Restructuring in bits

Nyesom Wike is pushing ahead with his VAT move despite the FIRS appealing a recent judgement that gave Rivers the right to collect VAT. In return, the FIRS is attempting to bribe legislators to move VAT to the Federal only list in our flawed constitution.

I like both moves. Nigeria needs them. Desperately. We dealt with this topic extensively in @sbmintelligence’s last two newsletters which you can read here and here. I encourage you to read, and to subscribe.

While the VAT decision by the Federal High Court is important, it is also important to state that not all VAT will be collected by the states. Each state would certainly administer VAT within their territory, while FIRS will administer VAT within Abuja as well as non-import foreign VAT. Customs will continue to collect import VAT on international trade.

Given the history of VAT (it was introduced by Abacha to replace IBB’s sales tax), it was always going to be a source of tension between the FG and the states the moment we left the command structure of the military era.

As an aside, I find interesting that rather than seek legal interpretation, states such as Lagos turned on their populations with a consumption tax. Rivers has done the right thing and gone to court, so I’m sure that by this time next year, the Supreme Court would have ruled on the matter, again showing us what we need to do with regards this restructuring argument: test everything and settle for what is really practical.

Which is why, somewhat ironically, I also welcome that effort by the FIRS to bribe legislators to amend the constitution and plunk the VAT in an already loaded exclusive list. You see, it’s clear that the Federal Government is unable to handle everything that it covers, yet it wants to take on more because of selfish interests.

Whether those selfish interests like it or not, Nigeria is restructuring, and more things like this will keep coming up and eating at the edges. States will come under more pressure, and ultimately, they will be faced with the choice of either anarchy or changing the rules of the game. You think what's currently going on is anarchy? Una never see.

Just a few days ago the finance minister admitted that more than 90% of the FG's revenue went into paying gbese last year, essentially validating what SBM and Budgit have been saying. Anarchy is when our debts are more than our revenue, and no one wants to lend us more because our credit worthiness is in the soak-away pit. We're not there yet, but we're inching closer. Anarchy is when tech bros start relocating their businesses to London or Accra because of predatory regulatory behaviour, thus reducing their ability to employ people or pay those same taxes that the regulatory predators are desperate for. The first part has happened, and many tech bros have moved. Anarchy is when the government completely runs out of funds to pay off murderers and kidnappers "for peace to reign". We're getting there too.

Ultimately, we are going to face this fight of what shape the successor to the current Nigerian arrangement will take. The fight won't be pretty, but there is only one logical outcome, and if we make the wrong choices, there won't be any Nigeria to talk about.

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Cheta Nwanze

Using big data to understand West Africa one country (or is it region?) at a time.