How Nigeria plans to fund its 5 trillion-naira budget deficit

The Nigerian government is facing the challenge of funding its 13.58 trillion-naira budget for the year, which includes a significant 5 trillion-naira deficit. To address this issue, the government recently approved the Finance Act, which enables the borrowing of funds from unclaimed dividends and dormant bank accounts that have been inactive for six years or more. The aim is to boost revenue and drive economic growth in the country. Taiwo Oyedele, Partner and West Africa Tax Leader at PwC Nigeria, sheds light on Nigeria's strategy to generate revenue and fund its budget deficit. Oyedele emphasizes the importance of proactive measures in addressing Nigeria's budget shortfall, considering the unprecedented magnitude of the deficit in the country's history. He acknowledges the challenges posed by the COVID-19 pandemic, fluctuations in oil prices, and uncertainties surrounding economic recovery. Despite these obstacles, Oyedele highlights some positive aspects of the Finance Act, particularly in supporting small businesses to stimulate employment and inclusive growth. The Act aims to promote economic recovery, generate jobs, and monitor macroeconomic indicators through counter-cyclical fiscal policies. Furthermore, Oyedele commends certain provisions in the Finance Act that seek to ease the burden on small and medium enterprises (SMEs). These include waiving value-added tax (VAT) on domestic flight tickets, removing import duties on aircraft components, and exempting personal income tax on minimum wage earners. Additionally, the Act reduces import duties on vehicles such as tractors, mass transit buses, and cars to enhance transportation and mitigate the impact of subsidy removal. Despite the positive initiatives outlined in the Finance Act, the key to success lies in effective implementation to ensure tangible outcomes for the Nigerian economy. Oyedele suggests that building on the momentum of the previous year's efforts could lead to a more fruitful execution of the Act in 2021. He underscores the importance of engaging stakeholders and fostering wider consultation to garner support and enhance transparency in decision-making. In a bid to diversify funding sources, the government aims to tap into unclaimed dividends and dormant bank accounts to access over 800 billion naira. While this move has sparked debate on the most productive use of private sector resources versus government control, Oyedele emphasizes the need for innovative solutions during these challenging times. He emphasizes the role of wider stakeholder engagement in decision-making processes to ensure inclusivity and public support for government initiatives. As Nigeria navigates its path towards economic recovery and fiscal sustainability, the implementation of strategic measures outlined in the Finance Act will be crucial in shaping the country's financial landscape. With a focus on driving revenue generation, supporting SMEs, and broadening the tax base, Nigeria aims to chart a course towards economic resilience and stability amid global uncertainties.