Finance minister says there are no plans for mass redundancies but Vat could rise soon

NIGERIA’S finance minister Zainab Ahmed has revealed that the federal government has no plans for mass redundancies or to lay off thousands of public sector workers as part of a programme to reduce expenditure.

Like many countries at the moment, Nigeria is struggling to balance her books in the hostile post-coronavirus era in which public debt has grown, government revenue has dwindled and borrowing has ballooned. It had been feared that Nigeria might have to resort to widespread redundancies to balance her books but speaking on the NTA’s Good Morning Nigeria programme, Mrs Ahmed said this was not necessary.

She denied claims that the government was planning on sacking workers in order to save funds, adding that it would reduce overheads by ensuring that agencies are merged. According to Mrs Ahmed, President Muhammadu Buhari had said repeatedly that no worker would be sacked but the government would encourage people to leave public sector jobs by giving them incentives.

Mrs Ahmed said: “Mr President doesn’t want to disengage staff, which is what he has directed from the beginning of his administration. He also directed that we pay salaries and the federal government has never failed in paying salaries and he said we must always pay pensions.

“So, he has been consistent in those directives and we have followed those directives to the letter. We do hope that at the end of the exercise, some agencies will be merged and it will cut down operational costs.

“Also, we will be able to come up with incentive packages to retrain people and redeploy them in some areas where they are useful. For example, we still have a very high need for teachers so we can retrain people and send them to teach but also incentive packages to exit.”

“That is why it is taking a lot of time because it is not easy to decide on this as everything centres on resources. We need resources and if we had a lot of money, we would just give very beautiful incentive packages and people would exit and go and start their businesses and we would reduce the size of the personnel cost.”

She added that the federal government has plans to increase the rate of value added tax (Vat)  paid by Nigerians from the current 7.5%. About two years ago, the government increased Vat to 7.5% from 5% but Ms Ahmed said that there was a need for the government to generate more tax revenue, so we could see another increase soon.

Mrs Ahmed said: “Our 7.5% Vat is the lowest in Africa and it is about 50% of the sub-Saharan African average which is about 15%, so we are still very low. Yes we have to increase Vat at sometime going forward, as we can’t stay at 7.5% when we want to increase our revenue.

She explained that the government did not make provisions for the increase in the Finance Act 2021 because of the contentions between the federal and state governments on Vat. Mrs Ahmed, however, said that while there were no plans to increase company income tax, the government was considering raising the rates of some levies.

According to Mrs Ahmed, the federal government is seeking to grow its revenue to 15% of the country’s gross domestic product (GDP) to achieve a healthy economy. She added: “We have to grow our revenue from 9%  to 15% of the GDP, which is when things will become healthy for us as a country.”