As Oil prices continue to go down, the debate on other alternative sources for government revenue has ensued. State governments have to think within the available law of there best option for increased revenue generation. In finding solutions, many have continued to shout “Agriculture” as the savior, but what people have not asked is, “can agriculture replace crude oil”? The way the petroleum industry is structured is not the same way the agricultural sector is structured. These make it impossible to use agriculture to replace crude Oil as the primary source of revenue at the moment.
These are some of the reasons to note:
1. Enabling laws to tax agriculture: While there has been a law for the petroleum industry that coordinates and guides the activities within the sector in Nigeria, it is not the same with the agricultural sector. The bill creates the NNPC as both the regulator and player on behalf of the country as well as the body responsible for issuing licenses, trading and collecting all revenue accrued to the country from the oil deals. This same law is not available within the agricultural sector in Nigeria. The agricultural sector is seen as a development sector for most rural communities in the country. As it is, there are no enabling laws that can guarantee revenue generation from the industry similar to what we have in the oil sector.
Often, government investment in the Agricultural sector is not seen as an investment that has a revenue side to it; it is mostly seen as an intervention. And that is why this investment has not been consistent and progressive over time. The constitution has agriculture on the concurrent list with both the state and federal governments with responsibility. These has made it possible for the national governments to own significant agricultural assets within the sector like dams, irrigation lands, among others. It has also made it impossible for the states to invest heavily in creating significant projects that can significantly impact the sector, such as constructing dams and modern irrigation schemes that can have a huge impact due to lack of sufficient funds, instead of states prefer the easy way out which is to buy fertilizers, tractors amongst others.
2. Enabling regulations within the Oil sector: While the oil sector has a regulator like NNPC, the Nigerian agricultural sector is unregulated. It is not possible to make agriculture a business without regulations that have led to a series of clashes between crop farmers and herders who continue to battle over grazing fields and farmlands. In developed countries, there are regulations around grazing cattle and cropping with expected outcomes and penalties.
There is also no regulation around agricultural logistics and handling. The way food and animals are being conveyed from the farms to the market needs to checked and regulated as it is being done in developed countries with standards for packaging, transporting, and handling. An essential component of this regulation is in ensuring standard means of measurement. Without a conventional means of measurement, it is not possible to determine the weight of commodity and volume of trade accurately. Using other means of measurements like bags, mudus, or random estimation in most markets promotes unethical practices on the part of the buyer, seller, and the government who needs revenue.
The Agricultural commodities market that is well organized, well structured, well regulated with trading and reporting rules, as well as modern infrastructure that eases transportation, handling, and enhances security, is critical for the government to earn her revenue. This is where the government needs to have rethink and reform the sector for proper revenue generation. As it stands, even if states generate 1 million metric tons of grains, there is absolutely no way to know, and as long as the revenue is not tied to the metric ton, they continue to lose.
Therefore, it is essential to create market rules around weight and measures using the metric system and metric measurement tools.
3. Investment In enabling infrastructure: For agriculture to be a major revenue earner, the government must invest massively in infrastructure that allows it to function. These infrastructures include access roads to and fro from farms and markets, market infrastructure for a commodity such as grains and livestock markets as well as parking houses for fresh fruits and vegetables, modern irrigation schemes that support commercial agriculture with dams and water canals covering large hectares of land, among others. It is when citizens see government investments in these areas that they will be convinced to pay taxes on their farm produce to the government. As it stands, demanding revenues from poor farmers who go through lots of hell to provide food and take to the market to sell, will be a herculean task.
Other initiatives, I believe, should include creating incentives that enable commercial farms to operate as business entities instead of what we currently have that is mostly informal. Once farms operate as business entities, then it will be easier for the government to track PAYEE tax and other relevant taxes as well as monitor employments, extending support directly to the sector. These will make it possible for the government to accurately track performance and know which farm is in production or not, or know what they are producing, the number of hectares cultivated, quantity harvested, among others. It will be easier for the government to extend relief in terms of crises, disasters, emergencies, among others.
In conclusion, I believe that agriculture can replace Oil, but it will not be as easy as we think. It will take consistent effort for at least the next ten years non-stop to get there. The government must come up with innovative ways to tax the sector and generate revenues while at the same time creating a win-win situation for all parties. Therefore, this is the right time for us to start working, now that Oil is down and we are in desperate need of a solution.
Written by Zanau Hassan Maikasuwa