The global economic meltdown has made it very imperative for the government to diversify the economy and increase revenue generation from other sources instead of depending on oil. Nigerian governments over the years have paid lip service in diversifying to agriculture that will provide food, employment, and grow the economy generally with its attendant linkage effect to other sectors. It is sad that our agricultural sector is still at the subsistent level with limited infrastructure and Moden implements that will increase the income of the farmers.
It is on this background that the present announcement by the government on its plan to boost 2020 generation of revenue by increasing value added tax is considered a very bad economic policy that will worsen the economic situation of the country. The country is currently faced with stagflation- a situation of slow economic growth and relative high unemployment accompanied with high inflation. The increase in VAT will ultimately worsen the situation as the added cost will increase the cost of goods and services, which will be passed on to consumers. The government has not been able to even implement the new minimum wage across board for its workers. The increase of VAT will mean that the government is giving with one hand and indirectly taking back with the other hand.
The increase in VAT will further increase the level of inequality in income which has been worsened by the impunity of the political class who appropriate our common resources with reckless abandon and allocate huge salaries, pension and perks to themselves. This has increased the consumption inequalities as evidenced in the law suit by some activists to restrain the national assembly commission from paying and releasing the sum of 5.550 billion Naira for the purchase of luxury cars to principal members, when Nigeria is rated as one of the poorest countries in the world. Unfortunately, they are not even taxed. Therefore, the increase of VAT by 7.5 percent is very regressive and counter intuitive to the goal of closing the gap between the poor and the rich,
Nigeria is already experiencing serious security problems that has affected the confidence of foreign investors, resulting in the current major sharp falls experienced in the stock market. The government has to check the effect of mass discontent in the land by initiating policies that will ameliorate the structural problem in the country.
This is not a good time for any serious government to increase the tax burden on its citizens, but rather avoid it through targeted intervention, such as a comprehensive review of government expenditures, to ensure that the obvious wastage which is glaringly displayed by government officials to everyone is brought down to the minimal level, salaries, allowances and office perks to most of their political appointees should reflect the true state of the nation’s economic situation.