‘Kaduna ‘ll be the preferred business destination in Nigeria’

JIMI LAWAL is the Special Adviser and Counselor to Governor Nasir El-Rufai as well as the Chairman of the Economic Development Council of Kaduna State. In this interview, he explains what Government has been doing to improve on the State’s World Bank ranking as the number one sub-national on Ease of Doing Business in Nigeria. […]

JIMI LAWAL is the Special Adviser and Counselor to Governor Nasir El-Rufai as well as the Chairman of the Economic Development Council of Kaduna State.

In this interview, he explains what Government has been doing to improve on the State’s World Bank ranking as the number one sub-national on Ease of Doing Business in Nigeria. In addition, he speaks on how the administration is attracting investors to the State.

Last year, Kaduna State raked in an unprecedented N44 billion as Internally Generated Revenue (IGR), how much is the state targeting this year and what strategies has it put in place to achieve this projected revenue?

We have a few Terms of Reference as our mandate in the Economic Development Council.

One of them is to increase the Internally Generated Revenue (IGR). In the year that end, we generated N44.2 billion; in 2020, our goal is to generate about N50 billion.

But how do you aim to achieve that?

We are applying a combination of factors to achieve the target. Perhaps, the first is our tax base.

Internally Generated Revenue (IGR), for any government is about taxes. We are broadening our tax base.

For instance, when Governor Nasir El-Rufai came into office, we had a tax base of less than 160,000 tax payers, including Pay As You Earn (PAYE); that is state and federal government employees and all Ministries, Departments and Agencies.

Out of that figure, at least 100,000 are state and local government employees. So, that narrow tax base means that out of our population of between nine and 10 million, people are just not paying taxes.

The first thing we are doing is to broaden the tax base to include those who are called self employed, small businesses. They come into the bracket of presumptive taxes that we are trying to implement.

As we do that, we are also pursuing other revenue sources like ground rents and land use charges. These are property-based taxes and all these are what make our taxation progressive.

If you have landed property, it is a privilege and you should be able to pay ground rent to the state. We are being very efficient and more effective in the collection of taxes.

We have not changed the rates, it is just efficiency and effectiveness, by broadening the tax base and the number of people who are paying taxes has increased. We now have well over 500,000 tax payers.

We are going to have two to three million by the time we are done.

No doubt, Covid-19 and the attendant lockdown will affect the projected N50 billion IGR for this year. What measures are being taken to at least mitigate the envisaged fall in revenue?

Yes, the adverse impacts of COVID-19 pandemic would manifest in reduced revenues for all tiers of government worldwide.

In response thereto, the following measures are being taken by Kaduna State Government.

Reduction of expenses, especially overheads, in line with the reduction of revenues; diversification of revenues beyond PAYE to other sectors such as properties and investments; enforcement of collection activities on tax defaulters and blockage of revenue leakage, along with improved efficiency of collection.

Normally, people don’t want to pay taxes, even in developed countries. Did you encounter such resistance in the course of increasing Kaduna State’s tax base and the actual collection of taxes?

Yes, of course. But I don’t agree that in some other countries people do not want to pay tax. Not in all countries.

It is part of the level of growth and development of our country, not just our state.

All developing countries go through this. If look at it, the level of income itself is low. We even have a lot of people without jobs.

So, this is the thing that drags down the amount of taxes that we were able to collect. But for those who are earning revenue and are not paying taxes, they are evading and we are determined to sanction them; to put in enforcement mechanisms to get them to pay.

It is an act of irresponsibility because we are providing services for the residents of Kaduna State and one of the ways to fund those services is through taxes. That is what we are trying to do.

In addition to sanctions and penalties, we are also adopting a mechanism called tax for services.

What that means is that we are issuing Residency Cards and if you live in Kaduna State, you are obliged to have a Resident Card by law. Once you have that card and you want your children or siblings to go to schools or hospitals, you have to have a Tax Clearance Certificate to do so.

We are working hard to the point that we have a data base for residents of the state and virtually everything you do will be linked to the card. The Residency Card will show whether you are up to date with your taxes, before you can enjoy services in the state.

It is easy to collect PAYE because it will be deducted from source. It is a bit difficult to get property owners to pay ground rent. It is very difficult to collect taxes from people in the informal sector. How did you get people in this sector into the tax net?

It is not quite easy to collect even property taxes in this environment, people are just not paying. For instance, on the ground rent and land use charge, we have arrears in the excess of N10 billion. This is so because there had been no enforcement in the past.

We want to begin enforcement. For instance, we have a few companies and banks, I don’t want to mention names, that have a backlog of taxes that they have not paid. We have gone to court and we have gotten judgments against them and we have enforced those judgments by sealing off their properties. That forced them to pay.

We want now to go beyond businesses into personal properties. If you get back to your house and you are not allowed to enter because you have not paid your ground rent, then you will begin to see that we are taking this very seriously.

You know, a whole lot is going on in Kaduna State, from urban renewal and all the good things that we are doing. We have built more schools, employed qualified teachers and built more healthcare centres. Where do we get these resources from? Unless the residents who benefit from these services pay taxes, we are not going anywhere.

Now, back to the question of how do we get the average trader, small business owners to pay taxes?

I had mentioned that in passing before, but let me explain it further. What we are doing under the Presumptive Tax Law, is that we have these small traders as cooperatives or groups. We arrived at the average that we expect these people to make in a month.

Then, we went as low as possible to N1,000; it is okay. You can be selling recharge cards, newspaper and you make N20,000 to N30,000 per month, paying N500 or N1,000 tax is okay. And as you grow your income, we will also increase the tax.

We are going to the markets to register traders in cooperatives and charge the minimum possible. The key is not the amount that is being paid but to get them into the tax net. That was how we broadened the tax base, from 160 to over half a million that we have now.

Like you mentioned, one of the key strategies that was used to increase IGR last year was taking defaulters to court, obtaining judgments and sealing off business premises. Don’t you think that that strategy may cast Kaduna State in the light of not being business-friendly, thereby affecting its Ease of Doing Business World Bank rating?

It is the opposite; keep in mind that we are actively promoting investors to come to Kaduna and we are doing whatever it takes, to make it easy for them to set up businesses in Kaduna State. Right from the incorporation of the companies to business registration, application for land, getting business and building permits, tax clearance.

And they have all been automated to make life easy for them. But if you go beyond that, when you have responsible companies who are paying taxes or responsible individuals who are paying taxes and you have those who are not paying, you are increasing the burden on those who are paying.

So, you are doing a disservice to those who are paying. In effect, you are not encouraging them to set up and grow their businesses, if you have those who are evading taxes without enforcement. So, enforcement is part of getting people to have confidence to do business in the state because they know that the burden of taxation is evenly spread.

That means that you don’t have people who you are unduly ignoring and are enjoying benefits while some others are paying. So, the more money we get in terms of taxation, the better the services that we can provide; which in turn will attract more investors into the state. So, it is a misnomer to say that tax enforcement is discouraging investors. No, it is the other way round. It is actually promoting investments.

About five months ago, senior government officials had dinner with captains of industry and high net worth investors under the auspices of ‘’Plug in Kaduna into the business world’’. What is this ‘plug in’ all about? Can you expatiate on it?

There are three ways to getting businesses to set up within Kaduna State. First, if foreign businesses decide to come to Nigeria, we want them to choose Kaduna State as their number one preference. Those are Green Field businesses. We also have the captive businesses that have already set up in Kaduna.

They are the Brown Fields. You don’t say because you have new businesses coming in, you ignore those that are existing. The existing businesses are employing people. If we can approach them and say, ‘’what can we do to grow your business and employ two or three more people?’’

Keep in mind that when they expand their businesses either because we assist them in getting capital or finding markets for them, their Pay As You Earn (PAYE) will go up. Then, they can pay more taxes to us and we can provide more services. Those who they gave jobs, who were hitherto unemployed, were people who couldn’t add value to our economy.

So, it’s a win-win situation if we reach out to the existing businesses as we actively promote the Green Fields which are coming to Kaduna; we must not must neglect those who are already here.

In which way is Kaduna State leveraging on its comparative advantage on Ginger production? The state produces one of the best species of Ginger in the world, in what way is government trying to boost local production and revenue generation?

I have said that there are three ways by which we can promote the establishment of businesses in Kaduna State to create jobs. I had mentioned the Green Field, when we go after new companies, be they from other parts of Nigeria or any part of the world, as the Governor did.

He led a team to Singapore in 2015, that was how we got Olam, the largest poultry farm in Kaduna and sub-saharan African. We also got a group called African Natural Resources, the Gupta Family, to establish the largest steel plant in Africa, in Kaduna State. In terms of value, it costs less than what it took to establish Ajaokuta. But in terms of output, it is the same; so it is very effective and very efficient. Now, we have the Green Field and the Brown Fields.

The third area is by direct intervention by government. Like what you just mentioned, the Ginger Value Chain is one of the examples of direct intervention. We have a standing committee that we established in the Economic Development Council, that is charged with the responsibility of reaching out to the Ginger farmers and asking them what we can do as a government, to cultivate bigger hectares of land, to improve their yield through improved seedlings, giving them fertilisers and to assure them of market upon harvest, by having a guaranteed minimum price.

We will find off takers who will buy from them at market price and not take advantage of them as small scale farmers. We will also assist them to form cooperatives that will give them the leverage to negotiate better when it comes to buying inputs like fertilizers. We will help them in even getting mechanised farming; that’s the next stage.

Our farmers are still doing subsistence farming but if you can get them to do mechanised farming by using tractors, and by getting good seedlings and fertilisers, their yields will improve. That’s what we are doing. We have a committee charged with that responsibility.

Once we know the output for 2020, we can then plan for 2021, by having more hectres of land cultivated to more farmers, providing extension services support which will produce better yield.

Olam has set shop in Kaduna, there was ground breaking of Damau Milk Factory in January and ten days after, there was another ground breaking for Tomato Jos. One company whose name has disappeared off the investment radar is Vicampro. What happened to the project?

It is like most things in the world; you can’t win them all. You attract ten investors, seven may come through and they will compensate for the two or three that failed to come through. So, Vicampro is one of the two or three that did not come through. What happened was a combination of factors but the most important is lack of financial resources.

We gave them the land and we ended up having to take the land back because they couldn’t raise the money. They were hoping to get some investors from abroad but they were not forthcoming. And without resources, we couldn’t proceed with the project. It was a big project, involving the farming of potatoes, along with processing, that was to involve about 10,000 hectres of land.

We had doubts, I may add, when they came but we gave them the benefit of the doubt. But because we are trying to promote investments evenly across the three senatorial zones in the state and Vicampro was targeting zone three, so we went out of our way to support them. But as it turned out, they couldn’t raise the money. I understand that they are doing something small but not as big as we expected.

Let’s talk about the proposed Dangote-Peugeot Automobile Nigeria Company which Kaduna State is part of. Is it not better for Kaduna State to increase its share holding in Peugeot Automobile Nigeria (PAN) Limited, which has been up and running for several decades, than building another automobile company from the scratch?

Yes and no. Yes, you are right that it would have been better to expand an existing business than to start a new one. And the ‘’no’’ aspect depends on technology. You remember I mentioned a bit about African Assurance Resources and Ajaokuta. Ajaokuta is old technology, it’s about 20, 30 years old.

The Federal Government has put in about $4 billion in that plant and yet, its output and capacity, even if it were to be operating, will be the same as a modern technologically-based steel processing plant that African Natural Resources Plant is doing, at a fraction of that cost, about $600 million.

The same is true for PAN. PAN is an old assembly plant which was set up in the 70s and here we are in 2020. Automobile technology has changed; a lot of automation has come in. Things that used to be done by direct labour, technology has taken over. So, we need to have a modern factory that can allow that to happen, hence the Dangote-Peugeot Automobile Company.

Having said that, we actually wanted to buy the old Peugeot, PAN, because the company more or less went into liquidation. It was taken over by AMCON and it wanted to sell it. Kaduna State formed a consortium and put in a bid but AMCON made a wrong decision, by choosing another bidder which ended up not able to pay. So, it couldn’t be revived. We would have preferred to acquire the old PAN, and then do a new plant in the same location. So, we were forced to continue with that consortium but in a different location.

Reports suggest that Kaduna State has a new website where people can register businesses and make payments online. How true is this story? Has the website come on stream?

Yes it has, in virtually all our five important service sectors. Let me go back a little so that you can see the importance of this automation of our services. Kaduna State has been ranked first in the Ease of Doing Business by the World Bank. And it has indices that it uses to evaluate which sub-national or even country, is doing better in terms of attracting investors.

For example, business registration is one of the five or six indices. If you want to set up a business in Kaduna State or Lagos State or Edo State for that matter, you will go to the Ministry of Commerce or its equivalent. Then, you will apply to get a business license or permit. In some states, this will take two to three months.

They will give you all kinds of forms to fill and when you finish, you will have to get Notary Public or go o court. By the time you make payments, it will take so much time. So, by automating that process, you can go to the website and provide all the information and in a matter of minutes, you make payments online.

No bureaucracy will slow you down. The computer will just respond and give you your number, and then the signing of the certificate will be done. And bingo, in a matter of minutes, your certificate is back to you. So, it’s done. You don’t have to leave your office or your house to do that.

So, when it comes to the next World Bank evaluation, what we are doing in Kaduna State compared to other states, we are way ahead. Other states are trying to improve their processes manually. By the time we finish automating our process, it will be difficult to catch up with us. We want to sustain the leadership position, that is why we are automating our business premises registration, tax clearance certificates, filing tax returns will be done online without going to the office of Kaduna State Internal Revenue Service (KADIRS).

Even land application, building permits used to take months; you had to go to Kaduna State Urban Planning and Development Authority (KASUPDA) and queue. So, not only are we saving time and resources with automating our processes, we also eliminating corruption. Once you remove the discretion of officers and you make it automated, then you have removed corruption. So, there are many benefits of automation apart from efficiency, you also enthrone transparency and open governance. This is what we are trying to achieve.