By Africa Links 24
Published on 2024-04-04 10:02:51
Fiscal risks are a major concern in Nigeria and addressing them is crucial for the government. One such risk is the variation in budget implementation, which can lead to financial instability. Additionally, hidden debts, such as inter-agency institutional debts, are not usually reported by the government, adding to the overall fiscal risk. Forecast risks, where the government’s predictions do not align with reality, can also pose challenges.
The devaluation of the naira has put pressure on the government to generate more revenue to pay off external debts. However, budgeting based on outdated exchange rates can lead to discrepancies and financial volatility. Despite poor economic growth in recent years, the cost of living crisis continues to worsen, impacting the economy.
Businesses in Nigeria are feeling the effects of various reforms, such as energy and currency changes. While these reforms may cause short-term challenges, they are necessary for long-term economic stability. The government’s commitment to addressing underlying economic issues, such as subsidies and exchange rates, is a positive step towards economic recovery.
Tax reform is essential for addressing fiscal risks in Nigeria. Property tax, in particular, has the potential to significantly increase revenue for the government. Currently, property tax contributes less than 1% to GDP, highlighting a major opportunity for improvement. Implementing a robust system for property tax collection and enforcement can help address the issue of tax evasion and increase government revenue.
Digitizing the tax collection process is also crucial for improving transparency and efficiency. However, there are still hurdles to overcome, such as technical issues with online payment systems and lack of monitoring mechanisms. By addressing these challenges and investing in technology, the government can streamline the tax collection process and reduce opportunities for tax evasion.
Enhanced tax collection, including property tax, may face resistance from citizens who feel they are already responsible for providing their own infrastructure. Building public confidence in the government’s ability to deliver essential services is key to overcoming this resistance. By demonstrating the tangible benefits of tax payment through improved infrastructure and services, the government can encourage compliance and boost tax revenue.
In conclusion, addressing fiscal risks in Nigeria requires a comprehensive approach that includes addressing hidden debts, improving budget implementation, and enhancing tax collection. The government plays a crucial role in promoting transparency, efficiency, and public confidence to ensure sustainable economic growth and stability.
