1.1 BACKGROUND TO THE STUDY
Nigeria is currently not enjoying the best of times. The country is presently suffering the adverse effects of the dwindling revenue from crude oil and gas sector, which today accounts for about 95 percent of its revenue. The fallen price of crude at the world market has orchestrated the devaluation of the Naira and increased inflation. The manufacturing and other productive sectors are worst hit because, as the country is highly import dependent, they find it extremely difficult to bring in raw materials, especially now that the central bank has closed its auction market window. The dollar is expensive to procure at the inter-bank window and the black market. More worrisome was the need for government to review its 2015 fiscal policy by slashing the benchmark of oil, in the 2015 budget from $120 to $75, and now to $53.
The implication of the budget review may not manifest now (Vanguard, 2015). It may result to a scale down in capital and recurrent spending. That alone can translate to a reduction in money in circulation. Looking at what this portends for the nation should this trend continue unchecked, experts have called on the government not to fold its hands, but to explore other potential sources of revenue through the diversification of the nation’s economy (Dike, 2015). While some urged the government to redirect its focus to the agriculture sector, others asked the government to explore the numerous mineral resources for alternative source of income. Yet, few others said Nigeria, like many other advanced countries, can rely on tax revenue for survival.
However this study is examining taxation as an alternative to the dwindling oil revenue in Nigeria. Taxation is a means of generating revenue by government for the purpose of providing social services to the people (Okauru, 2014). Taxation all over the world is a function of reciprocity (Okauru, 2014). While the government owes it as a duty to empower the citizens by providing jobs, infrastructure and other development projects, the citizens are usually expected to reciprocate by performing their own obligations, principal of which is payment of taxes (Okauru, 2014). Revenue generated from citizen’s taxes is usually recycled by the state (government) in the area of provision of basic amenities such as water, roads, electricity, schools, among others (Okauru, 2014).
The new reality considering the present situation in Nigeria is that governments at all levels have to raise the bar by embarking on an aggressive tax drive, considering the dwindling revenue profile arising from the fall in oil prices (Dike, 2015). Therefore, Nigerians have to come to terms with the present reality. Taxes come in various forms, ranging from personal income tax, value added tax and companies income tax, among others. To bridge the yawning gap in revenue accruals, there arose the need for government to embark on aggressive taxation which is the most recognized and plausible means of generating revenue for social services across the globe.The Vanguard of December 15th, 2015 indicates that revenue accruable from value added tax from March to June 2015 came to about N376 billion, but this figure has doubled since July till December.
The reason of course can be attributed to the Federal Government’s commitment towards diversification of revenue sources. With aggressive tax laws and enforcement, there is no doubt that Nigeria can withstand the shocks of the uncertainties in the oil market. What this means is that there will be more revenue available for the government to cater for the needs of the Nigeria people. This is the best time in our history for Nigerians to embrace the tax system. By this, Nigerians can be involved in the contributory social contract by paying their taxes regularly.
1.2 STATEMENT OF THE PROBLEM
According to reports that Nigeria has lost its position as the lead supplier of oil to the United States of America, there is need for Nigerian government to diversify its revenue base through taxation as the alternative means of revenue generation in order to keep fit in the face of dwindling revenue from oil. However, there is need to harmonize the tax system and ensure collaboration between government tax agencies and professional tax institutes and consultants. Government needs to practically shift attention from oil to development of other revenue sources especially non-oil exports to support internally generate revenue from taxes. The reliability of the institutional framework for tax processing and enforcement must not be questionable to ensure sustainable development through taxation. However, this study is examining taxation as an alternative to dwindling oil revenue in Nigeria.