SETTING THE SOCIAL MINIMUM THROUGH A TAX FOR SERVICE PROGRAMME

Abstract

The Nigerian economy has continued to record what is termed fiscal disequilibrium1, much of it attributable to five (5) key headwinds: oil boom and busts, a price inelastic tax system, poor public enterprise performance, increased expenditure created by political exigencies or administrative weaknesses, and worsening terms of trade. The country’s public financial management system and to a large extent, the general financial system has been unable to cope with fluctuations in oil revenues2,3.

Since 2015, governments at both the federal and State level have continued to stir fiscal restructuring to shore up public finances and find alternative sources of revenue, amidst economic indications that many of them did not do enough to reduce their dependence on oil. During the time, the cost of crude had fallen to levels not seen for 14 years. The impact was devastating and became the third largest over the previous 30 years, when oil began trading in the futures exchange.

Five years later, in 2020, the COVID-19 pandemic also gave way for greater concerns about the government’s capacity to cope with another fiscal crisis. For most Nigerians, the health risks brought by the pandemic ranked behind multiple, complex, and larger structural concerns such as economic uncertainty, absence of social safety nets and the lack of an enforceable social contract between the government and citizens. In May 2020, majority of Nigerians reported that although they were concerned about the health threat to their households, they were more worried about the secondary-level effects including the impact on their financial future4. The pandemic had disrupted employment, income-generating activities, access to food, healthcare, and education – and with wider impact on the country’s ailing human development indices. This report is structured into four (4) sections follows:

I. Section 1 provides the context and case for the TfS, a short systematic review and defines the scope and methodological approach

II. Section 2 presents a meta-analysis from the survey conducted successfully with 1,000 respondents from the 12 representatives States (i.e., 12,000 across the 12 states), covering the 6 geopolitical zones of Nigeria. The objective is to present a country report using cross-data analysis.

III. Section 3 presents the results from the IDIs and discusses the preparedness of the implementing institutions to take up the programme.

IV. Section 4 concludes by outlining key findings of the report to help State governments and other stakeholders implement the programme.