How the IGR expansion process addresses insecurity

Crime is a major problem in Nigeria, with the current common issues being insurgency, banditry, kidnapping, and communal clashes. Devastating impacts have been the loss of human lives and property and the threat to food access and availability. Nigeria Security Tracker reported 17,285 civilian deaths between May 2015 and March 2022 because of insecurity. Nigeria had the second-largest number of terrorism-related deaths globally in 2019. Again, Reuters reported on December 15, 2020, that the Gulf of Guinea now accounts for 95 percent of all global maritime kidnappings, and Nigeria is the country most affected by this trend. A recent UNICEF press release also noted persistent violence in the northeastern states of Borno, Adamawa, and Yobe and armed banditry and kidnapping affecting food access in other states, putting 25 million Nigerians at high risk of food insecurity in 2023. In the same vein, each of the five southeast states loses about N1 billion of revenue annually due to the IPOB-imposed sit-at-home. According to unofficial estimates, between 2015 and 2022, Nigerian businesses and commercial assets lost due to escalating levels of insecurity were between N2 billion and N10 billion. Addressing these security challenges requires a comprehensive approach. How can the subnational government’s efforts to grow its internally generated revenue (IGR) lead to a reduction in insecurity in Nigeria?

Undeniably, many Nigerian subnational governments are working to increase their domestic resource mobilization systems to build institutions and develop capacities for public service delivery. Governments rely on revenue generation to fight insecurity, which, when prolonged, substantially destroys part of the tax base and reduces government revenue generation. Some ways in which IGR growth can positively influence security include increased budgetary allocation to security, job creation and the opening of economic opportunities, infrastructure development, social welfare programmes, enhanced surveillance and intelligence gathering, and capacity building for security personnel. The expenditure, rather than the IGR effect, makes this possible. Properly allocating revenue towards specific areas may likely result in such positive outcomes, no matter where the revenue came from. However, it is more gratifying to discover that the process of IGR expansion may significantly result in the minimization of insecurity. Let us consider, for instance, the building of citizens’ trust in government as fundamental to facilitating compliance with tax payments.

Building citizens’ trust in government is crucial to reducing insecurity in Nigeria. First, building citizens’ trust in government means invariably making efforts to elicit their cooperation. Such cooperation, when successfully received, makes it easier for security forces to obtain information helpful in preventing or solving crime. Examples include support from local communities in identifying and reporting violent actors. Secondly, with enhanced citizens’ trust in the eventual cooperation, subnational governments are more likely to receive support for the security measures put in place. The effect is that they are most likely to work with the authorities to maintain peace and stability. This perspective speaks more to the sustainability of security gains, as they may not be sustained by low levels of citizens’ trust. Thirdly, good governance, such as the provision of essential services addressing the needs of the citizens partially underscores citizens’ trust. It also makes the citizens trust the government and cooperate with its security forces. Fourthly, citizens know that corruption fuels insecurity and criminality by sparking political violence. Corruption works equally against successful IGR expansion. Therefore, efforts to eliminate the corruption culture also enhance citizens’ trust and minimise the resultant insecurity and crime.

Again, strengthening the tax administrations of subnational governments in Nigeria can help reduce insecurity by improving revenue mobilisation, reducing incentives for fiscal indiscipline, increasing accountability, and improving capacity for tax collection. By improving revenue mobilisation efforts, subnational governments increase the number of monetary resources available to fund security measures, such as hiring more police officers or investing in surveillance technology. Reducing the incentives for fiscal indiscipline helps subnational governments ensure that funds are used for their intended purposes, such as procuring security containment infrastructure, rather than being diverted for other purposes. In turn, it elevates the level of trust that the citizens have in them. Increased accountability also makes it easier to track how funds are being used and to hold officials accountable for any misuse of funds. These minimise corruption and loss of revenue while enhancing good governance, citizens’ trust, and compliance.

Furthermore, as part of the steps in IGR expansion, subnational governments embark on substantial diversification of their revenue sources beyond traditional sectors. Such broadening of their revenue base helps them reduce vulnerability to fluctuations in a single industry and ensure more stable income streams. But in turn, this strategy has a massive impact on the reduction of crimes and insecurity. By embracing a multi-sector revenue diversification approach, subnational governments stimulate economic growth, create job opportunities, and alleviate poverty. With more investments, communities’ access to education, healthcare and living standards improve, they potentially weaken the allure of criminal activities driven by desperation. Moreover, revenue diversification reduces the vulnerability to corruption and bribery associated with resource dependence, enabling governments to channel funds into law enforcement, crime prevention and community policing initiatives. As subnational governments enhance their capacity to provide essential services and promote social cohesion, the foundation for crime reduction and improved security becomes more robust.

A major problem in traditional, paper-based tax collection processes is the potential for corruption and bribery. Digitalization helps reduce human interaction and opportunities for under-the-table dealings, making the process more transparent and accountable. Automated systems provide a transparent and traceable record of revenue collection and allocation. It also allows tax authorities to analyse data more effectively, identify patterns and trends, and focus on high-risk areas, potentially curbing illegal activities that often thrive in the shadows. Digitalization facilitates the more effective sharing of data among various government agencies. This collaboration helps identify connections between tax evasion, money laundering, and other criminal activities. By facilitating financial inclusion, digital systems provide an avenue for bringing more individuals and businesses into the formal economy. This leads to increased economic opportunities and a reduction in the desperation that sometimes leads to criminal activities. Digital systems also allow for real-time reporting and auditing of tax transactions, making it harder for individuals and businesses to manipulate records or hide assets. In general, while digitalization can contribute significantly to reducing crime and insecurity, it is not a standalone solution. It needs to be accompanied by effective governance, legal frameworks, cybersecurity measures, and ongoing efforts to build public trust in the tax system and government institutions.

Taxpayer education is also a strategic pillar of IGR expansion and plays a crucial role in reducing crime and insecurity within a society. As citizens become more educated about the financial system, tax regulations, and their responsibilities, several positive outcomes emerge that contribute to a safer and more secure environment. First, taxpayer education fosters transparency and accountability. When individuals understand the importance of paying taxes and how their contributions fund public services, they are more likely to comply willingly. This reduces the incentive for tax evasion and the associated criminal activities that often accompany it. Moreover, a well-informed citizenry can actively engage in holding government institutions accountable for the allocation and utilisation of tax revenues, curbing corruption and misappropriation. Secondly, taxpayer education aids in building social cohesion. When citizens perceive that their fellow community members are fulfilling their fiscal responsibilities, a sense of fairness prevails. This solidarity diminishes resentment and alienation, mitigating the factors that often contribute to criminal behaviour. Moreover, increased revenue from proper tax collection enables governments to invest in social programmes that address the root causes of crime, such as poverty and a lack of access to education.

The utilisation of Tax Identification Numbers (TIN) holds remarkable potential for expanding the internally generated revenues of subnational governments and also reducing crime and enhancing security. TINs are unique identifiers assigned to individuals and entities for tax purposes, facilitating efficient tax administration and financial tracking. This practice yields several benefits that contribute to a safer and more secure environment. First, TINs enable improved transparency and accountability in financial transactions. As individuals and businesses are required to link their TINs to various financial activities, such as bank accounts and property transactions, there is a higher degree of traceability. This discourages illicit financial activities such as money laundering, tax evasion, and fraud. The accountability established through TIN usage deters criminals from exploiting financial systems for their unlawful gains. Secondly, TINs bolster the accuracy of financial information. By linking transactions to specific individuals, the chances of concealing illegal activities are diminished. This assists law enforcement agencies in detecting and preventing criminal actions such as identity theft, embezzlement, and fraudulent financial schemes. The enhanced accuracy of financial records simplifies investigations and ensures that criminals are held accountable for their actions. Furthermore, the implementation of TINs fosters cooperation between governmental bodies, financial institutions, and law enforcement agencies. This collaborative approach facilitates the sharing of information and intelligence, strengthening the overall effort to combat crime. The timely exchange of data enables authorities to identify suspicious patterns and take proactive measures to prevent criminal activities before they escalate.

Finally, reducing crime and insecurity in Nigeria hinges on a multifaceted approach that encompasses several crucial elements, including the IGR expansion process. First and foremost, building citizens’ trust in government institutions is paramount. When people believe in the transparency and efficacy of governance, they are more likely to support law enforcement efforts and cooperate in crime prevention. Strengthening the tax administration is equally vital. A well-organised and efficient tax system not only bolsters revenue collection but also ensures that funds are allocated to essential services and security initiatives. Diversifying revenue sources increases financial stability, enabling consistent investment in law enforcement and community development. Digitalization plays a pivotal role in enhancing transparency and reducing corruption. Modernising financial systems and record-keeping minimises opportunities for financial misconduct and money laundering. Simultaneously, taxpayer education empowers citizens to understand their role in funding public services, reducing tax evasion, and fostering compliance. The deployment of Tax Identification Numbers (TIN) aids in tracking financial activities, discouraging illicit transactions and fraud. A comprehensive database of financial interactions strengthens accountability and helps law enforcement agencies detect and prevent criminal activity.