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Governments urged to raise non-oil revenue to stabilise economy

By on February 3, 2015

Some economists and financial market analysts have once more criticised the low level of non-oil revenue in the country.

As a result of this, they have advised governments at all levels to increase the non-oil revenue required for economic stabilisation and growth.

The experts stated this at the first Central Securities Clearing System’s (CSCS’) annual economic outlook for 2015 titled: “Nigeria: Which Way Forward,” that was held in Lagos at the weekend.

Specifically, the Chief Executive Officer, Economic Associates, Mr. Ayo Teriba, stressed the need for the federal government to raise the value-added tax (VAT) rate as one of the measures to cushion the effect of the falling oil prices on the economy.

Furthermore, he revealed that while VAT rates in Nigeria currently stand at five per cent, in South Africa it is 14 per cent (standard), 30 per cent (maximum); Egypt 10 per cent (standard) and 25 per cent on luxury goods; Algeria 17 per cent (standard); Angola 10 per cent (standard); and Morocco (20 per cent).

He noted that there is discordant fiscal contraction/austerity in the face of ongoing domestic economic expansion.

“Nigeria’s non-oil GDP is bigger than each of South Africa’s and Egypt’s GDP. Why should each of them have more tax revenue than Nigeria?” he queried.

According to Teriba, ongoing volatilities in global commodity prices and global equity prices threaten to destabilise the domestic economic and financial activity in 2015.

He argued that 73 per cent of economic activities in Nigeria come from six sectors, while 68 per cent of growth come from six sectors. Teriba noted that the sectoral concentration as a result of the rebasing had widened the diversity of the economy.

He added: “Two of the six regions are excluded from the growth process. Rich regions are thus getting richer, poor regions, poorer.”

In his presentation at the event, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane stated that imported inflation would hit consumers hard, just as he predicted that inflation would rise to 11.3 per cent while GDP growth to fall to 3.5 per cent.

Furthermore, he predicted that the naira would depreciate to N202/$1, adding that a further devaluation and monetary policy rate hike to 15 per cent would take place after the elections this month.

“Reserves to deplete to $25 billion by year-end as CBN continues to support the naira. Cut in fuel subsidies to save government $3.5 billion and current account surplus likely to swing to a 1.4 per cent deficit.

“Nigeria as a commodity exporter is vulnerable to price shocks. Oil and gas constitutes approximately 70 per cent of fiscal revenues and accounts for 94 per cent of Nigeria’s export revenue. Government’s revenue likely to decline further in first quarter 2015,” Rewane state.

 

[ThisDay]