Taxation vs Foreign Debts: Viable choice as engine of Nigeria’s growth 

Historically, except for wars, U.S. and most countries in Europe developed economically through internally generated revenues via taxation. Does it take any application of special genius for a country’s leadership to acquire foreign debts as a pretext of funding its economic activities? I don’t think so. This lazy resort to foreign loans brings Nigeria under the thumbs of international bankers from I.M.F. and World Bank who are not hesitant to dictate and impose conditionalities under which the country must run its economy. Prov. 22: 7 says the ‘borrower is the slave of the lender.’

Going the route of privatization which unfortunately has assumed the status of economic diktat is the standby recommendation from these international bankers who are essentially the ideological warriors of the American capitalist system. How helpful has that been to Nigeria’s growth?

 

But when we widen our production base through strategic and compassionate measures, we can widen our taxation base. Payment of tax to government is both compulsory and voluntary. For the sake of one’s conscience, voluntary tax compliance is paramount. Rom.13: 5-6 says: ‘So you must obey the government for two reasons: to keep from being punished and to keep a clear conscience. Pay your taxes, too, for these same reasons…’

 

So taxation cannot be equated to theft, extortion, slavery or tyranny on the part of responsible government.

Oliver Wendell Holmes Jr. wrote: “Taxes are the price of civilization.”

 

Sadly, the Nigerian government is apparently still addicted to foreign loans.

With the National Assembly’s approval of the fresh $8.6 billion and €100 million foreign loans requested, Nigeria’s external debt profile will hit over $51.759 billion.

According to data from the Debt Management Office, DMO, the country’s external debt stock stood at $43.159 billion as at June 2023.

Significantly, the President’s letter to the National Assembly was careful to draw attention to the fact that the external borrowing plan for 2022-2024 for critical infrastructure, such as power, water, roads, health, railway was approved by the past administration on May 15, 2023.

 

Part of the letter from President Bola Tinubu sent to the House of Representatives on November 28, 2023 read: ‘Considering the huge infrastructure deficit in the country and the enormous financial resources required to bridge the gap in funding infrastructure in the face of dwindling financial resources, it has become imperative that we resort to prudent external borrowing to bridge the financial gap which will largely be applied to key infrastructure projects, including power, railway, health amongst others.’

 

In the face of dwindling financial resources, whereby a huge percentage of the country’s revenues is used to service debts, why do we think we have no alternative but a resort to more external borrowing? If we refuse to acquire more foreign debts to fund needed infrastructure, would Nigeria not survive? Would the country suffer economic decline?

 

Why is there such a disquieting acquiescence on the part of the Nigerian populace towards the voracious appetite of the Federal Government for foreign loans? Have they been so beaten down by the harsh policies of government that being mute has become their default mode?

 

For those who are quick to rise in defence of government’s undisciplined resort to more borrowings, what they say can be paraphrased along these lines: ‘The reality is that external borrowing for infrastructure is not inherently a bad thing as long as we have probity and accountability. It is germane to balance borrowing with revenue generation and efficient allocation of funds. Without infrastructure, how can you have a developed and production-based economy? It could take forever and cost much more in the long run to finance infrastructure with internally generated revenues.’

 

On the flip side, I’d like to quote verbatim David Adonri, Executive Vice Chairman of High Cap Securities Ltd, a respondent interviewed by Vanguard newspaper on November 29, 2023: ‘If it’s in dollars, then the President has forsaken the advice given by DMO to avoid further external debt. That professional advice was also echoed by the Coordinating Minister of the Economy when he appeared before the Senate. Nigeria’s debt has surpassed sustainability level. The country has already been thrown into a debt trap that we must be extricated from. Further sinking FGN in debt, instead of repaying existing debt, in order to repair the damaged balance sheet of government, is a contrarian strategy that may end up in sovereign default ultimately. Piling of debt by FGN for any reason exacerbates the risk of its bankruptcy or financial failure. Instead of looking outwards to finance the development of Nigeria’s infrastructure, domestic factors should be mobilized for the purpose. This way, the need for external debt will be minimized and domestic value chains will be energized across board.’

 

Permit me to also quote Professor Friday Ndubuisi, the immediate past Vice Chancellor of Christopher University, Mowe, Ogun State, who said in his lecture at the first edition of this same National Tax Conference: ‘It is not good for the government to keep depending on borrowing for the provision of public goods, thereby piling loans upon loans. The government should generate revenue from within through taxation. But in doing that, there must be accountability.’

 

If we all agree that the fundamental goal of a national tax system is to mobilize revenues to pay for the expenditures of government at every level, why does the Tinubu administration look away from internally generated revenues to correct the infrastructure deficit? Why do they think there is no alternative for their addiction to foreign debts?

 

Have we not been told that excessive foreign debt can thwart long-term economic development? Surely we have learned how it can hinder a country’s ability to invest in its economic future while suffering from infrastructure deficit, inadequate education and dysfunctional health care?

 

Nigeria has found itself in a debt hole, we must stop digging. One could not help feeling some deja vu reading the President’s letter about the urgency of ‘prudent external borrowing’ to enable ‘key infrastructure projects’ and ’employment generation, and skill acquisition.’ We have heard it all before, the platitudes and noble aspirations inclusive. Nigeria has continually suffered from infrastructure deficit, despite the escalated foreign loans acquired by Buhari. Nothing has changed except the pain and hardships endured grimly by the people grew apace.

 

Let the President push through on his Tax Reforms. For his administration and leadership to do a lot of good, the pull of history necessitates that President Bola Tinubu must yield to the logic of being a fiscal reformer.

 

It’s a great fallacy to embrace the proposition that Nigeria’s infrastructure deficit can only be corrected through the acquisition of foreign debt. Nigeria can thrive and enjoy economic growth without acquiring any foreign debt.

I agree with Professor Friday Ndubuisi that: ‘government should generate revenue from within through taxation.’

 

F.D.R., the last American President who enjoyed more than two terms, once said: ‘The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something.’

 

Taking foreign loans as a mean of building critical infrastructure, employment generation and skills acquisition has repeatedly failed. Let’s have the honesty to admit it. The temper of the country, Nigeria, is a growing impatience and annoyance at the profligacy of lazy, corrupt government bureaucrats.

What we have not tried is having the discipline, competence and frugality to correct Nigeria’s infrastructure deficit through national taxation. This is the time for President Bola Tinubu to boldly and persistently wear his toga of fiscal reformer, and try this method. It’s a sure formula.

 

So the question arises: But how do you tax people who are impoverished, unemployed, and without meaningful skills?

At this juncture, let me say without hesitation that I agree with John Maynard Keynes (one of the founders of I.M.F. and World Bank) that the major responsibility of government is to create full employment, and thereby eradicate poverty – with a caveat. It is not compulsory for government to borrow money and take on mounting debt in order to create full employment and eradicate poverty.

 

With reference to the Bible, what the New Testament actually introduced is a system of government meant to eradicate poverty and unemployment by the instrumentality of justice.

The business of government is to discourage laziness among its citizenry, and encourage maximum production by giving full employment to workers which the marketplace fails to engage.

 

Government bureaucrats in Nigeria have become increasingly lazy, greedy, frivolous and corrupt because they have been

doctrinally excused from running profit-making enterprises: and creating jobs for workers that would have been otherwise unemployed, left to the whims of the marketplace i.e. free market.

 

Yet typical of those pushing the Capitalist Creed, an author of a book, The American Business Creed, once wrote: ‘Government is powerless to create anything in the sense in which business produces wealth.’

 

In line with that, the I.M.F.’s propagandists will tell you with contrived certainty: ‘Government has no business being in business.’ What a flawed, dishonest thinking.

 

Still we might do well to pay attention to Isabella Webber of University of Massachusetts, Amherst, who once said: ‘There is no magic bullet of development. Possibly, there’s not one big blueprint that we can derive from the experience of one country, and then spread through out the world, and that will solve the problem of development.’

 

A writer, Geoffrey Gorer, once wrote: ‘Any device or regulation which interferes, or can be conceived as interfering, with the supply of more and better things is resisted with unreasoning horror, as the religious resists blasphemy, or the warlike pacifism.’

 

We should not be limited to pick a choice as to what agency, whether government or private business, that can facilitate production and development in a country – as long as monopoly is discouraged and eliminated.

We should frown at, and rebuke those who insist that privatization is the way to go, if any economy must grow!

We should be able to discern that ‘Natural selection is at work’ to hear advocates of capital formation over labour. They are the ones holding the false philosophy of ‘Survival of the fittest.’

 

John Kenneth Galbraith, in his book, The Affluent Society, wrote: ‘The vulnerability of the weakest members of the society could not entirely be ignored. An economic system which of constitutional necessity was so unfeeling, so intolerant of weakness, was troubling. And even in the best of causes, compassion is difficult to control…At every turn they showed their inclination to press collectively or with the aid of government for measures designed to make life more secure.’

 

The responsible governmental leader must yield to the control of compassion in order to ‘make life more secure’ for the weak, those who have not yet learned to be effective, internally motivated decision-makers.

 

In Matt.20: 1-16, Christ tells a parable concerning how the Kingdom of God is like the owner of an estate who went out early in the morning and hired workers for his vineyard. Having agreed to pay the normal daily wage, he sent them out to work. Passing the MARKETPLACE at nine o’clock that same morning, he saw some people standing around doing nothing. He then hired them telling them he would pay whatever was right at the end of the day. At noon and around three o’clock, he did the same thing. At five o’clock that evening, he was in town, and saw some more people standing around.

 

So he asked them: ‘Why haven’t you been working today?’ They replied: ‘Because no one hired us.’

The estate owner then told them: ‘Then go out and join the others in my vineyard.’

 

He told the foreman that evening to call in the workers and pay them, starting with the last workers first. Those hired at five o’clock were paid the full day’s wage. Those hired earlier were paid a day’s wage too, even though they supposed they would be better compensated. They protested: ‘Those people worked only one hour, and yet you paid them just as much as us who worked all day in the scorching heat.’

He replied one of them: ‘Friend, I have not been unfair. You agreed to work all day for the usual wage, didn’t you? Take it and go. I wanted to pay the last worker the same as you. Is it against the law for me to do what I want with my money? Should you be angry because I’m kind?’

 

With the ‘marketplace’ in this parade, one can see what Adam Smith in his Wealth of Nations referred to as the ‘invisible hand’ whereby the actions of self-interested individuals could bring a free competitive market to equilibrium with levels of supply and demand. No doubt that how people react to this invisible market force can foster greed, inequalities and other vices.

 

In this parable of Christ, where you read ‘estate owner’, you can do well to insert a governmental leader like a President or Governor with executive powers. His distinct objective is to discourage laziness or idleness, and make anyone to see what an intolerable condition it is. With compassion, this governmental leader goes all out relentlessly to attack idleness by creating full employment for people who are ready to work.

 

He is not keen to interrupt the rhythm of the marketplace which has its own requirements. Yet the labour that the marketplace is not prepared to absorb, this governmental leader is keen to employ in his ‘vineyard’ at a reasonable wage. In the place of ‘vineyard’ you can do well to insert ‘State-owned enterprises’ (SOEs.)

 

As John Kenneth Galbraith rightly noted, no responsible governmental leader can watch the vulnerability of the weakest members of the society being ignored. He asked the idle people: ‘Why haven’t you been working today?’ They replied: ‘Because no one hired us.’

Obviously, the marketplace has no room for their skills or non-skills.

 

Yet the responsible government leader has facilities available to train and retrain the workers available for employment and get them to acquire the necessary skills and experience while earning reasonable wages. The marketplace as an economic system might be so unfeeling and so intolerant of weakness, but every responsible governmental leader must put in place ‘measures designed to make life more secure’ for the vulnerable and the weak.

 

The same John Kenneth Galbraith also said on C-SPAN, November 13th, 1994: ‘I react pragmatically. Where the market works, I’m for that. Where the government is necessary, I’m for that. I’m deeply suspicious of somebody who says, ‘I’m in favor of privatization,’ or, ‘I’m deeply in favor of public ownership.’ I’m in favor of whatever works in the particular case.’

 

We have been relentlessly propagandized by agents of capitalism that the role of government in business should be creating an enabling environment for businesses to thrive and galvanize growth, instead of engaging in direct participation in commercial activities…The point is well taken. But can that give us a true, complete picture of a success story?

 

It is axiomatic that the role of government in business should be creating an enabling environment, from both regulatory and adjudication standpoints, for businesses to thrive and galvanize growth. But who makes the ‘law’ that prevents government from direct participation in commercial activities? Why should any government be held hostage to an economic dogma that cannot stand under critical scrutiny?

 

I want to say very clearly there’s nothing wrong with government having direct participation in commercial activities. Today we learn that the success story of the Chinese economic development model both at the national and worldwide levels is rooted in the public ownership of revenue-generating business enterprises. Yes, the system allows capitalists from the West to set up shops and factories in China while also giving ample room for Chinese citizens to engage in private enterprises. Still, the authorities insist, as a matter of policy, for China’s SOEs to play a dominant, leading role over all.