… As Expert advocates block chain technology to curb tax fraud***
The resort to borrowing by the country to finance virtually everything has become worrisome to many analysts, with the state governments increasing their exposure to the foreign and domestic debt markets at will.
The 36 states of the federation and the Federal Capital Territory increased their domestic debts by N1.64tn in the past three years, available data have shown.
According to statistics obtained from the Debt Management Office, the subnational governments raised their domestic borrowings from N1.71tn as of December 2014 to N3.35tn as of December 2017.
This shows that the subnational governments ramped up their domestic indebtedness by N1.64tn within a period of three years ending December 31, 2017. This shows an increase of 95.9 per cent in the local debts within the three-year period.
Within the same period, the domestic debt of the Federal Government rose from N7.9tn to N12.59tn. This means that within the timeframe, the domestic debt of the Federal Government rose by N4.69tn.
This means that the domestic debt owed by the Federal Government rose in the three-year period by 59.37 per cent.
Although the domestic debt of the Federal Government exceeds that of the subnational governments put together, the states grew their domestic debts by a higher percentage of 95.9 per cent compared to the 59.37 per cent for the central government.
The resort by the various tiers of government across the country to the debt market, experts argued, has had some negative impacts on the economy.
One of such impacts is the rise in interest rates. As a result of increasing rate of borrowing, the country has been spending much on servicing the domestic debts.
In the first nine months of 2017, for instance, the Federal Government spent a total of N1.24tn on domestic debt servicing.
Apart from the sheer increase in the cost of borrowing, another effect of the government’s increased presence in the domestic debt market is the crowding out of the private sector from the market.
The logic is simple: Those with resources are more comfortable lending to the government and its agencies than lending to the private sector, because the possibility of default is higher in the private sector.
The increasing involvement of the state governments in the domestic debt market has also raised concern in some circles. The Social Development Integrated Centre, a coalition of civil society organisations, for instance, has raised the alarm over the states’ increasing debts.
The Head, National Advocacy of the group, Vivian Bellonwu-Okafor, recently asked the National Assembly to come up with a legislation that would stipulate stringent conditions for states to borrow money.
According to the group, it is unpalatable for some states to be paying as much as N500m for debt servicing on a monthly basis.
In the meantime, Mr Abikure Tega, the Chief Executive of Kurecion Foundation, has called for the use of block chain technology to address fraud in the country´s taxation system.
He made the call on Sunday in Abuja at a training session organised by the foundation for some members of the public on the technology and how they could tap into its facilities.
Tega explained that block chain has the capacity to handle trust which makes it a top choice and the easiest and most efficient infrastructure among users of currencies across the world.
According to Tega, a financial advisor and business mentor, the block chain technology, like the internet, has a built-in robustness that stores blocks of information that are identical across its network.
He said the technology could also be used to address the challenges in agriculture, oil sector, pension and all other government processes.
“The block chain technology is essentially a decentralised transaction ledger in which digital information can be distributed and viewed but not copied or altered.
“It can be used to address complexities in governance and administrative systems,’’ he said.
He said that as a distributed database, it lives across a network of computers which makes it exceptionally secure.
Tega said the block chain stores transaction records in groups called blocks, while each block is time-stamped and added to a chain linked to the previous block.
“It is completely transparent and cannot be changed; it can be used to create a decentralised system of payment where the tax payer has an unhindered access to the collector which is the government.
“It enhances revenue collection and removes the challenges of remittances; everything becomes easy when it is brought to the block chain infrastructure,’’ he said.
He described as unfortunate the fact that Nigeria has the lowest Gross Domestic Product (GDP) ratio between tax collection and its GDP across the world, noting that “not everything collected is usually remitted to government.’’
Tega also noted that the block chain technology had already been tested in some African countries, stressing that all that was needed in Nigeria was government´s political will to embrace it.
“We are saying that this technology is already here with us and we can deploy it for our own advantage.
“So I am calling on the government to see the possibilities and to have an open mind to innovation technology.
“In the next 10 years, any system that is not on block chain would be considered a fraud because of its height of transparency and immutability,’’ he said.
Tega said that the block chain infrastructure would also help government to block leakages in the country´s taxation process while enhancing its operations.
Additional report from Punch