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Nigerian naira

Africa’s once-booming, biggest economy is in dire need of new revenue streams after the oil price collapse and destruction of Nigeria’s pipelines by militant groups slashed the government’s income and tipped the economy in to recession.

In a rare interview with Reuters, Tunde Fowler, chairman of the Federal Inland Revenue Service (FIRS), said already 700,000 companies that have never paid tax before have been added to the collection register.

FIRS is aiming to raise 4.95tn naira ($15.7bn) in taxes in 2016, compared to 3.73tn naira ($11.8bn) last year. Fowler said a little over 2.3tn naira ($7.3bn) had been collected between January and August, putting the country’s collections so far on par with last year’s.

Value added tax had increased by 25% year on year and corporate income tax remained the same, but petroleum tax collections were set to halve due to low prices and production, he added.

Tougher enforcement and a waiver on interest and penalties for evaders who come forward within 45 days are among the measures he said would be taken to increase collections.

An increase on the 5% VAT rate, one of the lowest in the world, was however not on the cards, he said.

Amid its first recession in 20 years, Nigeria is struggling to fund a record 6.06tn naira ($19.2bn) budget, which tripled capital expenditure and set the tax collection target for FIRS.

The budget was aimed at providing stimulus for a flagging economy and to avert recession. But after the economy shrank for its second quarter in a row this year, observers began questioning the continued viability of the plan.

The budget also anticipates a record 2.2tn naira ($7bn) deficit, equal to more than 30% of the entire budget, to be funded largely by borrowing.

But as the country’s currency devalues, its debt stock in naira terms is growing even faster than planned.

The government has confirmed it will not be selling national assets, as suggested by some within business and politics, but will push ahead with implementing the planned capital projects.

Babatunde Fashola, the Nigerian minister of power, works and housing, said over the weekend that the solution to the recession lay in massive infrastructure investments, which he said have already begun, according to the country’s Guardian.

In July, he said the ministry of works had already spent nearly a quarter of its budget in less than three months.