Cash crunch: Nigerians to pay more tax

Cash crunch: Nigerians to pay more tax

Yvonne Williams

Against the backdrop of the economic crisis plaguing Nigeria amid falling global oil prices, the Federal Government is considering changes to the nation’s tax regime in a bid to shore up dwindling revenue.

There are indications that the government will increase Value Added Tax, as recently suggested by the International Monetary Fund, whose Managing Director, Ms. Christine Lagarde, visited the country early this month.

Economic and financial experts have, however, said the move to increase VAT would put further pressure on Nigerians, as it would cause increase in the prices of goods and services, among other implications.

VAT is a consumption tax payable on the goods and service consumed by any person, whether government agencies, business organisations or individuals. It is currently levied at the rate of five per cent in the country.

The sharp drop in crude oil revenues, which provide 95 per cent of the country’s foreign earnings, has led to significant depletion of the nation’s foreign reserves.

Oil prices have fallen in the last few days to their lowest levels since 2003, trading about $10 lower than the oil price benchmark of $38 proposed by President Muhammadu Buhari for this year’s budget. Oil prices staged a rebound on Friday, trading around $32 per barrel on Saturday.

The Minister of Finance, Mrs. Kemi Adeosun, has said the Federal Government plans to borrow up to $5bn from multiple sources, including the Eurobond market, to plug its budget deficit.

Buhari had in December presented a total budget size of N6.08tn, with a deficit of N2.22tn to be financed by both domestic and foreign borrowings of N1.84tn.

He put the revenue projection for the year at N3.86tn, adding that over the medium-term, the government expected to increase revenues and reduce overheads, to bring the fiscal deficit down to 1.3 per cent of Gross Domestic Product by 2018.

Vice President Yemi Osinbajo, who said changes to taxation were being considered, told CNBC in a television interview, “We are looking at increasing our tax coverage.

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