The Nigerian tax agency (FIRS) is closing offices, seizing bank accounts and writing customers of “tax defaulters” with unbelievable energy that if Nigeria has deployed the same zeal in fixing electricity and education, we will have a better nation. I support FIRS on its mission but it needs to calibrate its secondary sources: the FIRS algorithm is not evidently fault-tolerant.
Yes, on Friday, a lady had her office locked up because FIRS did not believe her tax receipts. She drives a “big car” and by extrapolation, her company was making more money than she declared! Her plea that her husband bought the car was not accepted. Go figure.
Government will make marginal progress on tax receipts. But that will not fix anything as the economy is not growing healthy enough for tax to dent our debt paralysis. The question is this: what happens when all mechanics of tax collection have exhausted and yet nothing has improved the total receipts?
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This is why I am projecting that Nigeria will devalue its currency in 2021. This devaluation will help offset internal debts we are packing now. Because our oil is sold internationally, government does not get the heat on devaluation since it still receives dollars which magically becomes a lot in a devalued naira. It uses the generated tons of naira to pay local bank loans, and other debt obligations.
This mindset which started since the new democratic dispensation began in 1999 is the biggest risk to Nigeria: continuous use of currency devaluation as a core monetary tool to adjust disequilibrium in the economy. The military juntas protected the naira more than the civilians (see plot). Before 1999, it was below N100 to US$1 for decades; since 1999, it has risen to N500 before settling at N350! I expect the naira to fall to N450 to one USD by Dec 2021.
naira devaluation since 1999 (official rates used)
Why is that possible? Government has disintermediated bank lending by making treasury bills (TB) a solid investment mechanism in Nigeria. My Nigerian bank practically did not want me to invest in TB because its own money did not have enough space (I guess). So, it changed its rules that I must instruct it, monthly, to invest in TB over the “perpetual instruction” I had previously issued. With no way to be sending letters to reinvest my TB, they returned the capital, and after a while, I moved that money to something else.
Here is the problem: if the Nigerian treasury pays you 14% at practically no risk, why would you as a bank invest in any company in Nigeria for say 17% with all the associated risks? So, as CBN jacks up the TB rates, investments in the real economy will keep dropping because anything but TB becomes unattractive. Of course, you do not pay tax on TB which means, compared with other sources of income, the effective returns could be close to 18%. Under that construct, any bank that invests in any other thing when there are treasury bills available in Nigeria, is not fiduciary responsible to its financial stakeholders.
With the economy not growing, now slower than the population growth, the government will panic in coming years to cover expenses. The panic will lead to currency devaluation. Unless Nigeria can magically grow economically at say 5% in GDP in coming quarters, the Naira will lose value to leading global currencies. Now is the time to plot your survival strategies!
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We were busy shouting and clamouring for democracy, that the military guys have finished us.
Nobody took time to ponder on the competence and capabilities of these civilians, posturing to manage and govern Nigeria.
We handed Nigeria to unprincipled and uncultured lackeys, and somewhat believe they gonna take us to the promised land.
When you have largely uninformed or uneducated citizens and going ahead to combine them with politicians who know next to nothing, this is the outcome.
All the people running around to become president, governors, legislators, and the ones they appoint to head agencies, judges; what exactly do they know about growing Nigeria’s economy?
Both our fiscal and monetary policies have become official scam, and we keep behaving as though we are ok.
Sowore is in detention, for saying what is very obvious. I guess it’s time to build bigger detention camps, because all of us may need to march in there soon; if we must save Nigeria!
What makes the military guy different? What makes you think the military guy knows about national economy? What makes you think the military guy can fix the economy. The military is also human being like the civilian, in fact the military was once civilian. Democracy is the sure way to go, not-withstanding there could be better way democratically to fix the economy. Let us shirk this believe that democracy is the problem and that military is the answer.
Very interesting if that was your understanding of the military reference