Jonathan’s 100 days in office: Economic performance below expectations

Posted by admin Latest Politics Tuesday, September 6th, 2011

100 days of president Goodluck Jonathan do not really call for celebration as analysts and stakeholders told BUKKY OLAJIDE and TOYIN WAHEED USAMAH

THE global perception of economy is that its management holds the ace in determining the quality of life of the people. Its effectiveness therefore derives from good governance, with aspirations of majority of the people being the guiding principle for its operation.

With 100 days in office, the administration of the President Goodluck Jonathan is yet to receive the much-expected kudos from the general populace.

The raison d’etre for the low rating has to do with seeming tardiness in grappling with unemployment, security and infrastructure issues, which have together, made the economy to assume a discomforting prostrate posture.

Others pointed out to the Personal Income Tax Bill, which has not been signed by the president, yet, this bill is expected to bring a new lease of life to Nigerian workers.

Stakeholders observed that the oil-rich Nigeria has been hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management and all thse are responsible for the country’ poverty.

Olu Ajayi, a public analyst said Nigeria’s former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95 per cent of foreign exchange earnings and about 80 per cent of budgetary revenues.

And according to him, all other in coming presidents followed their footsteps including the present government.

Ajayi also said that following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms. Nigeria pulled out of its IMF program in April 2002, after failing to meet spending and exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club.

President Jonathan has pledged to continue the economic reforms of his predecessor with emphasis on infrastructure improvements. Infrastructure is the main impediment to growth and in August 2010 Jonathan unveiled a power sector blueprint that includes privatization of the state-run electricity generation and distribution facilities.

According to Ajayi, there is nothing on ground that indicates that infrastructures will be developed fast.

Others who spoke to The Guardian said that Nigerians have always desired collectively a massive revamping of the country’s economy. But the question has always been, who will bring about this desired economic miracle?

They however expressed pessimism over the inauguration of the Economic Management Team, EMT, co-ordinated by Ngozi Okonjo-Iweala, finance minister and former managing director of World Bank saying that the state governors that make up the team have no fiscal prudence.

By making job creation her priority, experts disagreed with her moves saying that her first tenure as minister did not have any impact on the citizens .

Concerning the financial sector, financial experts who spoke to The Guardian, said that in the last two years the financial sector has had more than its fair share of job losses.

According to them, collapsing infrastructures on many fronts and credit squeeze have similarly forced many companies in the industrial sector to sack workers in large numbers. They however opined that if the president can fulfil his promises to form technical and financial partnership with global businesses and organisations in its drive to turn around the economy, the country will benefit

Some financial experts however said that the crisis of the financial sector is nearly over as it appears set for the final resolution of the banking industry crisis, which started about two years ago, with the various approvals given by Securities and Exchange Commission (SEC) and courts to four out of the five rescued banks.

All the banks will be recapitalised by the Asset Management Corporation of Nigeria (AMCON) before the investments by the core/strategic investors.

The CBN and Nigeria Deposit Insurance Corporation (NDIC) had, in July 2009, carried out a special examination of all the 24 banks with aim of assessing their health, with particular focus on liquidity, capital adequacy, risk management and corporate governance practices.

They applauded the fact that AMCON has given these banks a N679 billion lifeline to enable them continue as a going concern.

Concerning the Personal Income Tax Bill, which the president has not signed, the amended Personal Income Tax Bill is expected to usher in a new lease of life for the Nigerian workers because of enhanced allowances, which are embedded in the bill. This would have been a welcome relief from the current state of affairs whereby the allowances are not only unrealistic, but in fact punitive.

According to him, the president is delaying his assent because of probable pressure from the governors, who may be afraid that their Internally Generated Revenue could reduce because of enhanced personal allowances, which are granted therein. Especially when this is viewed in the context of the new minimum wage, which governors are expected to pay.

In terms of the financial sector, Uviase said that the first 100 days have been devoted to ensuring stability of the Financial System. This has been demonstrated by the nationalisation of banks and pursuit of other regulatory activities like the requirements of ten-digit number for corporate bodies to open account, as well as, the promised cash withdrawal limits.

As in going forward, he said, we should expect to have better impact of monetary policies on the economy because of reduction in leakages from the financial system that would accrue from such policies if properly implemented.

His words:’’ I, however, have my serious reservation on the mode of implementation and timing of these policies. For example, I do not believe that the shareholders of the nationalised banks have been allowed to exhaust all the options available to them before government’s decision to wield the big stick.

‘’Also, I hope we have the necessary infrastructure to support the proposed cashless society otherwise we would be putting the cart before the horse.

On October 18, 2004, the Federal Inland Revenue Service (FIRS) made a presentation at an extra-ordinary meeting of the Federal Executive Council (FEC) on the proposed comprehensive reform of the Nigerian Tax System.

Amongst the key recommendations made at the presentation, was the need to carry out a holistic review and amendment of existing tax legislation to bring them in line with existing realities and improve the ability of the FIRS to administer the Nigerian tax system.

Further to the presentation, a Presidential Technical Committee was constituted to draft appropriate bills for legislation into law. The draft bills were presented to the National Economic Council (comprising all the state governors) for deliberation and thereafter to the Federal Executive Council (FEC) for approval.

Subsequent to approval by FEC, the nine proposed bills were presented to the National Assembly in November 2005 as Executive Bills. The bills included “A Bill for an Act to amend the Personal Income Tax Act.”

The National Assembly accepted eight of the proposed bills inclusive of the Personal Income Tax (Amendment) Bill and thereafter held public hearings on the Bills from December 7 to 9, 2005.

However only four of the eight amendment bills were passed by the National Assembly and subsequently assented to by then President Olusegun Obasanjo on April 16, 2007. The PITA Amendment Bill was, however, not one of the bills, which were passed into law in 2007.

The outstanding bills, which had not been passed into law in 2007, were represented to FEC by the Federal Inland Revenue Service through the minister of finance in January, 2010 as Executive Bills. FEC approved the representation of three of the outstanding bills to the National Assembly with the withdrawal of the bill to amend the Petroleum Profit Tax Act (PPTA) on the ground that the entire provisions of the PPTA have been subsumed under the Petroleum Industry Bill (PIB) currently before the National Assembly.

On April 13, 2010 the Presidency represented the three bills to the National Assembly as a joint Executive Bill from the Office of the Attorney General of the Federation, Ministry of Justice and Federal Ministry of Finance. It should be noted that there had previously been a joint retreat organised by the FIRS with the relevant committees of the Senate and House of Representatives, where all the issues surrounding the bills had been thoroughly considered and resolutions reached.

Accordingly all the state governments were aware of the existence and contents of the bill up to the time it was passed by the National Assembly:

With respect to the bill itself, the following details will provide a proper understanding of the basis for and focus of the bill:

to the realities of the Nigerian economy. For example:

The bill, therefore, replaces the previous reliefs and allowances with enhanced consolidated reliefs and allowances, the bill also amended the income tax table and adjusted the applicable income tax band, which was in incremental levels that were not realistic given current income levels, the bill also seeks to bring personal income tax administration up to date with existing realities and simplify compliance by tax payers.

It replaces a complicated system of computing reliefs and allowances under the existing laws with a simpler and more straightforward system. In addition the net effect of the enhanced reliefs and allowances and the amended tax rates is to reduce the overall tax burden on lower income taxpayers.

This is, especially, relevant in view of the newly introduced minimum wage at federal and state level, to enable workers take maximum benefit of the new wage regime, in addition to all this the bill provides greater leverage to tax authorities and the minister of finance in administering the provisions of the Act.

the Tax Appeal Tribunal and empowers the minister of finance to make necessary regulations for giving full effect to the provisions of the Act.

Overall the bill is in line with the provisions of the National Tax Policy that set out government’s intention to implement a shift in focus from direct to indirect taxation, by lowering the overall income tax burden so that there is more disposable income in the economy. It will also make taxation a tool for income redistribution and wealth creation by imposing lower tax burden on low-income earners and higher tax burden on the highest income earners.

-Guardianwp_posts

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