TAXATION AS AN ALTERNATIVE TO DWINDLING OIL REVENUE IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria is not currently experiencing the best of times. The country is currently facing the consequences of diminishing earnings from the crude oil and gas sector, which now accounts for approximately 95 cent of total revenue. The falling price of crude on the global market has facilitated the Naira's devaluation and exacerbated inflation. Manufacturing and other productive sectors have been hurt the hardest because the country is heavily reliant on imports, making it incredibly difficult to obtain raw materials, especially now that the central bank has stopped its auction market window. The dollar is expensive to buy in the interbank window and on the black market. More concerning was the necessity for the government to rethink its 2015 budgetary policy after lowering the oil benchmark in the 2015 budget from $120 to $75, and now to $53. The budget review's implications may not be clear right now (Vanguard, 2015). It may result in a reduction in capital and recurring spending. That alone can lead to a decline in the amount of money in circulation. Given what this means for the country if this trend continues unabated, experts have urged the government not to give up but to look into other potential sources of money through economic diversification (Dike, 2020). While some urged the government to shift its priority to agriculture, others suggested that the government investigate the vast mineral riches for an alternate source of income. However, a few others believe Nigeria, like many other sophisticated countries, can rely on tax revenue to survive. However, this study looks at taxation as a potential solution to Nigeria's diminishing oil revenues. Taxation is a mechanism by which the government generates revenue in order to provide social services to the citizens (Okauru, 2021). Global taxation is based on reciprocity (Okauru, 2021). While the government has a duty to empower residents by providing jobs, infrastructure, and other development initiatives, citizens are typically expected to reciprocate by fulfilling their own commitments, the most important of which is paying taxes (Okauru, 2021). The state (government) frequently recycles revenue from people's taxes to provide basic services such as water, roads, power, and schools (Okauru, 2021). Given the current circumstances in Nigeria, administrations at all levels must raise the bar by embarking on an aggressive tax push, despite the shrinking income profile caused by the drop in oil prices (Dike, 2020). As a result, Nigerians must accept their current circumstances. Taxes have several forms, including personal income tax, value-added tax, and corporate income tax, among others. To close the growing revenue gap, the government was forced to engage in aggressive taxation, which is the most widely recognised and feasible method of raising cash for social services around the world. According to the Vanguard of December 15th, 2015, revenue accruable from value-added tax from January to June 2015 was approximately N376 billion, but this figure has doubled from July to December. The rationale, of course, is the Federal Government's goal to diversify revenue streams. With robust tax policies and enforcement, there is no doubt that Nigeria can endure the shocks of oil market volatility. This means that the government will have more revenue to meet the needs of Nigerians. Nigerians have never had a better opportunity to embrace the tax system than now. Nigerians can participate in the contributing social compact by paying taxes on a regular basis.
1.2 STATEMENT OF THE PROBLEM
According to reports, Nigeria has lost its position as the leading supplier of oil to the United States of America. In order to stay afloat in the face of dwindling oil revenue, the Nigerian government must diversify its revenue base through taxation. However, there is a need to harmonise the tax system and ensure collaboration among government tax authorities, professional tax institutes, and consultants. The government must shift its focus away from oil and towards the development of other revenue streams, particularly non-oil exports, in order to fund domestic revenue generation through taxes. To achieve long-term development through taxation, the institutional framework for tax processing and enforcement must be reliable. However, this study looks at taxation as a potential solution to Nigeria's diminishing oil revenues.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
To examine taxation as an alternative to dwindling oil revenue in Nigeria.
To examine the effect of taxation on the taxation economy and development in general.
To examine the effectiveness of the institutional framework for the collection and enforcement of tax duties.
1.4 RESEARCH QUESTIONS
Can taxation serve as an alternative to dwindling oil revenue in Nigeria?
What is the effect of taxation on the taxation economy and development in general?
What is the effectiveness of the institutional framework for the collection and enforcement of tax duties?
1.5 HYPOTHESIS
HO: Taxation cannot serve as an alternative to dwindling oil revenue in Nigeria.
HA: Taxation serves as an alternative to dwindling oil revenue in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
The results from this study will educate the stakeholders saddled with the management of Nigeria’s economy and the general public on how huge revenue capable of replacing oil revenue can be generated through taxation and its effect on national development.
Findings from this study will also educate the government of Nigeria and the general public on the effectiveness of the institutional framework saddled with the responsibility of collection and enforcement of tax duties.
This research will be a contribution to the body of literature in the area of the effect of personality traits on students’ academic performance, thereby constituting the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the process of taxation in Nigeria. It will also cover the activities of the tax collection and enforcement officers.
1.8 LIMITATION OF STUDY
Financial constraint – Insufficient funds tend to impede the efficiency of the researcher in sourcing the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint – The researcher will simultaneously engage in this study with other academic work. This, consequently, will cut down on the time devoted to the research work.
References
Dike, V. (2020). Taxation and economic diversification in Nigeria: Challenges and opportunities. Journal of African Economic Development, 32(2), 103-116.
Okauru, A. (2021). Taxation in Nigeria: A tool for economic recovery and growth. Nigerian Journal of Tax Policy, 28(3), 45-59.
Vanguard. (2015). Nigeria’s oil revenue crisis: Implications for government fiscal policies. Vanguard News. https/www.vanguardngr.com/2015/08/nigerias-oil-revenue-crisis-implications/
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