The place of CSOs in subnational IGR expansion 

Civil society organisations (CSOs) in Nigeria have earned a long-standing reputation for successfully inter-mediating policymakers and implementers on the one hand and the citizens on the other with fruitful outcomes. Civil society groups belong to the class of associations neither owned by the government nor the family. They are also primarily nonprofit-focused. Some of the group’s members are faith-based organisations, labour unions, professional associations, academia, NGOs, and community-based associations. While each CSO, on average, has a unique focus, they are most interested in achieving a good society. Essentially, their primary concern is ensuring that citizens are satisfied and that government officials and politicians uphold their constitutional obligations. Within the public financial management space, myriads of such organisations operate as NGOs, sustaining moderate pressure on government officials to imbibe sound practices that strengthen citizens’ trust in the government and elicit their compliance with improving the state’s revenue mobilisation efforts. In a more general sense, it may be correct to assert that in the absence of societal pressure and protestation evocable, through CSOs, the executive arm of the government can effortlessly overrun the rest of the society, sidelining the judiciary and the legislature. CSOs may be considered the fourth arm of government sustaining its relevance with veiled threats of legal actions or the stimulation of an uprising such as the #endSARS protest.

Good governance is majorly achievable with adequate revenue. That is why concerted efforts at continuous expansion in the internally generated revenues of the government are critical for meeting growing needs for citizens’ well-being. Achieving this revenue buoyancy is not necessarily by imposing additional tax burdens or increasing the number of taxable assets. While they all contribute to satisfying reasonable governance expectations, one crucial factor ignored is the effect of the government’s previous efforts at enhancing citizens’ welfare. When the government builds a new market to facilitate exchange, productivity, decision-making, and convenience, it also creates an additional base for future revenue harvesting. Traders, buyers, commuters, and virtually all taxable actors will contribute to the income of the state or local government by participating in the market. Such revenue prospects keep expanding by the degree to which the government reinvests mobilised revenue to provide the state with relevant social and physical infrastructure. For instance, to keep the streets clean, citizens pay fees for environmental cleanliness. Likewise, to receive good public education, citizens pay school fees. All things being equal, citizens contribute to governments’ revenue primarily to purchase well-being as espoused in the theoretical social contract. In essence, therefore, the idea of accountability and transparency is to gauge the extent to which those in political authority utilise these revenues to provide commensurate welfare for the citizens who contribute to it.

Quite often, however, governments miss the mark and fail to provide corresponding welfare to the citizens relative to the revenue they currently or can potentially mobilise. For instance, subnational governments may need help to fund their budgets successfully despite grounding their appropriations on realistic projections. On the other hand, gaps may arise from the pervasive fiscal imprudence of those in authority. Simple arithmetic summing up of all the revenue that most state governments have collected in the past two decades and subtracting the total genuine recurrent spending and the value of all capital assets provided will show a considerable gap. This gap typically comprises stolen, misappropriated and simply unaccounted-for funds. The compounded benefits that would have resulted from prudent spending on these poorly utilised revenues are also another huge loss. As explained already, well-managed assets resulting from prudent government spending today will likely continue to create future benefits and more opportunities for more income that are re-investable in creating additional future benefits. That is the notion of a virtuous cycle of government spending. These concretize into two critical factors: the adequacy of mobilised revenue and the fiscal discipline for high-quality budgetary expenditures.

Further disaggregation of these two factors reveals four areas where most subnational governments need to catch up. First is the nonexistent or poorly crafted IGR expansion programme. It is indisputable that effectively implementing well-thought-out strategies always delivers good-quality outcomes. High-performing corporate organisations usually derive their guidance from properly formulated and well-executed strategies. Unfortunately, that is rarely the case with revenue-generating and collecting agencies of most subnational governments in Nigeria. They rarely embark on solid peer assessments, interrogating their revenue-maximising potential and why their routine approaches might not deliver the most optimal results. The second is accountability, transparency, and trust concerns. A substantial percentage of the Nigerian population does not trust their governments primarily because, on average, political officeholders and civil servants still do not measure up to public expectations in accountability and transparency. Citizens’ trust is a significant factor in the decision to comply with tax payment obligations. The Nigerian Fiscal Responsibility Commission, the State’s Fiscal Transparency, Accountability and Sustainability (SFTAS), the Nigerian Governor’s Forum, and several other NGOs are at the forefront of interventions to improve this situation. The third factor is minimal public education and effective communication on government revenue mobilisation and significant stakeholder collaborations. Citizens have a right to know why they should pay taxes, the government’s use of their previously paid taxes, various tax rates and taxable assets and, in fact, all communications that would convince them to continue complying. These communications must be easily digestible and impactful. The fourth factor is the limited technology adaptation. Digitalization and process automation within revenue-collecting agencies result in enhanced convenience for those paying, reduced compliance costs, reduced revenue leakages, reduced collection costs, and increased collectible revenue. But most subnational governments are pretty slow in fully digitising their processes.

In its February 13 report, the BusinessDay newspaper noted that 31 governors piled up N4.8 trillion debt on their successors. Most governors may be handing over to new ones after the March 11 election or a few months later. Without question, state governments’ long-running low levels of internally generated revenue are at the heart of this high level of indebtedness as they have to look for additional sources to finance their operations. History demonstrates that, save for the utilisation of the borrowed money on initiatives and programmes that can repay them, the continuous accumulation of such large public debts is not the answer. Unfortunately, most governments need to perform better in selecting and managing revenue and profit-generating projects. Some merely set up state-owned enterprises as conduit pipes for syphoning public funds. Here is where the CSOs need to come in. They have to sensitise policymakers on why and how borrowing that does not address critical priority needs and financing projects or programmes that cannot conveniently repay the debt only creates a severe burden for the citizens. First, the citizens do not derive creditable value from the project or programmes as they do not fall within their priority lists. Second, whatever placebo benefit they offer fizzles out to expose them to an additional tax burden for repaying the debts. Most analysts agree that the tax burden indirectly correlates with citizens’ compliance with tax payments. Third, even when the debt in question seemingly meets these two conditions, they do not satisfy, except where their costs are free of the traditional roguish price padding and over-invoicing. Fourth, CSOs need to work with incoming state governors to assist them in doing better in revenue generation.

But it is not only in debt management that CSOs need to intervene. There are at least four fundamental areas of intervention that would be helpful to state governments in shoring up their internally generated revenue. The first is capacity building. While states such as Lagos, Ogun, and Sokoto prioritise capacity building within the Internal Revenue Service, more than 70 percent of revenue-generating and collecting agencies of subnational governments do not place a paramount premium on training their workforce. This scarcity of adequately trained personnel affects the capacity for well-coordinated and impactful domestic revenue generation. For instance, an apposite ability is critical for designing and effectively implementing a sound IGR expansion strategy and compliance improvement programmes. CSOs can help support the workforce’s capacity in the state and local governments’ revenue collection institutions. Secondly, to further build the confidence and trust of the citizens in the government, CSOs should always devote a significant amount of time to interrogating the financial records of subnational governments and communicating the outcomes to the public thoroughly and consistently. They also need to engage with the government in discussing their observations where necessary. The third area is facilitating the domestic revenue mobilisation of the government through public tax and citizenship education.

Providing support enabling state and local government legislatures to better appreciate how to work with the executive arm in IGR expansion is a critical role of CSOs. Because without the legislature, there is no legally binding tax policy, legislators need to have a solid grounding on issues around domestic revenue mobilisation. Aside from deepening their understanding of working harmoniously with the executive arm, they also need to know when and how to call the latter to order when they overstep their bounds. Historically, Nigeria’s legislature-executive relations have been more of a principal-agent relationship where the executive is the principal. In practice, the legislative chamber is typically an extension of the office of the executive governor, who merely rubber-stamps the propositions of the latter. Therefore, CSOs’ assistance in supporting subnational government legislatures to realise and live up to their constitutional calling would always be helpful.

Finally, an operative CSO community will typically act as the fourth arm of the government, albeit informally. Unlike legislators, democratically elected to represent the citizens, CSOs volunteer their time and efforts to push for and protect the well-being of society. Because the continuous expansion of subnational governments’ internally generated revenue and their prudent utilisation will naturally result in such expected well-being outcomes, the role of CSOs in the process is indispensable. They can intervene in at least five ways to positively affect the state’s revenue performance. These include capacity building, particularly for strengthening revenue collection institutions of states and local governments, deeply and objectively interrogating the financial records of subnational governments as regularly as possible and communicating the same to the legislature and citizens for informed action. Their involvement and promotion of public domestic revenue mobilisation education and the regular engagement of critical stakeholders are also indispensable.

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