IN POINT of fact, Lagos State is more than just a state. And that is written without any sense of exaggeration. Lagos is more or less a country. The state can be compared to some countries in Africa, especially along the continent’s west coast. Take a look at the state’s GDP and compare it to Liberia, Sierra Leone and Togo’s figures.
The state’s economic indices completely outclass theirs while competing favourably with even Ghana or Cote D’Ivoire’s. Analogously, the Federal Capital Territory – (not yet recognised as a state) – Abuja – perhaps, with no one noticing – is rapidly morphing, racing up the path that shaped the Lagos’ development trajectory.
The end outcome is for time to reveal. And, it surely will. Comparatively, the other thirty-five states in the Nigerian federation are less than what one would call a state in terms of revenue generation, infrastructural presence and the other state-determinant economics and features, as they are straddled by very weak eco-financial profiles. In fact, their Treasuries are often said to be in chaos, which I think should be some wake-up call to all their stakeholders. For instance, benchmarking the VAT and IGR (largely driven by consumption and the spate of economic engagements) numbers across the states in Nigeria presents another vivid revelation of immense size.
The disparity between Lagos and Abuja’s VAT and IGR figures, on the one hand and the other 35-states’ is frankly too dizzying for comfort and should raise some concern.
Some (constitutional – largely fiscal) arrangements must have led to this. Therefore, truly concerned elected political office holders and economic planners should know it’s time they spoke up.
Their continued silence rewards no one, not even the present benefitting states, especially in the long range. The gap also does not speak in favour of country-wide development, especially when it negates the exact arrangements the nation badly and urgently needs. Of many of the factors driving the unwholesome developmental optics, the structure of the country’s tax (particularly the PAYE system – how this is shared) can be considered to be at the heart of this misnomer.
Nigeria, stakeholder concerns and taxes
Interestingly, Nigeria is a federation of states. Our federating structure is like no other in the world. How most of its holding pillars are defined are not evolving.
They are stuck in their original letters, negatively impacting real development. The Nigerian constitution recognises the clearly inflexible dichotomy between state of origin and state of residence for various reasons.
There is also an aspect of the Nigerian state that is often de-emphasised in discourses even though it’s an integral part of its politico-administrative architecture – the local government.
Every economically engaged Nigerian (especially in the formal sector) is at least a stakeholder in the three politico-administrative jurisdictions of state of residence, state and local government of origin. But of all the three, allegiance is most tightly expressed in one’s state of origin.
How deeply true is this when the PAYE-tax structure favours the state of residence while neglecting his supposed allegiance to his state of origin?
To help the government at each of the levels – federal, state and local – meet with their responsibilities and duties, every working/ earning adult is, amongst others, expected to be tax-responsible as a citizen-stakeholder. Nigeria has adopted the PAYE-tax structure for its workers. Don’t we know that tax is a sine qua non for development?
The existing PAYE-tax architecture is defective. It directs that PAYE-tax should be on the basis of the state of residence (where the typical worker is domiciled). It does not take into consideration the many ‘fates’ of the Nigerian worker outside his state of origin and his stakeholder responsibility bent.
In other words, the PAYE-tax structure demands him to be tax-responsible to a state where he is more or less regarded as a ‘stranger’. That way, he is therefore tax-irresponsible to his state and local government area of origin, where according to the Nigerian constitution he also has some stakes.
The drawbacks of this long-standing arrangement are so easily seen and they are enormous, reflecting in the development hiatus between the two (of Lagos and Abuja) and the rest.
The development gap also comes with its socio-economic challenges if we think in terms of migration. On the other hand, a critical evaluation will also reveal that, like some have argued, Lagos and Abuja’s development is at the price being paid by the other 35-states.
For instance, a Deltan living and working in Abuja can be tax-responsible to the FCT while being tax-irresponsible to Delta State – where he is also a stakeholder (isn’t it wrong to be a stakeholder only on paper?). How this insalubrious tilt has remained the case for too long is what I do not know.
The existing PAYE-tax arrangement completely turns its back on many of our highly engraved and pronounced peculiarities as a nation, which should not be.
A fairer PAYE-TAX structure for Nigeria
It is time everyone – the politicians and economic planners – sat at the roundtable to develop a new and more equitable PAYE-tax sharing arrangement, which must take into account our many oddities as a nation.
Furthermore, it must also align with the stakeholder leanings of the average Nigerian worker, which in the final argument will benefit country-wide development. Argue against this if you can. A stitch, like they say, can actually stop the necessary need for nine.
TONY MONYE
Tony Monye, the publisher of The TMBC Business, Monye, is an economist, who can be reached via tonymonye@yahoo.com
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