There is no doubt that the world economic outlook has darkened significantly for some obvious reasons – even developed economies are being threatened. In fact, countries are tottering on the edge of a global recession.
Given the severity of the economic situation, the Bretton Woods institutions such as World Bank and the International Monetary Fund, IMF have issued warnings to the entire world, sometimes offering solutions and interventions. The root cause of the up surging economic challenges is the Covid-19 pandemic, which threw the world into a standstill. While measures were being rolled out to tackle the Covid-19 monster, the war between Russia and Ukraine set in to frustrate the recovery plans.
As a matter of fact, on the very day the Russian invasion of Ukraine began, the global financial markets fell abruptly, and the prices of oil, natural gas, metals and food commodities surged. The global oil market is greatly disrupted; Brent oil prices breached USD 100 per barrel for the first time since 2014 and it spins around till today.
The ripple effect and upshot of such economic destabilisation is the increase in commodity prices. While high commodity prices were one of the perils already recognised as hypothetically unsettling to the economic reclamation, the escalation of the conflict increases the possibility that commodity prices will remain higher for whatever period the war lasted. The more it lingers, the more economic harshness it brings. If it’s not resolved, it exaggerates the risk of long-lasting high inflation, thereby increasing the dangers of stagflation and social unrest in both developed and developing countries in the world.
Today, for its dependence on Russian oil and natural gas, Europe appears to be the region most exposed to the consequences of the Ukraine invasion. It’s impossible to replace all Russian natural gas supply to Europe in the short to medium run and current price levels of the products, what’s now significantly affecting the world economy.
In Nigeria and generally the rest of the world, the daring and overbearing economic consequences are wreaking mainly through the upsurge in commodity prices, which will fuel already existing inflationary burdens. As at all times, it’s certain that each time commodity prices wheel up, the net importers of energy and food products will be particularly affected, with the specter of major supply disruptions in the event of an even greater escalation of the conflict. The drop in demand from Europe will also hamper global trade.
Recently, in an interview with the British Broadcasting Services (BBC), Nigeria’s former Minister of Finance and the Director General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala, cautioned that Nigeria and many African countries may face food crises due to the ongoing war in Ukraine.
The country like any other African nation was among the fastest growing economies in the world but the unfortunate advent of COVID-19 pandemic has significantly upturned the long-term government’s economic strategies by the President Muhammadu Buhari administration. Nigeria, being an import-dependent nation, is heavily dependent on imports that are priced in US dollars. And as the value of the dollar rises, the dollar-priced commodities perpetually become more expensive for holders of other currencies, such as the naira, high incidents of imported inflation will arise and weigh on the spending power of domestic consumers.
Nigeria, while battling with the impacts of the global economic crisis, has its own creepy domestic challenges brought to the fore by the regular crude oil theft, internal aggression by Boko Haram banditry, cattle rustling, kidnappings for ransom, and secessionist agitation from the southern part of the country by IPOB terror group.
To successfully navigate through the prevailing challenges, it was recommended for Nigeria to focus on the consolidation of the enactment of the Strategic Revenue Growth Initiatives to raise revenues. The fact that federal government generated less revenue compared to its debt service cost recently, called for stakeholders to think outside the box, strengthen the tax net in order to face the gawking economic realities.
It’s pertinent to deduce that there’s urgent need to improve the country’s tax culture in Nigeria by the Federal Inland Revenue Service, FIRS. The transformation of the Nigerian National Petroleum Corporation (NNPC) has made it necessary for the FIRS management to widen its tax net by blocking leakages, and embark on rigorous and strategic tax education.
The FIRS Executive Chairman, Muhammad Nami, with his enormous and enviable skill in tax and financial management system, has within a very short period improved the country’s revenue generation by employing global best practices and strategies. It’s on record that FIRS has realised over 100 percent of its collection target for the year 2021, the highest ever, despite the global economic challenges occasioned by the Covid-19 pandemic.
FIRS, in 2021, collected a total of N6.405 trillion in both oil (N2.008 trillion) and non-oil (N4.396 trillion) revenues as against a target of N6.401 trillion. The service has been the major revenue provider to the federation account, bringing about 60% of what the government shares at FAAC.
It’s indeed necessary for the executive and legislative arms of government to provide the FIRS with the needed legislative backing and government support to execute its mandate to its fullest capacity in order to successfully help the country get out of the woods. The FIRS also needs more funding for its activities, especially policy implementation and tax education and collection.
Indeed, Nigerians also need to be thoroughly cultured on the fact that it is no longer business as usual. And that they must pay taxes. The era of free money from oil is over, and citizens must begin to change their mindset that they’re the ones who must contribute to the development of their country, through the taxes they pay.
Nami has all it takes to further improve on Nigeria’s revenue generation. Thus, all hands must be on deck to give him the necessary legislative and administrative backings. It’s no longer a time of playing politics with sensitive issue, Nigeria needs to do better amidst the staggering global economic challenges.
Gabriel writes from Abuja.
