Pioneer chief executive of the Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi, on Monday in Lagos reiterated the need for the Federal Government to harness the huge economic potentials inherent in taxation to raise revenue and effectively diversifying the economy from crude oil. This, he said, is possible if the tax net is expanded such that much more people attracted into the tax net, thereby reducing the burden on the few that faithfully pay, a situation he expects will reduce tax rate in the country from the current 30%, the highest in the world today.
Chike-Obi, Executive Vice Chairman, Alpha African Advisory, who spoke on the theme: Repositioning Nigerian Economy for Sustainable Growth,” at the Finance Correspondents Association of Nigeria (FICAN) Bi-Monthly Forum, an event meant to set economic agenda for second four-year term of the Muhammadu Buhari administration, while addressing key economic issues, challenged government to discourage multiple taxations, as part of efforts to enhance voluntary compliance. Speaking on the plethora of intervention funds and why adequate infrastructure is needed to stimulate the economy instead, also noted the need for a lower interest rate of between 12 to 15% per annum. For him, “all these intervention funds don’t work… Let me tell you why they don’t work. If you lend to a farmer at 5% you think you are helping him, but everything around him is at 26%. So, he gets a little bit of relief on his financing, but he doesn’t get reliefs on his supplies, diesel, food, employees… So, at the end of the day, those things he gets at 26% invades his 5%.” Chike-Obi said intervention funds also don’t work because “the default rates are as high as default rates of non-intervention funds. So, they don’t work. They are not very efficient”. What Nigeria’s economic managers should do in the new dispensation is to provide capital at reasonable interest rates that work for everyone. “There must be access to capital at a reasonable price. With a 26% interest rate, you cannot do business successfully. So, we must find a way to provide interest rate to everybody at a reasonable rate. We must have an interest rate that will support our economy. And it cannot be much higher to the borrower at 12 to 15%. Every Nigerian should be able to borrow money at between 12 to 15%… So, we must have capital available.” He also spoke on what foreign lenders look out for when lending to developed markets, warning that borrowing in US$ may not be cheaper on the long-run than the Naira as widely believed in some official quarters. For example, he stressed, even the country borrows in US$ at 8%, creditors are concerned with the exchange at the time of repayment, as it is unlikely to remain at N360/$, just as the foreign creditors consider borrowers with a capacity to generate needed funds for repayment of such loans. “The reason why they are lending money at 8%, instead of 16%, is because they know that by the time that money matures, your Naira will not be exchanging at N360/$. This is because the Naira always depreciated by approximately 50% every five years,” Chike-Obi argued.
Source: Invest Data
