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There is a
dimension to the recent debacle over allocations to sub-national
governments from the Federation Account Allocation Committee (FAAC),
which incidentally appeared to have been missed by most commentators.
Following the incident at the FAAC meeting, when state governments
insisted on a share of the revenue consistent with the provisions of
the 2010 budget, much attention focused on falling crude oil prices in
the international markets, and the need to adjust the basis for the
computation of the revenue projections of the current budget. However,
the fact that estimated revenue from non-oil sources has also been on
the wane, since the beginning of the year is no less a problem for
managers of the economy. There are of course issues concerning the
efficiency of the collecting agencies.

Expanding the tax net

Most Nigerians do
not pay taxes, with the personal income tax reflecting only the
mandatory deductions from the payslips of captive employees in the
atrophying real sector. Along with the successful plugging of leakages
in the revenue collection infrastructure across the economy,
effectively expanding the tax net to include sectors of the economy not
currently covered might do wonders for non-oil sector revenue growth.
On the other hand, small comfort may yet come from the fact that the
non-oil export sector of the nation’s economy is doing quite well. With
demand for primary produce exports rising this year, and the price for
most non-oil commodities firming, the formal non-oil export sector
recorded US$638.43bn in the first quarter of 2010.

Now, falling
non-oil revenue is quite a bother. Solid performance in the non-oil
sector of the economy has been harnessed in defence of official numbers
on the economy’s output growth since the Great Recession set in. From
5.98% in 2008 through 6.66% in 2009, to growth projections of 7.53% in
the current year, the sector, especially agriculture, has allegedly
saved the nation from a recession. Now that the revenue numbers tell a
different story, the concern is that the economy might finally slowdown
this year. Yet, official numbers were always a mystery.

Negative feedback loop

The real sector has
seen its main performance indicators drop-off in the last couple of
years. Even where gross earnings have grown because companies have been
able to squeeze savings out of their operations, profit margins have
either fallen rapidly, or moved laterally. Competition has been a
problem true. Nevertheless, in most cases, pressure has come from the
rising costs of doing business, as both social and physical
infrastructure has deteriorated badly. One consequence of this has been
that company income tax, has dropped off. The take by the customs and
excise department has fared no better in response to the pressure that
businesses are under. Moreover, as businesses have had to retrench
their operations in response to these pressures, they have taken the
knife to personnel costs.

In turn, the sacked
staff phenomenon has played its part in the negative feedback loop.
Final domestic demand has dropped as the number of persons in work
falls off. Expectedly, the takings from personal income tax have
tapered off. In addition, the dynamic of job loss affects folk still in
paid work too. To the extent that it curtails their spending, as
everyone tries to save for the rainy day. At this point, all that
remains of the economy’s rather roseate outlook at the beginning of the
year is that hearty perennial, the agricultural sector. This is the
sector, remember, that accounts for something like 65% of domestic
employment, and around 45% – 50% of GDP. It is the sector much ignored
by government, but whose performance year-in and year-out has saved
government’s blushes.

The only problem is
that we are talking about a sector that, in this country at least, did
not leave the last century. Largely subsistence in its organisation,
its tools would be familiar to those who lived in pre-colonial Nigeria.
A lot of these would have no difficulty with understanding the
susceptibility of the sector to the vagaries of the weather. Because of
these, many able-bodied youth have left our rural areas to go eke out a
living at the margins of the few urban centres that still offer them
hope. Demographers complain that our rural areas are peopled by the
weak and the infirm because of this. But, agriculture remains the
country’s killer application.