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Despite having many entrepreneurs who have made their marks in the country and beyond, the recent report that the South East ranks low in Value Added Tax (VAT) collection is lamentable. The inability of the people of the zone to invest at home, growing insecurity, unfriendly tax regime, erratic power supply, high migration rate to other states, infrastructure deficit, among others, are responsible for the zone’s abysmal performance in the collection of VAT.
The situation is also said to have impacted negatively on foreign direct investments in the zone. VAT is a form of tax on finished goods and services along the production chain. It is paid by the end-users. At present, 7.5 per cent is charged as VAT.
According to the Federal Inland Revenue Service (FIRS), the South East, comprising Abia, Anambra, Ebonyi, Enugu, and Imo states collected the lowest figure when compared to other zones in the country. Figures collected within eight months (January-August) last year showed that VAT collected within the zone stood at N21billion; the war-torn North East region N38billion; North West N59billion; South South N126billion; North Central N261billion; and South West N495billion.
A further breakdown of the VAT collected in the South East geopolitical zone indicated that Ebonyi State hauled the highest VAT within the period under review with N7.2billion; followed by Anambra with N5.9billion; Enugu N5.4billion; Abia N2billion; and Imo ranked lowest with N1.94billion. The South East low performance can be linked to the fact that many industries owned by indigenes of the region are located in the South West region, especially Lagos and Ogun states, where they pay their VAT. While we urge South East industrialists to always think home, by investing more in the zone, it is also important that governments in the South East should address squarely the challenges of doing business in the region. Even some of the industries in the South East which ought to improve VAT collection are either moribund or operating far below their capacity.
It is unfortunate that all of this has impacted negatively on the overall performance of the region in VAT collection. For example, a report in 2020 on Foreign Direct Investments (FDI) in Nigeria, estimated at $93.3billion between 2013 and the first quarter (Q3) of 2020, showed that the South East received the least amount of $203.898 million. This represented a paltry 0.22 per cent of the total FDI within the period. This is grossly inadequate considering the fact that the region has a sizeable portion of the nation’s top entrepreneurs.
A breakdown of the investment figures from the National Bureau of Statistics (NBS) revealed that out of $152 million invested in 2013 and $151million in 2014, respectively, Enugu State got the most within the period. Abia had a total of $9.7billion between 2013 and 2014, Anambra $38billion. Imo had less than $10billion while Ebonyi had none. Unfriendly tax regimes, poor quality infrastructure, federal and state government’s flip-flop policies in the South East are responsible for low investment inflows in the region. The political leaders in the zone do little or nothing to attract investments when compared with their counterparts in the South West region.
Comparative figures from the NBS report indicate that South East only outperformed the North East and North West within the same period (2013-2020), with capital importation of $39.4billion (0.04 per cent) and $29.9billion (0.03 per cent), respectively. The South West received the largest, $81.8billion, representing 87.70 per cent of the total FDI, South South $470.6 million (0.50 per cent) and North Central $10.7billion (11.51 per cent). The low investment in the South East during the period obtains due to lack of commitment of the political leaders in the zone to industrialisation as well as poor business environment.
Let the South East governors provide the enabling environment that will make the region an industrial hub. A world bank’s report last year on Ease of Doing Business (EoDB) rated the South East low, citing lack of coordination among the political leaders in the zone, poor infrastructure, multiple taxation, that discourage investments, among other factors. No investor goes to where return on investment is low. Ogun State, according to Manufacturers Association of Nigeria (MAN), has become an industrial hub in the country, almost outpacing Lagos State, because of its conducive business climate. MAN reveals that 74.42 per cent of manufacturers’ investment of N691billion in 2014 went to Ogun State.
The South East should draw investment lessons from Lagos and Ogun states to boost its economy. Improving business environment is key to developing a functional industrial hub. The case of the South East is made worse because most of the industrial layouts that should have served as industrial clusters have been converted to personal estates and hotels. But in spite of the constraints, the Federal Government can change the situation by initiating projects that will promote economic development in the region. Allowing the national gas lines to pass through the region and having steady power supply can boost the economic fortunes of the region.
