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Minimum Wage: FG asks technical committee to look for additional revenue

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  • Minimum Wage: FG asks technical committee to look for additional revenue

The Technical Committee on the Implementation of a new Minimum Wage inaugurated last Wednesday by President Muhammadu Buhari has been asked to look for additional sources of revenue to pay the minimum wage and the consequential salary adjustment that will follow.

The Minister of Budget and National Planning, Senator Udoma Udo Udoma, during an interactive session with the media on Friday, explained that the committee would, among other things, identify additional sources of revenue to ensure that the government could meet the increased costs that would arise from the implementation of a new minimum wage without affecting government’s ability to meet the other obligations particularly with respect to the ambitious infrastructure development plans of the current administration.

According to Udoma, whenever a new minimum wage bill is enacted, there are demands for some wage increases even from those already earning more than the new minimum wage.

He said, “All these salary increases will impose additional costs on the government. Therefore, the committee is expected to make suggestions as to how the government can raise additional revenues to ensure that the government can still meet its expenditure on other services such as education, health, infrastructure and other important functions of the government, after paying the increased salaries.”

A statement signed on Sunday by the Special Adviser (Media) to the Minister, Akpandem James, added, “The committee is expected to, among other things, look at how to get additional revenues so that as our wage bill goes up, we are able to increase our revenues to ensure that our spending on capital projects, basic infrastructure, health, education and others is not reduced. In short, the committee is to advise on ways to ensure that notwithstanding the increase in payroll costs, there continues to be adequate funding for other government activities. This is not just for the 2019 fiscal year, but going forward, thereafter.”

Because of government’s commitment to the minimum wage and increased salaries, Udoma had said that the amount provided for recurrent (non-debt) spending would rise from N3.53tn in 2018 to N4.72tn in 2019.

So, there is a substantial increase in the recurrent expenditure, which according to the minister, reflects an increase in salaries and pensions including provisions for the implementation of a new minimum wage.

“This is the reason why the President has set up a technical committee to look at additional revenue sources so that we can pay the minimum wage and the consequential salary adjustment,” he reiterated.

On the issue of the budget deficit, Udoma said the government was proposing to bring it down slightly from the N1.95tn projected for 2018 to N1.895tn in 2019. This, he said, was 1.3 per cent of Gross Domestic Product and Well Within the Three Per cent Limit Set by the Fiscal Responsibility Act.

On the debt service to revenue ratio, the minister gave the assurance that as the nation’s revenue situation improved, the ratio would come down.

The minister said, “Nigeria does not have a debt problem, as such. Our debt is within prudent limits. However, we need to optimise our revenue generating potential. This will bring down our debt service to revenue ratio. Given the size of our economy, we can, and should, be doing better, in revenue generation. This explains our focus as a government on revenues and revenue generation.”

With regard to the complaints that the budget was small, the minister explained, “Some commentators have complained that the 2019 Budget proposal is too small. They would like us to have a larger budget. All of us in the government would also like Nigeria to have a larger budget. Indeed, as our revenues grow, we will be able to expand our budget size. In truth, though we have increased our budget size significantly since we took over the government in 2015, our budget size is still far too small to meet all our needs.

“However, we are limited by the size of our revenues. Our current proposal for 2019 represents the maximum size that we believe we can prudently fund from our revenue and debt sources. There is no point announcing a large budget that you cannot fund. As we are able to generate more revenues in the future, we will be able to continue to increase the size of our budgets.”

Also speaking on the issue of unemployment, the minister explained that the government was working hard to improve the enabling environment for economic expansion which would lead to the creation of additional jobs.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Economy

World Bank Calls on Nigeria to Impose Special Taxes on Alcohol and Tobacco

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The World Bank Group has made a call to the Federal Government of Nigeria, urging the government to impose special taxes on alcohol, cigarettes and beverages that are highly sweetened in order to improve primary healthcare conditions in the country.

Shubham Chaudhuri, who is the Country Director for Nigeria in the World Bank Group, said that an improvement in healthcare in Nigeria will come by taxing the things that are “killing us.” He said that the economic rationale for the action is quite strong if lives are to be saved and a healthier Nigeria achieved.

Chaudhuri made the call on Friday, at a special National Council on Health meeting which was organized by the Federal Ministry of Health in Abuja. Chaudhuri stated that placing special taxes on tobacco, sweetened beverages and alcohol would reduce the health risks which come with their consumption and expand the fiscal space for universal health coverage after COVID 19.

The country director also said that investing in stronger health systems for all would make significant contributions to the fight against inequality and the rising poverty situation in the country. He went on to add that increasing health tax would provide an extra advantage of reducing healthcare cost in the future, by hindering the growth of the diseases which are caused by tobacco, alcohol and sugar-sweetened beverages.

The representative of the WHO in Nigeria, Dr Walter Mulombo said that he could confirm the large health needs of Nigerians, as well as the efforts being made to meet those needs. He said this was based on the fact that he had been to over half of Nigeria’s states in less than two years of being in the country.

Mulombo then noted that although the coronavirus exposed weaknesses in the global economy (not excluding health), it could be considered as a unique opportunity for a thorough examination of existing resources and mechanisms to prepare for a more resilient future.

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Nigeria’s VAT Revenue Falls to N500 Billion in Q3 2021, Manufacturing Sector in the Lead

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Value added tax - Investors King

In the third quarter of 2021, Nigeria generated a total sum of N500.49 billion as value-added tax which represents a 2.3% decline when compared to the N512.25 billion recorded in the second quarter of the year.

This is as seen in the VAT report which was recently released by the National Bureau of Statistics (NBS). The report revealed that the manufacturing sector was in the lead as it remitted a total of N91.2 billion, representing about 30% of the total local non-import value added taxes in that period.

In spite of the quarter-on-quarter decline of VAT collections in the reviewed period, it grew by a further 17.8% when compared to N424.7 billion generated in the same period of the previous year. The report also shows that an amount of N1.5 trillion has been generated from value added taxes from January 2021 to September 2021.

That is 40.2% higher than the N1.08 trillion recorded in the same period of 2020, and 72.3% higher than what was recorded in the same period of 2019.

To break it down, the Value Added Tax collected in the first, second and third quarter of 2021 was recorded at N496.39 billion, N512.25 billion and N500.49 billion respectively. It is higher than the corresponding figures of 2020, which sat at N324.58 billion, N327.20 billion and N424.71 billion for the first, second and third quarters respectively.

In the third quarter of 2021, the Manufacturing activity accounted for the largest share of total revenue collected across sectors, with a huge 30.87% (N91.2 billion) coming from that sector. The Information & Communication sector came in second with 20.05% (N53.9 billion) contributed, while the Mining & Quarrying sector came in third with 9.62% (N28.4 billion).

Nigeria has continued to ramp up its efforts to increase revenue from non-oil sectors by increasing its tax collection rates, which has recorded largely significant growth since the federal government increased the VAT rate from 5% to 7.5% in the 2019 Finance Act, which was signed and made effective in 2020.

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Nigeria’s Economy to Close 2021 at 2.5% Growth Rate

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Trade - Investors King

The Lagos Chamber of Commerce and Industry (LCCI) has predicted that the Nigerian economy will close its growth rate for the year at 2.5%.

This was said by the President of the LCCI, Toki Mabogunje at the 133rd Annual General Meeting (AGM) of the chamber in Lagos on Thursday, as reported by the News Agency of Nigeria.

The LCCI leader advised that Nigeria’s monetary and fiscal aspects of the economy should encourage policies that enhance growth and build confidence which would invigorate private capital flows to the economy to achieve the growth. She also encouraged a medium-term recovery plan which is anchored on local productivity, attracting private investment, developing physical and soft infrastructure, and ease of business.

Mabogunje disclosed that Nigeria’s inflation would be maintained at its double digit level within the short to medium term, due to food supply shocks, foreign exchange illiquidity, higher energy cost, social unrest in the Northern region, possible removal of fuel subsidy, and insecurity. She stated that these structural factors will keep on mounting pressure on domestic consumer prices.

She also added that in spite of the non-oil economy’s growth by 5.4%, insecurity problems in some areas of the country may lead to shrinking in production and a disruption of the supply chain. She states that the important drivers of the non-oil sector growth were finance and insurance holding 23.2%, transport and storage 20.6%, trade carrying 11.9% and telecommunications 10.9%.

Others include manufacturing, construction, real estate and agriculture with 4.3%, 4.1%, 2.3% and 1.2% respectively throughout the year.

Speaking on the decision of the Central Bank of Nigeria’s Monetary Policy Committee’s decision to retain policy parameters, she mentioned that although the apex bank has been keen to extend credit to the real economy as a way of supporting it, it is a fact that the provision of credit recently has proven ineffective in improving output growth and stabilizing consumer prices.

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