I remember hearing something once that went like this - at some point you have to give less weight to the sources of a problem, and start to concentrate on the solutions to the problem. For example we should stop worrying about how Nigeria got where she is today, and focus more on how to get her to where she needs to be. Most times I know this is true, but sometimes I get smacked in the face by the sheer magnitude of the issues we have with our government. Our Government problems are like the heads of a hydra, cut off one and two grow back in its place.

Take the relationship with the private sector for instance. Nigeria is a nation of underserved markets. People are not consuming to their capacity because there is not enough product to consume. The government cannot possibly provide all the necessary products and so it allows the private sector to exploit opportunites. When the private sector manages to succeed at a specific opportunity - as only the successes get remembered - there tends to be someone in government who thinks that the private sector is making too much money from the opportunity. Here is where it pays to be the regulator, after all you get to see all the returns that the business is making.

In the old days, the government simply used to expropriate the business. Like the case of the man who managed the Lagos State trash collection. Some ministry guy apparently looked at the monthly figures and decided that the government should go into the business. Of course the business failed and trash collection in Lagos was set back decades.

These days, the government doesn't take over businesses, it simply jacks them. The private sector generally agrees to be jacked because it is better to lose some profit than to incur the wrath of a government like ours. I mean go ask the small business owners whether it is worth it to tangle with the local governments over some of the taxes that get thrown at them.

The Lagos State government has perfected the jacking strategy in their quest for internally generated revenue (IGR). Sometimes they are able to swing it - with the environmental impact tax they levy on the telecom operators for the masts they have all over the state (well at least for a while, the telcos sued and won). Sometimes they are unable to swing it - with the environmental impact assesment that they wanted to levy on private generators (I've read rumblings in the paper that they are going to try and bring this one back).

Sometimes the victim tries to fight back, as is the case with the 1004 redevelopment in Victoria Island. The developers got cash upfront for the project to the tune of N25 million per flat (some flats went for N27 million). I think the developers spent N7 billion acquiring the property from the Federal Government (about N7 million per flat). They will probably spend another N7 to N10 billion refurbishing each flat. The state government can do the math as well as anyone else and has decided that N8 billion is too much for the developers to book as profit. The state government as determined that planning permission was not granted for reconstruction of the estates, and has slapped the developers with N3.4 billion in fees and levies. The developers have taken the matter to court, and from what I have heard will probably win.

However most businesses do not have the deep pockets of the 1004 guys, or the telcos and have to bear the cost. For a lot of businesses, when you throw in the 30% company tax, the 2% education tax, and the attendant levies, there are businesses facing an effective tax rate of 50 to 60%. Now you can argue that a lot of businesses do not pay taxes, but would you in this situation?

The solution to the problem of haphazard taxation of the Lagos State variety in theory should a harmonization of the nations tax system. There will be certain taxes that the various federating units can charge, and these will be clear and transparent. The Federal Inland Revenue Service (FIRS) has largely succeeded in getting this harmonization thing passed into law. However the states are fighting the Chairman on implementation every step of the way, there is even talk that she will not be confirmed a second time around.

So once again we come back to the states. You my reader, I'm guessing is not surprised. Now that's a problem we need a solution to. How to get the state leadership to act against their own self interest?