Nigeria’s revenue-to-Gross Domestic Product ratio which went down between 5% and 6% last year is the lowest in the world.
This was revealed by the World Bank through its country director for Nigeria Dr. Shubham Chaudhuri during a panel session at a virtual public seminar theme “Nigeria in challenging times: Imperatives for cohesive national development agenda” which was organized by the Lagos Business School.
Chaudhuri stressed the need for private investment for the country to realize its potential.
“The private sector in the country is struggling to breathe”. Chaudhuri said.
He went further “In Nigeria, I think the basic economic agenda is about diversification away from oil because oil has really been like resource curse for Nigeria on multiple dimensions”
Chaudhuri noted the desire of the President Muhammadu Buhari to lift 100million Nigerians out of poverty by the end of the decade.
He acknowledged the worthy potentials Nigeria has and also expressed his worry that Nigeria is at a critical juncture, almost at the moment of crisis.
“Despite all of that, Nigeria is still the largest economy in Africa. So, just think about the potential that Nigeria has because of its natural resources, but more than that, because of its dynamism and all of its population. Nigerians are more entrepreneurial by nature.
“No country has become prosperous and realised its potential, eliminated poverty without doing two simple things: investing in its people, and unleashing the power of the private sector in creating jobs by investing and growing business. And then, of course, the basic function of the state is to provide security and law and order,” the country director said.
Chaudhuri said to invest in people entails basic services, basic education, primary healthcare and nutrition, and other benefit to the people.
He said, “On this, Nigeria at the moment ranks 6th from the bottom in terms of the human capital index that we produce every year.
“So, obviously, there is a huge agenda in terms of investing in human capital. Nigeria spends more on PMS (premium motor spirit) subsidy than it does on primary healthcare in a year, and we know who the PMS subsidy is benefitting.”
Chaudhuri noted that despite the country’s huge potential to attract private capital, the non-oil part of the economy “is not growing that robustly and certainly not generating revenues that the government needs”.
Chaudhuri said, “So, we see as priorities investments in human capital. But for that, one needs revenues. And there again, Nigeria unfortunately has the distinction of having about the lowest revenue-to-GDP ratio in the world.
“The standard rule of thumb is that for government to provide the basic services and law and order, it needs between 15%to 20% of GDP as being revenue, and this will be both at the federal and state levels combined.
In Nigeria, it was 8% in 2019. In 2020, in the middle of the COVID-19 crisis and with the fall in oil prices, that went down to about between 5% and 6%.
“So, domestic revenue mobilisation is huge. And then the third is enabling the space for private investment. You have to fix the power problem. Power is like the oxygen of an economy. In Nigeria, the private sector is struggling to breathe.”
Also speaking at the event, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, described the Nigeria revenue situation as very weak.
Rrepresented by the Special Adviser to the President on Finance and the Economy, Dr Sarah Alade, Ahmed said the ministry and the government were also concerned about the issues of insecurity, poverty and unemployment in the country.
She said, “But there is also one issue, and that is the lack of revenue to be able to do as much as we want. But maybe we would be able to do if we all realise that the revenue situation in the economy is very weak. It is fragile.
“Whatever we can get, maybe there is a way we can come together to make sure that we are able to reprioritise what we spend this money so that we can then meet our national priorities.
“So, there are a lot of things, and I can only assure you that that is what we are doing. We have the medium-term development agenda, which we are in the process of implementing from 2021 to 2025. And within the five years, a lot of issues will be taken into consideration.”
On the issue of macroeconomic stability, the minister said, “Right now, the economy is weak, growth is fragile, but we are hoping growth will improve as we begin to look at the policies that we have on ground and do policy reforms to attract both local and foreign investments.”
The Chief Executive Officer, Nigerian Economic Summit Group, Mr ‘Laoye Jaiyeola, who was also at the event, said government’s expenditure in the country had grown by 105% since 2015, while revenue had only grown by 15%.