NATIONAL ECONOMY recalls that Rivers, the prime mover state pressing for VAT collection, filed an appeal before the Supreme Court against the ruling of the Court of Appeal stopping its collection of VAT in the state.
The Court of Appeal in Abuja had, in a ruling on September 10 ordered Lagos and Rivers States to maintain status quo on the collection of VAT pending the determination of an appeal that was lodged before it by the Federal Inland Revenue Service (FIRS).
On the heels of the development and manifold predictions that the Supreme Court ruling will lean in favour of the states, economists predict that this would mark the beginning of fiscal federalism, which would in turn be the fertile ground for resource control.
Economist, research fellow, and member of the board of economists, NATIONAL ECONOMY, Dr. Bongo Adi said Nigeria needs the development to shake off complacency and for other states to reinvent and innovate on revenue collection and development.
He said the development will alter fiscal allocation and enhance decentralisation, as well as help states like Lagos, Ogun, Oyo, Anambra, Imo, Abia Enugu and Kano to determine their own development pace. He stated that the court ruling in Rivers State has settled the matter, which is a victory for democracy and fiscal federalism.
He also said with the ruling and subsequent developments, states will be able to hold themselves accountable, and there will be reduction in the sharable revenue from the Federation Accounts Allocation Committee (FAAC), as well as inculcate the right incentive of accountability and efficiency.
Dr. Bongo Adi said the ruling in Rivers State is one of the most significant developments in terms of fiscal federalism in Nigeria’s modern history.
Also speaking with NATIONAL ECONOMY on the issue, economist and former director general, Lagos Chamber of commerce and Industry (LCCI), Dr. Muda Yusuf said, “There is a strong correlation between the volume and scale of economic activities, VAT revenue generated and negative externalities to the host states. Such economic activities generate proportionate negative externalities which the host states have to take responsibility for. Such externalities include impact on the environment, pressure on economic infrastructures such as roads, pressure on social infrastructure such as schools and hospitals, social problems such as heightened criminality, waste management, urbanization challenges such as proliferation of slums, traffic congestion etc. These externalities put enormous pressures on the finances of the subnationals that provide the bulk of the VAT revenue.
“A stronger derivative principle of up to 70 percent should be incorporated into the sharing formula for equity and fairness,” he said.
“What is unfolding in this conversation are the challenges of a unitary system which we wrongly characterize as a federal system. This situation underscores the imperative of fiscal federalism.
He said with the development, states currently generating high VAT will be the major beneficiaries while states with low generating capacity will be the losers. However, such a scenario would spur the states to be bullish in their quest to attract investors to their states. It is investment growth that would boost VAT revenue, and other revenues for that matter.
Associate professor, Department of Private and Commercial Law, and doctor of energy law, Babcock University, Professor Tayo Bello told NATIONAL ECONOMY that the development is tilting towards fiscal federalism. He said the current system where the country is running a unitary form of government in a federal state has failed to work over the years, which has necessitated the push currently being witnessed by the states.
Another economist who granted NATIONAL ECONOMY interview, pleading anonymity, pushed the argument that states should also be granted the authority to collect stamp duties.
Stamp duty is the tax governments place on legal documents, usually in the transfer of assets or property. These taxes were called stamp duties because a physical stamp was used on the document as proof that the document had been recorded and the tax liability paid.
In Nigeria, stamp duty is imposed at the rate of 0.75 per cent on the authorised share capital at incorporation of a company or on registration of new shares. All deposit banks and financial institutions are required to charge stamp duties of N50.000 on every eligible transaction above N10,000.
The economist argued that since the transactions are carried out in the states, which provide the infrastructure and services such as security and legal documentations, the states should lay claim to stamp duties.
The development may begin to strengthen the push for resource control.
It has been argued that every state in the federation has natural and human resources and other endowments that could become economically viable. The economist posited that the livestock business in Nigeria, estimated to be worth more than N30 trillion and a potential for N50 trillion over the next decade could begin to yield income to states that properly harness the potential practising ranching. He said there is a need as a federation to review the issue of exclusive and concurrent lists between the federal government and states.
The legislative lists in the constitution provide for the distribution of powers: the exclusive legislative list is assigned to the federal government; the concurrent legislative list is assigned to both federal and state governments and defines areas in which both can legislate; and the residual legislative list is assigned to the states. The exclusive legislative list has sixty-eight items, while the concurrent legislative list has twelve.
Nigeria is among countries in Africa with a wide variety of different natural resources. The country is richly endowed with natural resources ranging from industrial metals to various precious stones such as Barites, Gypsum, Kaolin and Marble. Most of these minerals are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in relation to the extent of deposit found in the country. One of the objectives of the new National Policy on solid minerals is to ensure the orderly development of the mineral resources of the country.
Apart from human capital endowment, each state in the federation has abundant resources they can develop. For example, Abia state has Gold, Lead/Zinc, Limestone, Oil/Gas & Salt; the FCT is endowed with Cassiterite, Clay, Dolomite, Gold, Lead/Zinc, Marble & Tantalite; Adamawa is blessed with Bentonite, Gypsium, Kaolin & Magnesite; Akwa Ibom has Clay, Lead/Zinc, Lignite, Limestone, Oil/Gas, Salt & Uranium; Anambra State has Clay, Glass-Sand, Gypsium, Iron-ore, Lead/Zinc, Lignite, Limestone, Phosphate & Salt and Bauchi State has Gold, Cassiterite (tine ore), Columbite, Gypsium, Wolfram, Coal, Limestone, Lignite, Iron-ore & Clay
Other states and their resources include: Bayelsa with Glay, Gypsium, Lead/Zinc, Lignite, Limestone, Maganese, Oil/Gas & Uranium; Benue with Barite, Clay, Coal, Gemstone, Gypsium, Iron-Ore, Lead/Zinc, Limestone, Marble & Salt; Borno with Bentonite, Clay, Diatomite, Gypsium, Hydro-carbon, Kaolin & Limestone; Delta with Clay, Glass-sand, Gypsium, Iron-ore, Kaolin, Lignite, Marble & Oil/Gas; Ebonyi with Gold, Lead/Zinc & Salt; Edo with Bitumen, Clay Dolomite, Phosphate, Glass-sand, Gold, Gypsium, Iron-ore, Lignite, Limestone, Marble & Oil/Gas; Ekiti with Feldspar, Granite, Kaolin, Syenite & Tatium; Enugu has abundance of Coal, Lead/Zinc & Limestone; Gombe has Gemstone & Gypsium; Imo has Gypsium, Lead/Zinc, Lignite, Limestone, Marcasite, Oil/Gas, Phosphate & Salt; Cross River has Barite, Lead/Zinc, Lignite, Limestone, Manganese, Oil/Gas, Salt & Uranium and Jigawa has Butyles.
Kaduna State has Amethyst, Aqua Marine, Asbestos, Clay, Flosper, Gemstone, Gold, Graphite, Kaolin, Hyanite, Mica, Rock Crystal, Ruby, Sapphire, Sihnite, Superntinite, Tentalime, Topaz & Tourmaline; Kano State has Gassiterite, Copper, Gemstone, Glass-sand, Lead/Zinc, Pyrochinre & Tantalite Kastina has Kaolin, Marble & Salt, Kebbi has Gold; Kogi has Cole, Dolomite, Feldspar, Gypsium, Iron-ore, Kaolin, Marble, Talc & Tantalite; Kwara is endowed with Cassiterite, Columbite, Feldspar, Gold, Iron-ore, Marble, Mica & Tantalite and Lagos has Bitumen, Clay & Glass-sand
Nasarawa State is heavily endowed with minerals, including Amethyst (Topaz Garnet), Barytex, Barite, Cassirite, Chalcopyrite, Clay, Columbite, Cooking Coal, Dolomite/Marble, Feldspar, Galena, Iron-ore, Limstone, Mica, Salt, Sapphire, Talc, Tantalite, Tourmaline Quartz& Zireon; Niger State has Gold, Lead/Zinc & Talc; Ogun State is heavily endowed with Bitumen, Clay, Feldspar, Gemstone, Kaolin, Limestone & Phosphate; Ondo has Bitumen, Clay, Coal, Dimension Stones, Feldspar, Gemstone, Glass-Sand, Granite, Gypsium, Kaolin, Limestone & Oil/Gas; Osun has Columbite, Gold, Granite, Talc, Tantalite & Tourmaline; Oyo has Aqua Marine, Cassiterite, Clay, Dolomite, Gemstone, Gold, Kaolin, Marble, Silimonite, Talc & Tantalite; Plateau is heavily endowed with Barite, Bauxite, Betonite, Bismuth, Cassiterite, Clay, Coal, Emeral, Fluoride, Gemstone, Granite, Iron-ore, Kaolin, Lead/Zinc, Marble, Molybdenite, Phrochlore, Salt, Tantalite/Columbite, Tin & Wolfram.
Rivers is rich in Clay, Glass-Sand, Lignite, Marble & Oil/Gas; Sokoto has Clay, Flakes, Gold, Granite, Gypsium, Kaolin, Laterite, Limestone, Phosphate, Potash, Silica Sand & Salt; Taraba has Lead/Zinc; Yobe has Soda Ash & Tintomite and Zamfara has Coal, Cotton & Gold.
There are tremendous opportunities for investments in the solid mineral sector of the Nigerian economy.