The Thing About IGR…
We have all heard a lot about Lagos state’s economy and its ability to generate revenue internally. Looking at it at a high level, that’s great, isn't it? A self-sufficient state, independent of the shenanigans of the center… what’s not to love? We have all heard about how Lagos state’s economy is the 5th largest economy in Africa and how it’s IGR has helped it become a ‘mega city’.
What we don’t often hear is how this IGR is generated and how the drive for IGR has crippled businesses and killed jobs. I believe that our drive for internally generated revenue from taxes is dangerous to the state and the country in the long term. Unfortunately, thinking for the long-term has never been one of our strengths.
Now, I am not saying taxes are bad — generating tax revenue is critical for any serious government as tax revenue funds projects, social welfare programs and so on. But ask any serious government and you’ll find that tax policy is not an end in itself — the growth of the economy is the overriding objective and fiscal policy (taxation and spending policies) is a tool to help grow the economy.
We therefore see that tax policy cannot be set independent of the current economic climate. Nigeria has been in a recession for the last two years; in addition to this, we have lost jobs — the unemployment rate has more than doubled in the last two years, from 6.4% in January 2015 to 14.2% in January 2017. Prices are rising and wages are not keeping up. The picture is not a very pretty one, is it?
It is in the middle of this that taxation policies have become more stringent — the federal and state governments have stepped up their drive for taxes by attacking the low hanging fruit — the formal sector and SMEs. FIRS and LIRS have come down hard on companies who are essentially working for the tax man in addition to providing power, water and infrastructure just so that they can keep the lights on.
Small businesses have been bombarded with all sorts of taxes. Some of these businesses had barely started operations when the tax authorities handed them bills for significant sums. How are we supposed to grow the economy when we don’t provide incentives for the private sector to create jobs? Surely, we must see that this approach is short-sighted in the extreme?
However, it is not surprising. One only has to look at our history to see that we have consistently tried to cut corners — we have consistently failed to do the hard work necessary for the sustainable, long-term growth of the economy and our nation. The evidence of this is all around us — over the last couple weeks, we have had floods in several parts of the state and the country. This has been a recurrent problem for years but the government has largely paid lip service to this. We have not seen any real reforms — only soundbites. It’s like using a band-aid to treat a gunshot wound; we are hemorrhaging blood but it’s covered so it’s fine.
Where do we go from here? First, we need to cut costs and it must start at the top. One thing I’ve noticed is that there’s almost nothing like the sense of shared sacrifice when leading people. Your followers will follow you if they think you feel their pain. And so, governance is as much about policy as it is psychological. Over the last 50 years, it has been a case of us versus the government. The perception, and it is very real, is that government does not feel the pain of the people. This must change — leadership must realize this and recalibrate. Forfeit your salaries; send your kids to Nigerian schools; serve the people. Lead from the front.
A painful part of this is reducing the size of government — this is a tough but necessary aspect of a path to growth. The government will need to run lean.
Next, we must find ways to simplify our tax laws to reduce the uncertainty and encourage people to start businesses and corporations to hire people. We need to encourage SMEs by offering a conducive environment — savings from recurrent expenditure can be used to finance capital projects. Until we start to consider these hard choices as viable options, we will continue to struggle. We will massively under-perform as a country. Let us start doing the right thing. It’s time to roll up our sleeves and work.

