COVID-19: What are Nigeria’s revenue options?

Nigeria's economy is currently facing a dual threat from the coronavirus pandemic and plummeting oil prices, with nearly 3000 confirmed COVID-19 cases in the country. Taiwo Oyedele, Partner and West Africa Tax Leader at PwC Nigeria, recently joined CNBC Africa to discuss the challenges Nigeria is facing in meeting its revenue targets amidst the current economic turmoil. Oyedele pointed out that the government's budget, which was based on a benchmark of $57 per barrel, is now significantly impacted by the sharp drop in oil prices to around $30 per barrel. This has necessitated revisions to revenue projections, including from customs duties, VAT, and other sources. In response to the economic strain, the Nigerian government has introduced various palliative measures to support businesses and individuals. These measures include a reduction in the percentage of pension contributions, an extension of tax filing deadlines, and financial assistance to vulnerable groups. However, Oyedele noted that Nigeria lacks the fiscal headroom to provide extensive cash transfers to all vulnerable citizens, highlighting the importance of targeted interventions for sectors most affected by the crisis, such as transportation, airlines, and hospitality. The Federal Inland Revenue Service (FIRS) has also implemented measures to facilitate tax compliance during these challenging times. This includes waiving interest on tax debts for taxpayers who settle by May 31st and encouraging early payment of annual returns for businesses in sectors that have not been significantly impacted by the crisis. Oyedele emphasized the need for the government to identify and address areas where revenue leakage occurs, such as through the removal of subsidy inefficiencies in sectors like fuel and electricity, which could potentially generate significant additional revenue for the country. While progress has been made in digitizing tax payment processes, Oyedele stressed the importance of further enhancing the ease of paying taxes online to increase revenue receipts without the need for physical visits to government offices. He highlighted the need for a robust IT infrastructure and essential status designation for IT services to support the smooth transition to online tax filing and payments. In conclusion, Nigeria is grappling with significant economic challenges exacerbated by the current global crisis. As the country navigates the impact of COVID-19 and dwindling oil revenues, innovative revenue generation strategies coupled with targeted interventions and enhanced tax payment systems will be crucial in supporting Nigeria's economy and sustaining government revenue streams.