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Knocks for Govt’s Plan to Exempt Firms from Tax



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  • Knocks for Govt’s Plan to Exempt Firms from Tax

The Federal Government’s plan to exempt 27 industries from paying companies’ income tax for three years, with an extension for one or more years, has been faulted by financial pundits and investment firms.

The FBN Capital, the investment and research arm of FBN Holdings, said the Federal Government’s initiatives, which include tax exemption for targeted firms, may have a negative impact on revenue collection. The government is also interested in developing economic plans for six special economic zones (SEZs) – one for each geo-political zone.

According to the firm, the authorities can argue that an initial sacrifice will yield far greater fiscal benefits over time. However, the government is under fiscal pressure, judging from the Central Bank of Nigeria (CBN) Governor’s recent statement that the deficit in the first-half of this year was a provisional N2.51 trillion, compared with the full-year target of N2.36 trillion.

In these circumstances, the firm believes the government may want to redouble its efforts to scrutinise the tax exemptions granted by the previous administration.

In a report titled: “The FGN’s pursuit of Investment”, the research firm said the government has already named 27 industries as eligible for pioneer status incentives.

It said their principal benefit is exemption from companies’ income tax for three years, with a possible extension for one or two years. Also, it believed that monitoring of the scheme would be the responsibility of the Nigerian Investment Promotion Council, which will maintain a list of qualifying companies on its website. The FGN is also developing its plans for six special economic zones (SEZs) – one for each geopolitical zone.

“The two initiatives are driven by the FGN’s determination to attract investment. Nigeria has some catching up to do. Investment amounted to just 14.8 per cent of Gross Domestic Product (GDP) in 2015. We recall an old donor rule-of-thumb estimate that a steady investment ratio of 25 per cent generates about five per cent GDP growth. Nigeria requires rather higher growth, not least because its population is said to be growing by 2.8 per cent yearly,” it said.

It added that an industry or company may be designated pioneer if its development is viewed to be in the public interest, and urged government that such plan should not be interpreted as an invitation to push national prestige projects.

The FBN Capital said an opportunity has emerged for Nigeria and other low-wage economies. “An estimated 85 million manufacturing jobs are being relocated from China due to rising labour costs including 20 million in textiles and clothing. The textile worker in China is paid $700 per month, rather more than the proposed national minimum wage in Nigeria of N45,000 ($150) per month,” it said.

It however, said that free zones have delivered some impressive results. In the 1980s there was Mauritius, and much more recently Ethiopia.

“In June Nigerian government advisors witnessed the opening of the country’s fifth zone, reserved for textiles and clothing and set to create 65,000 jobs. The example of China is Ethiopia writ large, and it is no coincidence that investors from the first are prominent in the Ethiopian zones. The first four zones were established in south-east China in the 1980s.

According to data cited by the Abuja Chamber of Commerce and Industry, zones accounted for 22 per cent of Chinese GDP and 50 per cent of its Foreign Direct Investment in 2007,” it said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Company News

BUA Cement Announces 24.6 Percent Increase in Profit to N43.4 Billion in H1 2021



BUA Cement stock - Investors King

BUA Cement Plc, Nigeria’s second-largest cement manufacturing company, on Thursday reported a 22.7 percent increase in revenue in the six months ended June 30, 2021.

Revenue rose from N101.261 billion recorded in the first half (H1) of 2020 to N124.278 billion in the first half of 2021.

The company disclosed in its unaudited financial statements release through the Nigerian Exchange Limited and seen by Investors King.

As expected, the cost of sales inched higher by 19.1 percent from N55.539 billion in H1 2020 to N66.158 billion in H1 2021. While gross profit expanded by 27.1 percent to N58.120 billion in H1, up from N45.723 billion.

The cement manufacturing company grew other income by 52.3 percent from N47.653 billion filed in H1 2020 to N72.6 billion in H1 2021.

Administrative expenses rose to N4.17 billion in the period under review, representing an increase of 57.9 percent when compared to N2.643 billion recorded in H1 2020.

Operating profit increased by 23.8 percent from N40.809 billion in the corresponding period of 2020 to N50.524 billion in the period under review.

Profit before income taxes rose by 26.9 percent to N49.700 billion in H1 2021 from N39.165 billion in H1 2020.

The company paid N6.3 billion in income tax in the first half of 2021.

Therefore, profit after tax stood at N43.396 billion in the first six months of 2021, an increase of 24.6 percent when compared to N34.819 billion achieved in the same period of 2020.

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Seplat Energy Appoints Dr. Emma FitzGerald as an Independent Non-Executive Director



Seplat Energy Plc - Investors King

Seplat Energy Plc has appointed Dr. Emma FitzGerald as an Independent Non-Executive Director of the Company, the company disclosed on Thursday.

Dr. FitzGerald will replace Lord Mark Malloch-Brown who retired from the Board of the Company on 1st August 2021.

Dr. Emma FitzGerald Profile

Dr. FitzGerald is a seasoned executive in Energy & Water, with hands-on experience in transformation through her many years of working at Shell, ranging from building its lubricants business in China to running its Global Retail network.

From 2007-2010, she was accountable for Shell’s Downstream strategy and played a key role in reshaping Shell’s renewables strategy including the creation of Raizen, a game changing biofuels JV with Cosan. From 2013 to 2018 she ran gas distribution and water & waste networks for National Grid and Severn Trent where she successfully
positioned them as sustainability thought leaders in their Industries.

Most recently Dr. FitzGerald served as CEO of Puma Energy International, a global energy company owned by Trafigura and Sonangol, which is focused on high potential developing markets in Africa, Asia and Central America. In 2020 she set up Puma’s Future Energies division to play a critical role in helping customers and communities find the right energy solutions to support the energy transition. Over the last 10 years she has served on various Boards in executive and non-executive capacities and currently sits on the board of UPM Kymmene, an international paper & biomaterials business focused on innovating for a future beyond fossil fuels.

Commenting on the appointment, Dr. A. B. C. Orjiako, Chairman of SEPLAT Energy said: “The Board of SEPLAT Energy is indeed delighted to have Dr. Emma Fitzgerald on board as she brings vast knowledge in important areas such as the energy sector, renewables and sustainability. SEPLAT Energy has a great future ahead and looks forward to the enormous contribution she will make towards its continuing global success.”

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Company News

Robinhood IPO Priced at Lower End of Range, Firm Valued at $32B



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Stock and crypto-trading app Robinhood has secured a $32 billion valuation via its initial public offering (IPO) and is set to debut on the Nasdaq exchange on Thursday.

According to a press release on Wednesday, Robinhood has priced its offering at $38 per Class A common stock share.

The pricing is at the lower end of the $38-$42 per share price range the company had targeted and had planned on selling 5.5 million shares targeting a $1.89 billion raise.

Net proceeds from the sale will go toward working capital, capital expenditures, funding tax obligations, hiring efforts, customer support services, among others.

Shares will be listed on the Nasdaq Global Select Market on Thursday, according to the release.

Earlier this month, Robinhood began unconventionally offering a portion of its IPO to users via its app — a view some consider to be a risky gamble.

Known for its zero-fee trading structure, the company has continued to endure hits to its image as well as legal and political ramifications stemming from the fallout of the GameStop saga and limitations to users trading crypto.

The company is trying to reshape that image and is reportedly working on a new feature that will help protect users from crypto price volatility while hiring a former Google alumn to improve its overall product design.

“Robinhood intends to use the net proceeds for working capital, capital expenditures, funding its anticipated tax obligations related to the settlement of RSUs, and general corporate purposes including increasing its hiring efforts to expand its employee base, expanding its customer support operations and satisfying its general capital needs,” the firm said in the announcement.

Robinhood filed the public offering prospectus on July 1, noting at the time that 17 percent of its total revenue in Q1 came from crypto trading transaction fees, which represented a big jump from the 4 percent in Q4 2020.

“While we currently support a portfolio of seven cryptocurrencies for trading, for the three months ended March 31, 2021, 34 percent of our cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4 percent for the three months ended December 31, 2020,” the firm said in the initial filing.

Still, the company’s CEO Vlad Tenev is staring down allegations from the Financial Industry Regulatory Authority over his failure to register Robinhood Financial relating to compliance issues.

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