The Commission has always been worried over the state of the Nigerian economy, particularly its over-dependence on one resource for its sustenance. The general consensus is that the country needs to reposition its economy as quickly as possible.
“Economic diversification can be explained as deliberate strategy of expanding the production possibility frontier of an economy. This is targeted at increasing the range of productive sectors and activities with the aim of broadening the revenue base of an economy and reducing reliance upon a single or small package of products and services that propels the economy.”
Therefore, improved performance across the broad spectrum of the economy will have the advantage of encouraging the development of raw materials for industrial use and facilitates local content utilization which in turn, expands the channels and windows of employment opportunities.
On Solid Minerals development, available data indicate that there are over 33 qualitative and high revenue yielding solid minerals in commercial quantities scattered in over 450 localities of all the States of the Federation. Despite all this, formal exploitation of these minerals resources has remained scanty with illegal (informal) miners having field days. As at today, Solid Minerals contribute only a paltry sum to the Federation Account.
Understandably, certain constraints such as lack of reliable geological data; problem of land tenure; insecurity of investments; paucity of investible funds/capital and absence of a well-defined legal/fiscal frameworks has continued to beset the sector. However, this sector must be developed in order to improve the volume of accruals into the Federation Account. The strategies which should include; comprehensive geological survey of solid minerals in the country, formalization of activities of illegal miners and use of liberal investor-friendly, legal/fiscal frameworks.
Another important area that plays a critical role in the industrialization process of a nation has been iron and steel sector. Indeed, Nigeria like most other countries around the Globe has for long recognized the decisive role of this material to economic growth. The contribution of this important item is multi-faceted in terms of local content to other areas such as manufacturing, automobile, shipbuilding, oil, construction and railways. In fact, the establishment of Ajaokuta steel company, Delta Steel Complex (Aladja), Osogbo, Jos and Katsina rolling mills indicates the seriousness with which Nigeria took the prospects of steel production.
The RMAFC, acting under its fiscal efficiency mandate, has taken various steps to examine the issue of diversification of the Nigerian economy and its implications for generating more resources for national development. This was done to bring the attention of stakeholders to the negative consequences of our monolithic economy and the urgent need to address the matter. Furthermore, the Commission over the years intensified its efforts in monitoring revenue accruals into the Federation Account. This is in line with section 32 (a) part I, of the Third Schedule of the 1999 Constitution of the Federal Republic of Nigeria which bestows on the Commission the role of monitoring accruals into the Federation Account. The monitoring activities of the Commission have helped in strengthening these revenue agencies and also blocked the hitherto numerous leakages in the system.
FISCAL INCENTIVES FOR ECONOMIC DIVERSIFICATION:
For a successful economic transformation in the country, the Government has embraced opening of the Nigerian economy to attract local and foreign investors in order to achieve economic growth and diversification which has been an on-going exercise, through measures such as privatization, liberalization of trade and exchange rate stability and various other reforms. Other aspects of the reforms include the pursuit of transparency and accountability in governance, increased investment in economic and social infrastructures, poverty reduction and adherence to the rule of law.
Through the Federal Ministry of Finance – the implementing agency for fiscal policy, government can influence economic activity towards meeting national aspirations of rapid economic development. Essentially, it involves the use of taxes and changes in Government expenditure to influence the level of economic activity through closely monitored macroeconomic variables notably nation’s monetary policies, balance of trade, inflation rate and so on.
Several institutional arrangements and incentives have been established for promoting export diversification over the last few years. Among these arrangements are:
- The Export Development Fund;
- Export Expansion Grant;
- Tax relief for any manufacturer who exports at least 50 percent of his turn-over;
- The Manufacture-In-Bond Scheme (MBS), which enables manufacturing exporters to import, free of duty, raw materials for producing export;
- The Duty Drawback Scheme (DDS), which allows for refund of import duty on raw materials used for export manufacturing;
- The Duty Draw Adjustment Scheme Fund, which provides supplementary export subsidy for high costs of production arising from infrastructural inadequacies;
- The Export Credit Guarantee and Insurance Scheme, which guarantees bank loans to exporters, enables exporters to extend credit to their foreign customers and provides exporters with insurance cover against the risk of default by foreign importers;
- The Rediscounting and Refinancing Facility (RRP), which provides pre and post shipment finance in support of non-oil exports;
- The Foreign Input Facility (FIF), which provides exporters with the foreign exchange required for importing essential raw materials used in producing exports and;
- The Stocking Facility (SF), which provides funds for manufacturers of exports to purchase and stock seasonal and scarce raw materials imports.
These incentives are to cushion the effect of high cost of doing business in Nigeria. Others incentives meant to encourage local production and expand the nation’s export potentials are: Currency Retention Scheme, Export License Waiver, Pioneer Status, Tax Relief on profit or Income and the Export Processing Zone/Free Trade zone.
It is obvious from the above that Nigeria has a comprehensive package of export promotion incentives to which exporters should have significantly responded. However, these incentive schemes have been under-funded over the years due to a number of reasons:
- That the three tiers of government depend mostly on revenue from the Federation Account to carry out its constitutional responsibility ; and
- Non-oil revenues have not been fully exploited as a result of low development of the non-oil sector.
Government should lead in the campaign for economic development and both the private sector and the government have a vital role to play in complementing each other to bring about quick economic growth and development. This stance should reshape the economic policy at this period.