaries.

    • lord of jaspers

      dats not wat he said, wat he is talkin about is priority! wen u hv a windfall, do u invest it in infrastructure so dat it can gro more? or do u employ more workers nd spend it on dem! whr uk is nw took a process, we r not yet whr uk was 100yrs ago!