SULAIMON OLANREWAJU takes a look at the policies and activities that defined the time of Mrs Kemi Adeosun as the nation’s Finance Minister as well as the likely effect of her exit on the economy.
It was not quite shocking but it was dramatic. On Friday, September 14, Mrs Kemi Adeosun resigned her appointment as the nation’s finance minister. According to her letter to the President, she resorted to that decision because the National Youth Service Corps (NYSC) exemption certificate which she presented to the government was not genuine. The minister’s resignation was the climax of a drama that started over two months ago when Premium Times, an online medium, reported that Adeosun’s exemption certificate was forged. This forced the government to set up a panel to look into the issue. The panel’s findings affirmed the Premium Times’ report.
However, despite the circumstances of her exit, Mrs Adeosun, who got into office in November 2015, had her tenure characterized by many issues.
Growing the nation’s tax revenue
Perhaps the most outstanding achievement of Mrs Adeosun in her almost three years in office was her resolve to grow Nigeria’s tax revenue base. Convinced that the country needed to diversify her revenue base, she was determined to put in place measures that would grow the nation’s tax revenue base.
To achieve this, the Ministry of Finance under her leadership, came up with the Voluntary Assets and Income Declaration Scheme (VAIDS), which provides an opportunity for taxpayers to regularize their tax status relating to previous tax periods. As a reward for full declaration of previously undisclosed assets and income, tax payers are forgiven overdue interest and penalties. They are also assured that they will not face criminal prosecution for tax offences or be subject to tax investigations. This has spurred many Nigerians into updating their tax payments.
The ministry also embarked on intensive public sensitization exercise, which has heightened awareness among members of the public. But not resting on just that, the ministry did not leave anyone in doubt about its intention to prosecute those who opt not to comply with the country’s tax regulations. Just last week, the Federal Inland Revenue Services (FIRS) said it would go after over 6,000 Nigerian billionaires who have yet to update their tax payments.
Talking about the success of the scheme, Adeosun, while playing host to a World Bank Mission of 10 Executive Directors led by Mr. Patrizio Pagano, in Abuja recently, said the country had been able to “grow the tax payers’ base to 19 million in two years from the 65 million economically active people who are not tax compliant.”
Consequent on the increase in the number of Nigerians who pay taxes, the government was able to grow tax revenue in 2017 by 51 per cent. Tax revenue also grew by 42 per cent by the end of the first half of 2018.
In addition, the country entered into an agreement with some countries to counter tax evasion. According to Adeosun, “Nigeria has signed agreements with a number of nations, which provide for the automatic exchange of information. These agreements allow the exchange of information between tax authorities of different countries and about financial accounts and investments to help stop tax evasion. Countries who are party to this agreement include Switzerland, Panama, the Bahamas and other tax havens.”
The former minister added, “This will provide tax authorities with greater transparency into the scale of multinational company operations, and enable increased detection of profit shifting and other tax evasion strategies. In addition, Nigeria signed up for the establishment of the Beneficial Ownership Register at the Anti-Corruption Summit in London in 2016. This will give us access to the true owners of properties in the UK and other participating countries.
“Within Nigeria, recent reforms provide additional information to the tax authorities. There is now increased inter-agency co-operation providing information from bank verification number, the Nigerian Financial Intelligence Unit, state land registries and the Corporate Affairs Commission, among others, to create an accurate financial profile of Nigeria’s taxpayers.”
Effective management of government resources
In December 2015, the Ministry of Finance established Efficiency Unit (E-Unit) to curb wastage and reduce corruption in ministries, departments and agencies. It was established with a view to setting guidelines and standards to benchmark government expenditure for efficiency and reduction in costs and overheads.
At the inauguration of the unit, Adeosun said, “At the moment, there are no standards of how much should be spent on certain services. The Efficiency Unit would benchmark government expenditures by comparing with similar expenditures in the private sector and see how they have been able to negotiate their prices and costs efficiently.”
She added, “We are trying to establish guidelines and benchmarks that would make everybody much more cost conscious in how government money is spent.
“Much has been said about the devastating effects of corruption on our economy. But, little has been said about costly and incrementally damaging effects of inefficiency and wastage. We are determined to change the balance between capital and recurrent expenditure to release fund for investment in the infrastructure we need.”
While serving as the Unit’s head, Ms Patience Oniha said the Unit carried out an extensive and detailed review of FG’s overhead expenditure data between 2012 and 2014 and found out that the overhead spending pattern was concentrated on items such as travel, maintenance, local and international training, welfare and office stationery/computer consumables.
According to her, “The cumulative expenditure on these five items was N825 billion, representing 61 per cent of the cumulative total overhead expenditure of N1,353 billion for 2012 to 2014. This means that the average amount expended annually on these five items during this period was N275 billion. The estimate for 2015 shows a continuation of this trend.”
She stated further that “By pooling the demand of MDAs, there will be opportunities to leverage the resultant bargaining power and secure price discounts and other benefits from suppliers.”
Apart from the activities of the Efficiency Unit, Adeosun also scrupulously implemented the Treasury Single Account policy of the government to guard against government money being put to unwholesome use just as she worked hard with other ministries to weed out ghost workers from government payroll.
To facilitate the recovery of looted funds, Kemi Adeosun’s Finance Ministry introduced the whistleblower policy in December 2016. The policy provides that if the government is able to recover stolen or concealed assets through information provided by a whistleblower, then the person will be entitled to between 2.5 and 5.0 per cent of amount recovered. However, the policy does not provide any immunity from civil or criminal prosecution should the informant be found later to have partaken in the act of corruption or a related incident.
Giving a report on the effectiveness of the policy, the former minister said, “the Federal Government recovered directly, as a result of tips received from whistleblowers, the sum of N7.8 billion, US$378 million and GBP27,800.”
Earlier in the year, the ministry extended whistle-blowing to tax evaders and was able to recover some money. Adeosun said, “From the specific information provided on companies which underpaid their taxes, we were able to go in and communicate with the companies. We have been able to recover the sum of N13.8 billion as a result of those specific tips.”
Last year, Mrs Adeosun ordered the suspension of the Director General of the Security and Exchange Commission (SEC), Mr. Munir Gwarzo, after an administrative board of enquiry set up by the ministry found him guilty of breaching public service rules. Gwarzo, however, claimed that his suspension was a consequence of his refusal to stop the forensic audit of Oando Oil Plc listed on the stock exchange as instructed by the minister.
According to Adeosun, while testifying before the House of Representatives committee probing the issues surrounding Gwarzo’s suspension, the probe of the DG was triggered by a whistle blower who informed the ministry that Gwarzo was serving as a director in two privately owned firms -Medusa and Outband even as SEC director general.
According to her, “He attested that he had resigned in 2012 while CAC was still showing he was a director and shareholder. He didn’t get other evidence. So we now went to bank records and found that Gwarzo remained a signatory to that account. We had ten evidence of banking transactions where he signed as director.’’
Gwarzo, however, insisted that his suspension was because he refused to yield to pressure exerted on him by the minister not to conduct forensic audit of Oando Plc.
Rising debt profile
In June 2015, Nigeria’s total debt stood at N12.2 trillion. But according to the Debt Management Office, by the end of June 2018, it had risen to N22.38 trillion or $73.21 billion. If the recent debts taken by the government are factored into this, the country’s debt profile would be really mind-boggling. Many concerned citizens as well as multilateral bodies have raised concerns about the nation’s rising debt profile in a time of prosperity, but this never bothered Mrs Adeosun while she superintended over the nation’s Finance Ministry.
Crude oil price hovered around $30 per barrel in 2015 but is now around $80 per barrel, yet between 2015 and the current year, the country’s debt profile has risen by over N10 trillion. Consequently, the allocation to debt servicing has also been on the increase. In 2016 budget, N1.48trillion was allocated to debt servicing. In 2017, it was N1.84trillion and in 2018, it went up to N2.014trillion. But this did not bother the former minister.
Expressing concern over Nigeria’s rising debt and the likely challenge of repaying, Vitor Gaspar, International Monetary Fund (IMF’s) Director of Fiscal Affairs Department, while speaking at the World Bank/ International Monetary Fund Spring Meetings in April 2017, noted that Nigeria spends 66 per cent of its tax revenue on debt servicing. Former governor of the Central Bank of Nigeria (CBN), who is currently the Emir of Kano, Alhaji Muhammadu Sanusi, also said the nation expends 66 per cent of its total revenue on debt servicing, leaving it with just 34 per cent for both capital and recurrent expenditure. The two expressed concern that such huge allocation to debt servicing would impair the country’s development.
In one of her responses to the issue, Adeosun said, “Nigeria’s debt-to-GDP ratio is one of the lowest. We are at 19 per cent, but most advanced countries have over 100 per cent.
“I am not saying we need to move to 100 per cent, but I am saying we need to tolerate a little more debt in the short-term to deliver the rails, the roads and power so as to generate economic activities, jobs, revenue, which would be used to pay back the debt.
“What we are trying to do is to create enough headroom to invest in capital projects that the country desperately needs. I do not think there is any Nigerian that will say we do not need to invest on power, do the roads, and that will not want us to fix 17 million housing deficits, build rails and they will generate economic activities and jobs.”
She added, “Why do we have to borrow? If you think back to the problem we face, our principal source of revenue plummeted by up to 85 per cent, so we had no choice.”
On another occasion she said, “We will have no problem managing our debts because they are sustainable. As the economy grows, we will get everyone to pay their tax so that we will be able to service the debts.”
Management of economy
The government is supposed to drive the fiscal policy while the nation’s apex bank takes charge of the monetary policy. But under the immediate past Finance Minister, the Central Bank of Nigeria (CBN) was practically left with the management of the economy as there was not much in terms of fiscal policies.
According to Dr Austin Nweze, a lecturer at the Lagos Business School, in an interview with the Nigerian Tribune, “Under Mrs Adeosun, the fiscal policy was very weak. The CBN governor has been struggling. It’s like the CBN has been left to handle both the fiscal and monetary policies. This resulted in a weak economy.”
Nweze also lamented the astronomical increase in the nation’s debt just within three years.
“It is lack of creativity,” he said. “Unfortunately under her whenever there was a shortage the next thing was to borrow. Now, there is so much debt that paying back will be a serious challenge. I didn’t see much creativity in the management of the economy under her.”
According to the don, the problem was largely because Adeosun always acted based on President Muhammadu Buhari’s body language.
“That should not be,” he said. “As a professional, the President should have relied on her expertise but that was never the case. This affected the well-being of the economy.”
Speaking in a similar vein, Professor Adeola Adenikinju, Director of Centre for Petroleum, Energy Economics and Law, University of Ibadan, said the harmonisation of fiscal and monetary policy under Adeosun was not very strong, adding that this had its negative effect on the economy. He also was not impressed about the nation’s rising debt profile. He, however, gave her credit for moving away from stacking up local debts so as not to crowd out private investors from the domestic market.
Adenikinju also lauded her for being forceful on increasing the nation’s tax revenue.
According to him, “She was very forceful in terms of closing loopholes to reduce wastage; she was very forceful in terms of eliminating ghost workers. She also ensured the full implementation of TSA policy of the government.”
Effect of her exit
Both Adenikinju and Nweze submitted that the exit of Kemi Adeosun could affect the management of the economy.
According to Adenikinju, “Her exit may create an alteration to the policy direction. The new minister may shift priority. Investors may be hesitant so as to know what the new direction will be and that may affect the inflow of investments. Mrs Adeosun’s focus was revenue generation but the new person may have a different focus. There is likely going to be an adjustment in priorities and that will affect the economy one way or the other.”
Nweze said the minister’s exit could affect some of the agreements the country has with some of her partners.
He added, “Of course, some of her ideas may be jettisoned. The new person may have to start some things afresh. But if they understand that government is a continuum, there should not be much problem. If the former minister had the time to prepare a handover note, then continuing with the programmes she started should not be difficult.”
Professor Adenikinju believes that some of her initiatives should be sustained for the good of the country.
He said, “Her legacies should be strengthened; the tax base should be widened and the revenue base should be diversified. The new minister should promote greater coordination between fiscal and monetary policies.”