Northern Nigeria, a region rich in resources, culture, and potential, must approach the Value-Added Tax (VAT) debate with purpose and clarity. While rejecting certain proposals may seem necessary, it is equally important to do so strategically and with a long-term vision. The north must move beyond emotional appeals and pity narratives to adopt a position of strength and foresight. One critical step in this direction is the formalization of its predominantly informal economy and the mobilization of its indigenous professionals.
*Formalizing the Informal Sector*
The informal sector in Northern Nigeria constitutes a significant portion of its economy. However, its informality limits tax revenue, financial inclusion, and overall economic growth. To address this, the north should take the following actions:
*Introducing Cooperative Societies for Small Businesses*
Establishing cooperatives for traders, artisans, and farmers can create a formal structure for pooling resources, accessing credit, and engaging with government initiatives. These societies can also serve as platforms for enforcing compliance with regulations and tax payments.
*Establishing Industrial Clusters and Business Parks*
Create industrial zones tailored to specific sectors such as agriculture, textiles, and crafts. These parks can provide infrastructure, access to markets, and formal registration for businesses, making operations easier and more accountable.
*Digitising Land Ownership and Property Records*
A clear, accessible land tenure system is critical. Digitizing land ownership records can formalize land-based economic activities, allow individuals to use land as collateral for loans, and increase formal investments in agriculture and housing.
*Streamlining Business Registration Processes*
Simplify and decentralize business registration, making it affordable and accessible to individuals in rural areas. Partnering with local government authorities and traditional rulers can increase participation and legitimacy.
*Developing Robust Transportation and Logistics Systems*
Poor infrastructure often forces businesses to remain informal. Improved transportation networks and organized logistics systems for moving goods can encourage formal operations, especially in the agriculture sector.
*Introducing Tax-Free Zones and Subsidies*
For specific industries and regions, creating tax-free zones or offering temporary tax holidays can encourage informal businesses to register and transition into the formal sector.
*Providing Financial Literacy and Technology Training Programmes*
Educating individuals and small business owners on financial management, digital tools, and the benefits of formal banking can facilitate formalization. Partnering with technology companies to provide free or subsidized tools for small businesses can be impactful.
*Expanding Mobile Money and Digital Banking Services*
Leverage the widespread use of mobile phones to promote mobile banking and digital payment systems. This will not only improve financial inclusion but also create digital footprints for informal businesses, aiding their transition into the formal sector.
Promote financial inclusion by encouraging the unbanked population to access financial services. This involves expanding microfinance institutions, digital payment systems, and community banking tailored to the rural population.
*Introducing Community Tax Ambassadors*
Recruit and train locals as tax ambassadors to educate and engage the community on the importance of formalizing their businesses. This grassroots approach can build trust and bridge the gap between tax authorities and informal operators.
*Creating Public-Private Partnerships (PPPs)*
Collaborate with private companies to formalize supply chains, improve market access, and provide technology for informal businesses. For example, agricultural processors can partner with government agencies to integrate informal farmers into formal supply chains.
*Developing a Formal Insurance Market for the Informal Sector*
Provide accessible and affordable insurance options for small-scale businesses, farmers, and artisans. This will help reduce the risks associated with their operations and encourage them to formalize for better protection.
*Leveraging Traditional Institutions*
Work with traditional rulers, religious leaders, and community influencers to advocate for formalization. Their endorsement can lend credibility and encourage widespread adoption of formal practices.
*Unveiling Market Registration Systems*
Set up formal registration systems for all open markets, ensuring traders and merchants are documented. Market associations can be empowered to enforce compliance and liaise with local tax authorities.
*Implementing Standardized Measurement and Certification Systems*
The need for the introduction of standard measurements and certifications for goods, especially in agriculture and artisanal trades, can not be over-emphasised. This will ensure quality, attract formal buyers, and integrate producers into larger markets.
*Using Technology for Data Collection and Analysis*
Deploy technology to map and track informal businesses and sectors. Real-time data can help policymakers design targeted incentives and programs for formalization.
*Establishing boards*
The establishment of boards will help regulate, promote, and support the agricultural, artisanal, and trading sectors. These boards can ensure price stability, enforce standards, and provide a formal structure for operations.
*Digitising Economic Activities*
Introduce technology-driven solutions for informal traders, farmers, and artisans to track transactions, improve productivity, and formalize their contributions to the economy.
*Implementing Taxpayer Education*
Educate the populace on the benefits of formalization and tax compliance. This will build trust in tax systems and encourage voluntary participation.
Provide Incentives for Formalization: Offer tax holidays, subsidies, or grants to informal businesses that register with tax authorities. This will encourage a shift towards formal economic activities.
*Repositioning the VAT Debate*
The north must also reassess its stance on VAT, particularly on agricultural products. While the argument against VAT on agricultural products often centres on the fear of increased food prices, this concern is debatable. The recent hike in fuel prices has demonstrated a far greater impact on the cost of living than VAT ever could.
Northern Nigeria provides over 80% of the nation’s food security, a contribution valued at approximately ₦4 trillion in VAT on such annually. If VAT on agricultural products is deemed necessary, the North must either demand subsidies to offset the burden or lobby for policies that recognize its unique role in feeding the nation. This approach not only strengthens its position in the debate but also ensures fair compensation for its contributions.
*Harnessing Professional Expertise*
To achieve these goals, the north must harness the expertise of its indigenous sons and daughters in fields such as technology, engineers , accounting, and tax experts and consultants .
Professionals, not politicians, should start leading the charge in re-engineering of tax administration and preparing the region for future challenges. By doing so, Northern Nigeria can modernize its revenue collection systems, reduce corruption, and maximize its economic potential.
The President has graciously supported such with the current regional development commissions that can support such stride’s of visioning and development of the region .
*Moving Beyond Sentiment*
The north must stop framing the VAT issue as anti-north or driven by pity. Such narratives weaken its bargaining power and fuel unnecessary divisions. Instead, the region should focus on showcasing its strengths, proposing innovative solutions, and ensuring that its progressive elements are not hindered by corrupt practices within MDAs or other vested interests indirectly fanning sentiments for such anomalous activities to continue ..
By speaking from a position of strength and implementing structural reforms, Northern Nigeria can transform its economy, secure its future, and set a powerful example for the rest of the nation. This is the time to act with purpose, clarity, and vision.
Let’s support the current reforms of Dr Zacch Adedeji whom should be commended for the current reforms and vision that rather empower than endanger the economy of the north , meaningful and well educated citizens should come together and give a voice to the passage of those great bills. NIGERIA MUST BE GREAT AGAIN
*BUKAR Mohammed* is a public analyst from Kano
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