Nigeria’s borrowing plan, small businesses and the VAIDS
It is a conundrum, of sorts. Never has the country been so financially prostrate, while at the same time in urgent need of massive capital injection into critical sectors of the economy. Funding is needed, not just to help stabilise the economy’s marginal escape from the waves of recession that had threatened to drown it, but to keep its feet warm away from hypothermia and help oxygenate the system into full recovery. But beyond this, few will fault that what Nigeria needs to make up for her massive infrastructure deficit and leapfrog it over the logistics nightmare which has kept it marooned to a zone of discomfort characterised by a merry-go-round, is a deliberate, targeted investment in infrastructural development, even if some of us will rather look in the direction of a bottom-up approach to development, rather than keep amassing debt. Yet, in the light of the urgency of the moment and the compelling, even damning statistics out there, confirming how far back we are on many counts, steps in the direction of redemption on the part of policy makers, especially between the executive and legislative arms, have been uneven, with hands that should be pulling in one direction, latching to different ends of the spectrum to sing discordant tunes.
We are agreed on the deficit and the urgency of intervention, so the executive, in October last year, came up with the 2016-2018 External Borrowing (Rolling) Plan, asking the legislature for approval to borrow $29.960 billion to execute key infrastructural projects across the country over the two years. Contrary to what was made out, it was not a single facility but a basket which included the infrastructure loan to fix railways and roads. Part of it was the $575 million World Bank loan for reconstruction of the North-East and efforts to combat the outbreak of polio in the region devastated by the Boko Haram insurgency. While $125 million was for the polio emergency, $450 million was meant to assist Nigeria in the reconstruction and rehabilitation efforts in the North-East. While $10.686 billion was for special national infrastructure projects, the request also included $4.5 billion euro bonds and what was tagged federal government budget support of $3.5 billion. Some other projects and programmes were to be executed with a loan of $11.274 billion. There was also a request for the virement of N180.8 billion from the 2016 budget for the provision of needed votes for some critical sectors across the 36 states of the federation and the FCT. An analysis of the proposed virement shows that it was to take care of the Public Service Wage Adjustment (PSWA), the increase in the cost of cadet feeding at the Police Academy, Wudil, Kano, while the amnesty programme needed N35 billion and internal operations of the armed forces was to cost N5.205 billion, apart from votes to Operation Lafiya Dole, NYSC, and N14.667 billion to foreign missions, capital expenditure for the Nigerian Air Force, statutory transfers to the Public Complaints Commission, among others.
The Senate barely took a look at the paper requesting for the loan before it was thrown out. Of course, eyebrows had been raised about a request for such amount and the senators were smart to read the mood of the nation. But there was work to be done and the executive should have taken the legislature as an internal public and communicated the need and what the request was meant to achieve, appropriately before the public presentation and the avoidable backlash. The Senate itself could have dug deeper and, for once, restrained itself from its trademark impulsive, knee-jerk reactions. It is not enough to come up with a policy, it is important to think and see through how to secure approval for it and ensure implementation. Well, April this year, another request came for what was tagged the $6.4 billion China, World Bank loans. It was to cover the China-Exim supported projects; Lagos-Kano modernisation projects, the Lagos-Ibadan segment at $1.231 billion; the Lagos-Kano railway modernisation project, the Kano-Kaduna segment at $1.146 billion, the coastal railway project, and the Lagos-Calabar segment at Â£3.474 billion, making a total of $5.851 billion, with $575 million being for the rehabilitation of the North-East and polio eradication. Perhaps the Senate remembered this was part of the request that had been earlier presented and rejected; perhaps not. But months after, an approval was received for $1.806 billion to cover the Lagos-Ibadan segment double track railway modernisation project, to be funded by the China Export-Import Bank and the North-East rehabilitation project for $575 million.
So while one arm is dreaming big, the other one is unable to see the dream and is busy clipping the wings of the former. A year after the big dream of powering a renewal via a $30 billion loan across many segments, including an urgent fight for the eradication of polio, it has taken about a year to have approval for only a bit of what was deemed necessary to drive development. When the finance minister said the government was incapacitated in funding capital projects because it had not received approval for external borrowing that had been planned as source of funding, the Senate did not understand it. When another request now came for a $5.5 billion dollar loan to be sourced from Eurobond, the Senate claimed it had been proved right that the minister was less than honest, as they had no pending request. The distinguished senators must have forgotten that there was a $4.5 billion Eurobond and Federal Government budget support of $3.5 billion in the basket presented to it last year, which it summarily threw out. I am of a different school on the approach we should take in terms of economic development, from the one being espoused by policy and decision makers, but if they have so decided on the direction to take, how is it that all the relevant organs of government cannot be brought to buy in, take ownership of the agenda and push it? How can there be such a huge disconnect yet hope to fight our way up from below ground-level where we have forced ourselves into? We wonably expect from the bottom, weighed down by a lack of support, if the progressive model functions as it should. Those on annual income below Â£11,500 in the United Kingdom do not pay tax. In France, citizens pay tax only if they earn above â‚¬5,963 yearly, while it is â‚¬5,165 in Spain and â‚¬8,354 in Germany. In South Africa, tax is not paid on an income of less than 5000 rands and one does not even have to register a business until it hits 1 million rands in value. So seeking to widen the net is one, a clear policy framework that accommodates and protects small businesses and those at the bottom will generate trust and buy-in from the people.
If the resources to regularise outstrip the benefits or incentives that are on the table for small businesses, VAIDS will do little to trigger compliance. But VAIDS must be supported and pushed to become the norm rather than the exception. The question is how can we make voluntary tax declaration and payment a way of life and culture, starting from the very bottom? VAIDS is the way to go in a long and necessary journey towards entrenching the culture of voluntary tax declaration and payment. But even as it is a good place to start, perhaps we should consider renaming the worthy initiative. One might ask, is the acronym VAIDS, not too close to something rather discomfiting to elicit the much needed buy-in from the people?
Olorunfemi works for Hoofbeatdotcom, a Nigerian Communications Consultancy.
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