Enabling business in Nigeria by reforming the tax system and promoting investment
Growth and Employment in States (GEMS 3)
In Nigeria the level of corruption, bribery and dishonesty in the tax system has meant that few people pay the tax they owe, as there is little belief they will see it invested in projects benefiting them. The country ranks 139th out of 176 on the Transparency Initiative’s 2012 Corruption Perception Index and this international perception of the country has contributed to low rates of investment. This has meant that much of the oil wealth that makes up 80% of government revenue has been siphoned off by officials, doing little to improve the lives of the 121 million people in Nigeria who live below the poverty line.
In 2011, we were asked by the Department for International Development to work with private and public stakeholders at national, state and local government level in the Growth and Employment in States (GEMS 3) project. This seeks to build a systematic framework to make it easier to do business in Nigeria, offering lasting improvements in economic opportunities for the poor, and particularly for women. Beneath all our activities is a commitment to women’s economic empowerment. We have partnered with women’s organisations in all our focal states, embedding the concept in state programme strategies with the engagement of female entrepreneurs.
GEMS 3 implements investment, land and tax interventions, starting at the Federal level and in our four focal states of Cross River, Kaduna, Kano and Lagos. In July 2013, we began to tackle other states, first in Jigawa and Kogi with a further six states to be added by January 2015.
Our tax interventions focus on tax harmonisation, reducing and formalising the number of taxes, charges and levies affecting small businesses and professionalising tax collection. We have also produced a toolkit including a draft harmonised tax law, sensitisation materials, and training packages for revenue collection officers. We facilitated the signing of an agreement between Fagge LGA and Kano Traders Union (KATSU) on implementing tax for service projects, bringing an increase in payment compliance and raising awareness of illegal taxes, another significant problem for the country. The Executive Secretary of KATSU commented that “we did not know that certain taxes were illegal until GEMS3 came into the market”.
We identified Nigeria’s lack of land title security as a major constraint to doing business and as a result, have partnered with the Presidential Technical Committee on Land Reform. We devised policy reforms to make land registration simpler and more transparent though the introduction of Systematic Land Titling and Registration (SLTR), aiming to increase levels of investment. This is an innovative approach which Austen Okumo, the GEMS3 Senior Land Adviser, described as “ground-breaking” because “men as well as women are now able to obtain Certificates of Occupancy which can be used to better their livelihoods”.
From April 2013, 5,700 full time jobs have been generated and over 21,000 enterprises have benefited from £2.3 million in additional income or savings. By 2017, we aim to have increased the incomes of more than a million people including 375,000 women, increased income levels by £248 million (£92 million for women), and helped create more than 50,000 new full time positions (18,763 for women).