Tax reforms’ll ensure economic growth, competitiveness – Oyedele

The Chairman Presidential Fiscal Policy and Tax Reforms, Taiwo Oyedele has said that due to ongoing reforms by the federal government, the country has been able to save between $20-$25 million daily.

Speaking to finance journalists at the Annual General Meeting (AGM) of Finance Correspondents Association of Nigeria (FICAN), Oyedele, further said that the reforms led to stability of the naira.

President Bola Tinubu on assumption of office declared the subsidy gone and stopped multiple exchange rates at the foreign exchange market.

The Tax Committee chairman said the reforms have Slowing inflation in developed markets and rate cuts; declining budget deficit by FG and states; rising revenue, more spending on capex and repayment of Ways & Means financing; rising crude oil and gas price and volume; commencement of local crude oil refining; positive outlooks by rating agencies; capital market performance; and improvement in forex inflow (FPI & remittances).

According to him, the situation cannot be bad in 2025 as it was in 2024. Last year, the naira lost about 40 per cent of its value, with the currency going for as much as N1800 to the dollar. 

He said, “There is no forecast that is expecting Naira to lose 40% this year. In fact, most of the credible forecasts are expecting the Naira to strengthen in 2025, again, that’s because we’re expecting more inflows than outflows. One because we’ve cut down on our consumption of PMS. So the consumption of PMS is down by more than 20, 30 million litres a day. So you’ve taken out pressure of around 20 to $25 million every day from the market. Our production, if you add condensate, is now over 1.8 million barrels. Even according to OPEC, we met our quota for the first time in a number of years. And by the way, volumes are up. Our projection is to get to 2.0 6 million barriers per day if you have condensate. …That is positive for the exchange rate.

“I just thought about the foreign portfolio investors, and I spent time with all the major ones anytime they came. The last one with JP Morgan, and you see that they leave with the excitement is a good place to invest. While we believe that foreign portfolio investment is only short term in nature, you need it to build confidence for FDI. FDI people are very particular about the long term stability of your currency, and you need the FPI to make it stable in the short term. And if you sustain that for a couple of years, the FDI will start coming in. So that’s also positive news.

“Budget deficit is declining. If you look at the federal government budget for 2025, apart from the cost of servicing debts, it is a balanced budget. That’s a huge progress. In 2022 we spent 97% of federal government revenue to service debt, almost the entire revenue of the government. In 2023 it became 74%. This 2024 that just ended now is around 50% or even less. That’s remarkable progress in three years. You know while those reforms are painful? They were very, very necessary.

Oyedele also said that the tax system that the country presently operates is unconducive for growth adding that Nigeria was using archaic laws and ambiguous provisions to drive its tax system.

According to him, there is a need to urgently address multiple taxation and multiplicity of taxing agencies especially as taxing poverty, capital and investments and the high corporate tax burden that is on businesses.

He insisted that the tax reforms when implemented will facilitate economic growth, competitiveness, shared prosperity and revenue mobilisation.

He explained that it would reduce business risks, lower tax burden, and competitive tax regime.

According to him, “it would lead to macroeconomic stability, economic growth, revenue mobilisation, healthy fiscal balance, improved Tax to GDP ratio, revenue mobilisation, enhanced credit rating and lower cost of debt, addressing distortions – incentives regime, free zones, equity and fairness (governments and taxpayers).”

In his presentation partner at SPM Professional, Dr. Paul Alaje, said the tax reforms represent a pivotal effort by the federal government to modernize its tax system, enhance fiscal sustainability, and create a more conducive environment for economic development.

Dr. Alaje noted that over 50 minor taxes will be repealed and remaining taxes merged, with corporate income tax dropping from 30% to 25% in two years. He added that essential items like food, education, healthcare, rent, public transport, and renewable energy will get 0% VAT.

“Businesses will benefit from input VAT credits on their purchases and the removal of minimum tax requirements for companies with low margins or losses, reducing costs and encouraging investment.

“VAT revenue will be shared more fairly by allocating funds based on the actual tax contributions of each state rather than favoring states with many corporate headquarters.

“The creation of a Tax Ombudsman ensures clear, accountable tax rules and protects vulnerable taxpayers.

Alaje further noted that implementation might pose a challenge for authorities as “The ambitious timeline for implementing these reforms, coupled with limited stakeholder engagement, raises concerns about the readiness of businesses and tax authorities to adapt. Insufficient preparation could lead to compliance issues and administrative inefficiencies, undermining the reform’s objectives.”

He however said that the Senate was “addressing these concerns through comprehensive stakeholder consultations and phased implementation strategies is crucial to ensure the reforms achieve their intended economic benefits without unintended adverse effects.”