Tax Reform Bills and the economic outlook for 2025

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By Abiodun Komolafe

The Year 2024 has been flogged to death! With 2025 now underway, it's clear that this year will be crucial for Nigeria and Nigerians. To ensure a game-changing year, the government must develop a comprehensive framework to address the economic, social and political challenges ahead.

To begin with, President Bola Tinubu should leverage his political expertise to facilitate a consensus-driven approach to the Tax Reform Bills currently before the National Assembly. This requires negotiating with regional stakeholders, addressing politically-driven concerns, and finding common ground to ensure the Bills' successful passage.

The Tax Reform Bills are to be commended as the much-needed attempt to get the country back to where it was before the suspension of the 1963 Republican Constitution by a misguided set of people in 1965. Yes, Nigeria must become a producer nation again! This is the only way to pull tens of millions out of poverty, create jobs and nurture a political economy based on shared economic prosperity.

The fantasy coming from some people that Nigeria can continue to defy the law of gravity and go on with the assumption-based political economy must be consigned to the dustbin. So, the Federal Government has a responsibility to push upfront an economic spokesperson who can present its economic position with the clear lucidity necessary to shift the territory of the debate in favour of its own position. This has to be done with the sense of urgency that the current situation demands!

When President Tinubu took office, Nigeria faced significant challenges, including widespread insecurity, underdeveloped infrastructure and a debt service-to-revenue ratio of 97%. The country also struggled with a massive Forex backlog of $7 billion and many State governments' inability to pay salaries. These pressing issues underscored the need for urgent reforms to get the country back on track.

By 2025, Nigeria's economy is poised for growth, driven by increased oil production, projected to reach two million barrels per day, and enhanced domestic refining capabilities. Building on recent momentum, Nigeria has achieved notable economic gains, with its Gross Domestic Product (GDP) growing by 3.46% and unemployment rates decreasing to 4.3%. The country's fuel imports are also declining rapidly, and it has begun exporting Premium Motor Spirit (PMS) to West Africa and Europe.

Contrary to former Vice President Atiku Abubakar's claims, Nigeria has made significant strides in managing its debt. The country has reduced its revenue-debt service ratio from over 90% to 64%, indicating a marked improvement in its debt management. Furthermore, Nigeria's foreign reserves have increased substantially to over $40 billion, despite the challenges of servicing external debts and clearing foreign exchange backlogs. These positive developments are expected to strengthen the Naira, ultimately leading to a reduction in the cost of goods and services.

Infrastructure development is another area where Nigeria is making progress. The Lagos-Calabar coastal road is under construction and it’ll soon be the turn of the Sokoto-Badagry highway. Likewise, initiatives such as the student loan scheme by NELFUND and consumer credit by CrediCorpNG are gaining traction, providing financial support to individuals and businesses.

The Tinubu-led government is taking steps to promote autonomy for local governments, modernise the livestock industry and restructure social investment programmes. Efforts to address insecurity, such as (the detention of) Simon Ekpa, banditry and farmers-herders clashes, are also yielding positive results, indicating improved social cohesion.

To effectively address inflation in 2025, the government should consider implementing a comprehensive Inflation Reduction Act. But then, this would require strong political will! Key components of the Act should include cost-efficiency measures, such as implementing the Oronsaye Report and designating a cost-efficiency czar - preferably the Minister of State in the Ministry of Finance or the Secretary to the Government of the Federation. This czar would be responsible for overseeing the implementation of performance-based budgeting, ensuring the budget is aligned with specific timelines and objectives.

The National Assembly should adopt a Performance Planning Budgeting System for its oversight functions. It is alarming that, since 1999, the Assembly has not established a Congressional Budgeting Office to provide technical expertise. This oversight contributes to Nigeria's underperformance, and the current Assembly must address this flaw. To tackle economic challenges, implementing the Inflation Reduction Act and declaring a State of Emergency in ports and trade facilitation systems could help streamline trade processes, reduce inflation, and stimulate growth.

Nigeria must revamp its trade facilitation mechanisms. There's no alternative! This overhaul should be accompanied by an Inflation Reduction Act that fosters partnerships with the States and Local Governments to revamp rural roads and promote integrated rural development. To combat food price inflation, the President should reinvigorate his commitment to creating an enabling environment for modern commodity exchanges. These exchanges are a crucial tool in reducing inflation and addressing the current economic challenges. Ultimately, the government must prioritize inflation reduction in its economic policy and ensure this goal is reflected in the 2025 budget.

It is our belief that there’s already a Technical Committee in progress, examining what will be the signs and wonders of the Trump Presidency in terms of the global cost of oil prices and the effects of proposed tariff hikes on international trade. Since we are not God, instead of questioning Donald Trump’s character, we must be as proactive as we were in responding to the devaluation of the British Pound Sterling in 1967. Nigeria’s response to the British devaluation as a member of the Sterling Group earned the country great plaudits and admiration across the world. Essentially therefore, there must be a plan! Before we start clapping for Trump, there must be strategies in place to project his policies rather than his character!

A Trump Presidency begins on January 20; and, like the Boy Scout, Nigeria must be prepared! It is to be hoped that a savvy international trade negotiating team is already in place. It is going to be very hard! We must be prepared!  

May the Lamb of God, who takes away the sin of the world, grant us peace in Nigeria!

  • Komolafe wrote from Ijebu-Jesa, Osun State, Nigeria (ijebujesa@yahoo.co.uk)