This is a special period when the word ‘Sacrifice’ will resound among the Muslim faithful around the globe. They will be encouraged to make sacrifices, an act of giving up something for the good of another. It is not only Muslims who should make this sacrifice. After all, Mahatma Gandhi, the father of modern India, has been quoted as saying that “there is no religion without sacrifice”.
Nigeria today needs men and women of all faiths who will sacrifice one thing or the other; one possession or the other for the country to weather the current storms that threaten to torpedo the nation’s economic ship.
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Nigeria is in need of people who will give up something they are holding to so that other people’s present condition can improve. The question now is: who will start it? From whose table will it start? Who has the propensity to let go of something for the greater good of society?
That is an opportunity cost, by which economists mean something that an economic agent gives up so that he or she can get some quantity of another thing that is of value. Three principles will drive this process. The first is the principle of trade-off or opportunity cost. It says that people give up something in order to get more of another thing, the thing given up being the cost of the item obtained in turn.
The second is the principle of rationality, which says that every economic agent is a rational person. Both are part of the 10 Principles of Economics as enunciated by Greg Mankiw, the Harvard Professor of Economics. These principles present a succinct encapsulation of the factors that underlie the entire gamut of economic behaviour, and they apply in any economy, irrespective of its level of development.
Mankiw says that a rational person seeks to maximize his values or utility. Being rational includes the quality of being able to know something that one likes or wants and being able to distinguish it from others. Therefore, a rational person naturally would want more of a good thing than less of it. He or she also wants less of a bad thing than more of it.
The third principle that will or should drive this process is the concept of enlightened self-interest. Only a Sampson whose eyes have been gored by his enemies, and who therefore places a value of zero on his life would want to pull the house down on himself and his enemies. In normal situations, individuals take action to preserve their interests. Now, if one’s interests and others’ are tied together it becomes incumbent on the individual to seek to protect everyone’s interest. That is the principle upon which Nigerians need to act now so that together they can work for the common good of everyone.
In this postulation, the item of value that the rational individual is supposed to be evaluating here is social and economic stability, two variables that are currently threatened in the country. There is so much angst in the land, which is being driven largely by the widening gulf between those who have and those who do not have; between the poor and the rich.
As this column has pointed out recently, more Nigerians have fallen into the trap called absolute poverty, for no fault of theirs. Add to that, the rising level of food insecurity and hunger in the country, a combination that is sure to breed social unrest across the land, if not checked. The trend portends danger ahead.
Apart from perhaps a negligible few, even among the rich, most Nigerians want a stable polity that can guarantee their future existence in this land. The question becomes whether and to what extent they are ready to make the sacrifice or trade-off certain things to ensure the sustainability of the economy.
Let’s look at the much-talked-about dismal performance of the Nigerian economy in the area of tax revenue, which today is commonly measured by the tax/GDP ratio. Why is the tax/GDP ratio so low in Nigeria? The government through its numerous agencies has said that tax revenue, a percentage to the value of goods and services is so low, in the region of about six to eight per cent in the country.
Across Africa, this ratio ranges from as low as 6.7 per cent in Ethiopia to as high as 33.6 per cent in Lesotho, the small Kingdom in Southern Africa. In between, there are figures that also indicate that Nigeria’s value is really low: Botswana 22.1 per cent; Rwanda 14.6 per cent South Africa, 26.7 per cent, Ghana, 11.9 per cent.
Why is there such a disparity between Nigeria and its African peers? Why are the citizens, including corporate citizens, getting reluctant to pay taxes? This has sometimes been put in the context of what the government has done with the taxes paid by the people.
Payment of taxes by the citizens is a duty that must be discharged by all because it is one side of the equation of public finance. It is a sacrifice. At the same time, it places a burden on the leaders to show that every kobo or naira collected as tax is accounted for. This is the second side of the equation, and the best way to demonstrate that is by putting into maximum use all tax revenues to the benefit of every citizen.
But in assessing the effective tax rate of the average, low-income, or middle-class Nigerians vis-à-vis their counterparts in other African countries, a number of factors have to be taken into consideration. While it could be argued that the rate is low in Nigeria, the circumstances in the country show that this is actually not the case. The Nigerian has to provide most of the public goods that his counterpart in, say Botswana, takes for granted: security, light, water, health services, education, etc.
Another critical area that must be changed is the bogus package of the political gladiators and the wastage in government. The starting point for this must be the National Assembly, both chambers. A situation where a senator receives in a year the following: salary, N9,000,000; running allowance N163,000,000; Constituency projects, N200,000,000, making a total of N372,000,000, is unacceptable.
In addition, the senator receives in a year the following: severance gratuity, N7.43m; furniture allowance, N7.45m; motor vehicle allowance, N9.94m, making a total of N24.82m.
These are not earned salaries. They breed discontent among the populace. They are allocated figures that have no bearing on the work done or being done. These figures are being allocated to lawmakers where people are daily sliding into poverty in their numbers while the legislation being done seems incapable of addressing the hurt of the poor.
Based on the principles described earlier here, the senators and all others in the government must realise that it is better for them to give up a little now to secure a stable future. Doing so will purchase for them a stable future at low prices. Holding unto the currently allocated remunerations is an open invitation to protests.