In January, the Commissioner for Economic Planning and Budget in Lagos, Mr. Sam Egube, during the 2020 budget analysis, announced a grand ambition to increase the state’s monthly internally generated revenue (IGR) from about 35 billion to 73.8 billion Naira.
The internal revenue goal which comes to about N866 billion for the year is expected to partly finance the N1.168 trillion budget the legislature had passed in 2019, which allocated more funds to education and infrastructure development.
The Lagos Internal Revenue Service (LIRS) was tasked with providing N42 billion every month which amounts to about N500 billion – more than half of the N866 billion targeted IGR.
With Lagos being the commercial capital of the country with over 24 million inhabitants and a projected population of 35 million by 2020, the LIRS Chairman, Mr. Ayo Subair, was confident that the target was achievable. His master plan was to increase registered tax-payers from about 4.5 million to 8 million and leverage technology.
Mr. Subair was quoted by ThisDay Newspaper to have said that “there are various strategies and basically we are going to leverage technology. I can assure you that there are no more new taxes coming. Though people confuse levies as tax and complain there is multiple taxations, we won’t come up with taxes.”
“We believe that there are huge revenue-generating opportunities in the informal sector, including real estates, transportation for which Lagos State is known for,” Mr. Sam Egube, the Commissioner for Economic Planning and budget cited by the Guardian.
At the time the Lagos state government announced the grand revenue target to make up part of the finance for the N1.68 trillion budget, COVID-19 had begun spreading in Wuhan, China. By the end of January, it was declared a Public Health Emergency of International Concern after several countries in the world began reporting cases of the virus.
The stringent measures including lockdown and travel restrictions which many governments have imposed to curb the spread of COVID-19 have hit the global economy hard. The International Monetary Fund (IMF), has predicted a 3 percent contraction in the global economy and a recession for sub-Saharan Africa.
The IMF also projected a relapse for Nigeria’s economy which is largely dependent on oil whose global price keeps plunging – threatening the country’s revenue. According to the IMF, Nigeria’s GDP will fall by 3.4% this year. A sharp fall compared to 2.2% growth in 2019, according to Reuters.
In Lagos, the down-turn in the global economy and the lockdown – which has been extended by another two weeks — imposed by President Buhari are not looking good for the state’s 2020 revenue generation ambition.
Individuals and small businesses operating in the informal sector which the Lagos government hopes to target for revenue generation would have closed their businesses for a month by the end of April. The continued spread of the viral infection makes the survival of their businesses uncertain.
A COVID-19 induced recession could trigger loss of jobs, making more people drop out of the tax net and frustrating the LIRS 8 million taxpayers’ target.
With a post-COVID-19 economy to stimulate and several sectors requiring funds, the Lagos government may end up spending more than the revenue it would get in 2020.
Realising the challenges ahead, Mr. Egube said the government was considering re-ordering the 2020 budget. He said, “we have started to put together a post-COVID-19 response and stimulation plan to ensure our business continuity plan is riding after Coronavirus.”
As the epicenter and major frontline in the battle against COVID-19 in Nigeria, many say that when Lagos finishes dealing with the health crisis, it will inevitably confront the economic crisis – one that will test policymakers’ boldness and residents’ longsuffering.
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