Mrs. Zainab Ahmed, Minister of Finance, Budget, and National Planning, explained how the federal government rejected governors’ bid to borrow N50 billion from the Central Bank of Nigeria (CBN) to cover a revenue deficit in March and allocate the money through the Federation Account Allocation Committee (FAAC).
According to the minister, who appeared on a National Television Authority (NTA) program monitored in Abuja, the federal government found reports by Edo State Governor, Mr. Godwin Obaseki, that it printed N60 billion to supplement funds shared to states in March surprising.
Governors bemoaned the state’s precarious finances as a result of the COVID-19 pandemic’s negative impact on tax generation, which culminated in a 40% drop in revenue.
The governors have also written to Ahmed, asking her to halt the issuance of a promissory note to one Dr Ted Edwards as reimbursement for legal services rendered to the Association of Local Governments of Nigeria (ALGON) under the umbrella of the Nigeria Governors’ Forum in compliance with the Paris Club refund (NGF).
According to the minister, rather than approving the governors’ appeal, the federal government told them to manage the available funds.
She continued, “It’s a trying time.” I’ll tell you how difficult it is for not just the federal government but also the states. FAAC revenues have been steadily declining.
“In the month of March, we had an FAAC shortfall of nearly N50 billion, and we did not have enough accrued in any of those accounts. To be honest, the states pressed us to take out a loan from the central bank, but we declined. We basically told everyone to go back to working within their means.
“As a result, when we heard a sitting governor claim that the CBN had printed money for FAAC, we were taken aback. It was a bad mistake because it isn’t true.”
The minister clarified that when the federal budget was reduced, the federal government drew funds from savings accounts, and that in the case of the March allocation, which was cut by N50 billion, all state governments were told to keep their budgets under control.
In response to a question about how the economy was going, she said that the economy was stabilizing after the third-quarter 2020 recession.
COVID-19 is said to have cost states 40% of their income.
Yesterday, governors expressed remorse for the state’s precarious financial position, citing the negative impact of the COVID-19 pandemic on revenue generation, which resulted in a 40% drop in revenue.
They also cited the country’s attempts to collect domestic revenue as being hampered by a poor economy and a lack of technological convergence in tax administration.
Mr. Asishana Okauru, Director-General of the Nigeria Governors’ Forum (NGF), said in Abuja during the forum’s technology tax case that these factors had harmed tax authorities’ ability to successfully collect taxes and taxpayers’ ability to easily meet their tax obligations.
“We already know that most contact-intensive taxes are in jeopardy, based on our research from last year, given the lessons we learned during the lockdown, when contact-intensive tax collections fell by an average of 40% across all Nigerian states.
“As tax authorities, we’ve learned the value of internet-based business support systems and payment platforms for automating all back-end operational processes and payments across all revenue streams.
“In the past, many governments chose the path of least resistance, maintaining tax systems that allow them to maximize whatever limited options they have rather than investing in digital and more efficient tax systems.
“As part of this transformation, we also recognize the risks of data ownership, data protection, and cyber security. This is something that any government must consider. It would necessitate a strong in-house IT team as well as an experienced legal workforce to help protect the rights of all parties involved, including taxpayers,” he explained.
Although the paths to tax digitalisation vary by state, he believes that “the conditions remain the same,” such as providing internet access and encouraging the growth of new skills across the economy.
He went on to state that in Nigeria, web-based transactions increased from N31.6 billion (2.3 million transactions) in 2012 to N478 billion (103.5 million transactions) in 2019, while point-of-sale (PoS) transactions increased from N485 billion (2.6 million transactions) to N3.2 trillion (438.6 million transactions) in the same time span.
Smartphone purchases increased to N828 billion (377.3 million transactions) in 2013, up from N31.5 billion in 2012. (2.3 million transactions).
“In contrast to the growth of these channels, the value of cheques has decreased from N7.5 trillion (12.2 million transactions) in 2012 to N4.5 trillion in 2019.” (There were about 7.3 million transactions total.)
“The rise of digital payments not only provides opportunities to advance financial intermediation and financial inclusion, but also domestic revenue mobilization, as it provides transaction efficiency and convenience for both tax authorities and taxpayers.” according to one of the NGF’s documents circulated at the tax meeting.
Chairman of the Federal Inland Revenue Service (FIRS), Mohammad Nami, stressed the importance of looking inwards to boost state revenues to make up for the federal budget deficit.
The Federation’s Account
Taxation has always been the most effective and stable source of government revenue around the world, he said, if properly harnessed and handled.
He bemoaned the country’s former reliance on oil revenues, which he said had culminated in major tax problems and sluggish budget implementation at all three levels of government.
Nami clarified that finding a solution to the company’s persistent revenue issues required a well-thought-out strategic action plan.
Chairman of the Federal Inland Revenue Service (FIRS), Mohammad Nami, stressed the importance of looking inwards to boost state taxes in order to make up for the federal budget deficit.
The Federation’s Account
Taxation has always been the most effective and stable source of government revenue around the world, he said, if properly harnessed and handled.
He bemoaned the country’s former reliance on oil revenues, which he said had culminated in major tax problems and sluggish budget implementation at all three levels of government.
Nami clarified that finding a solution to the company’s persistent revenue issues required a well-thought-out strategic action plan.
In a letter written on its behalf by its lawyer, Mr Femi Falana, SAN, the NGF said the request was based on a court action filed to “challenge the court’s decisions relating to or connected with payments of legal and consultancy fees arising from London Club D00ebt, Buy Back, and London Club Debt Exit Payment, which is the fulcrum of the judgment of the Federal High Court, Abuja in a case inv
The letter was titled Re: Issuance of Promissory Note to Dr Ted Iseghone Edwards and was dated April 19, 2021.
The letter read in part, “Our attention has been drawn to a letter from the firm of Ikechukwu Ezechukwu, SAN & Co dated 8″ April, 2021 urging you to issue promissory notes to Dr. Ted Iseghoni Edwards.”
“We respectfully request that you decline the request because these promissory notes will be debited from the states’ accounts for the next ten (10) years. As a consequence, it is advisable to await the outcome of the states’ judicial decisions, as represented by the NGF.
According to Section 162(5) of the 1999 Constitution of the Federal Republic of Nigeria, “any amount standing to the credit of local governments must be paid directly to the states for the benefit of their local government councils” (as amended). States have a responsibility to secure funds held to the credit of local government councils as custodians of those assets.”
According to Falana, all judicial cases challenging court rulings, as well as those seeking a stay of execution and/or injunction pending appeal, have been scheduled and will be lodged as soon as the Judiciary Staff Union of Nigeria (JUSUNstrike) ends its strike.