Don’t compare Nigeria to South Africa— Minister of Finance warns as FG moves to borrow N11.03 trillion
The Minister of Finance and National Planning, Zainab Ahmed, has warned Nigerians against comparing Nigeria with South Africa.
She stated that South Africa is a tax-based economy, while Nigeria on the other hand is competing with Sudan in the area of taxation.
The minister disclosed this on Monday while defending the government’s Medium Term Expenditure Framework and Fiscal Strategy Paper.
According to the minister, most high earners in Nigeria are not paying taxes, particularly at the state level.
“The comparison between Nigeria and South Africa cannot be done. The federal government national budget and South African national budget are not proportionate. It is important to state that the South African budget is largely funded by taxes, unlike Nigeria’s economy. The tax base in Nigeria is still narrow. The tax rate is still quite low, VAT is still 7.5%, the average VAT rate in West Africa region is 15%.
“We have the lowest tax rate in the world, second only to Sudan. Even Sudan is increasing its VAT rate. We need to all efficiently improve tax collection. In Nigeria, PIT is very low. Individuals of high networth—only a few of them are paying taxes,” he said.
This comment is coming amid plans by the federal government to borrow over N11 trillion to finance the deficit in the proposed expenditure of the federal government.
In the document submitted to the lawmakers, the federal government plans to borrow N9.32 trillion comprising N7.4 trillion from the domestic market and N1.8 trillion from foreign sources. The government is expected to generate N206.1 billion from privatization proceeds and N1.7 trillion multilateral project-tied loans.
She added that the government cannot afford to keep subsidy beyond June 2023. As the government is not planning for subsidy beyond mid 2023.