Professor Uche Uwaleke, Director of the Institute of Capital Market Studies at Nasarawa State University, has called on the Federal Government of Nigeria to restructure its revenue collection process, cautioning that the existing practice is exposed to wastage of the resources the government generates, news.ng reports.
Uwaleke noted that while the government has made some policy interventions, including Executive Order 9 tackling certain deductions by the Nigerian National Petroleum Company (NNPC), more issues still need to be addressed to ensure an efficient revenue collection system in the country.
“Now the first thing that we need to do, as I’ve said earlier, Executive Order 9 has taken care of the, you know, deductions that NNPC used to make before now. Now, we also need to address this issue of, you know, the high cost of revenue collection by these agencies. That’s what we need to do,” he said during an interview on Arise Television on Thursday.
The professor described the 4% and 7% retained by revenue-generating agencies as operational costs as excessive, noting that the global standard is between 0.5% and 1%, particularly in the United Kingdom (UK), while in Africa, countries like Kenya record figures between 1% and 2%.
“Today, as we speak, these three agencies I mentioned, and it was important I started by mentioning them, you know, collect between 4% to 7% of, you know, they retain them as cost of revenue collection. So that is high on, you know, by any standard. The Nigerian Revenue Service gets 4% of non-oil revenue.
“Nigerian Customs Service (NCS) gets 4% of customs duties. And then, no, 7%, and then the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) gets 4%. So, what needs to be done is to try to reduce them in line with the global standard.
“Global standard is between 0.5% and 1%. Now, if you look at the UK, for example, the UK Her Majesty’s Royal Revenue and Customs, okay, the cost-to-revenue ratio is 0.51%. Now, if you take the Organisation for Economic Co-operation and Development (OECD) countries, that’s eight of them, it’s between 0.5% and 1%. And even if you come down to Africa, Kenya, for example, has between, you know, 1% to 2%.
He warned that if the current practice is not addressed, it will create what he called “perverse incentives”.
“It’s not in line with global, you know, global standards because we are simply, if you like, incentivising. For me, it’s a perverse, you know, incentive, you know, incentivising volume, you know, as opposed to promoting efficiency. One of the principles of revenue collection in public finance is that the cost of collection should be low relative to the amount being collected, he said.
On the way forward, Uwaleke recommended breaking away from conventional percentage-based deductions to a budget-based approach.
“My recommendation is reduce the cost and also consider going forward, let’s all of that be, you know, budget-based, not payment as a percentage of revenue, the ad valorem type,” he noted.
Kenneth Afor,
