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FG Mulls 50% Hike in VAT, Others to Pay Minimum Wage

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  • FG Mulls 50% Hike in VAT, Others to Pay Minimum Wage

Minister of Budget and National Planning, Senator Udo Udoma, and the Chairman of the Federal Inland Revenue Service, Mr Babatunde Fowler, on Tuesday said the Federal Government was considering an upward review of the Value Added Tax by 50 per cent.

Udoma and Fowler who stated this on Tuesday when they appeared before the Senate Committee on Finance, said the increment was to, among others, enable the Federal Government to fund the new national minimum wage.

Fowler said the proposed payable VAT by Nigerians based on the increment would actually be between 35 per cent (6.75%) and 50 per cent (7.25%)

The government is currently charging five per cent VAT on all products in the country

Udoma and Fowler were among the heads of the Federal Government agencies, who were in the Senate to explain the detail of the 2019-2021 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which is expected to be the benchmark for the 2019 budget deliberations.

Fowler, who said the FIRS’ goal was to achieve an N8trn revenue generation target this year, also said the 50 per cent increment would affect the Company Income Tax and the Petroleum Profit Tax.

He said, “By the end of this year, we should be ready for an increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. They pay when they go on those trips. We should be ready for an increase on VAT.

“I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.”

Fowler added that his agency had collated the detail of 34 million Nigerians that were captured in the BVN network with a view to assessing their compliance with the tax laws.

He added that the FIRS raked in N3.1trn in 2016, N4.03 in 2017 and N5.32tn in 2018 even as he expressed the hope it would surpass past records in 2019.

Fowler said the agency had increased VAT collection by 25 per cent in the last three years, but lamented that many of the firms that were collecting VAT were not remitting it.

“Nigerians should be ready for an increase in VAT with at least by 35 to 50 per cent this year. Nigerians travel to other countries and they pay more on tax”

Udoma also told the panel headed by Senator John Owan-Enoh, that the Technical Advisory Committee on the minimum wage, would submit its report to President Muhammadu Buhari this week.

He said, “Recall that as a result of agitations from unions, the President set up a tripartite committee to look at the minimum wage.

“Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states, it is a tough time to review wages. But the N18, 000 is really too low and it is difficult for people to live on N18, 000.

“The President supported a review, but it is important that as we are reviewing (the minimum wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee.

“We will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the minimum wage.

“So it is something we are going to work closely with the finance committee on how best this minimum wage will be addressed, both from the Federal Government and the states to ensure that the whole government apparatus is not just paying salaries and nothing else.

“It is important that we are able to pay the minimum wage and still have enough resources to do infrastructure. The committee has virtually completed its work”

He added that the Federal Government would intensify efforts in its assets recovery drive and would also challenge revenue generation agencies like the FIRS and the Nigeria Customs Service to boost their operations.

He also said efforts were on the way to ensure that capital projects and other sectors of the economy were adequately funded.

Udoma justified the benchmark recommended by the executive in the fiscal document and expressed confidence that necessary strategies were being employed to make them realisable.

The Federal Executive Council had in October last year, approved the MTEF/FSP and also proposed N8.73tn for the 2019 budget, which is N400bn lower than that of 2019, which is N9.12tn.

The Federal Government in the fiscal document, proposed an oil price benchmark of $60; oil production of 2.3 million barrels per day; exchange rate of N305 per US dollars; and Gross Domestic Product growth rate of 3.01 per cent.

Udoma said the expenditure aspect of the 2019 budget proposal in the MTEF/FSP was lower compared to the projection in the actual budget because of the hike in the police salaries that was later accommodated after the document had been submitted.

The Director General of the Budget Office, Ben Akabuese, while reviewing the performance of the 2018 budget, noted that it had achieved appreciable performance.

He also said that no specific revenue had been channeled to the Social Intervention Programme apart from the looted funds being recovered especially the popular ‘Abacha loot’.

The Chairman of the Senate Committee on Finance, Owan-Enoh, assured Nigerians that details of the senate version of the MTEF/FSP, based on the interactions with the officials, would be made known soon.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

NLNG Boosts Cooking Gas Production to 1.5 Million Metric Tonnes Annually

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Nigeria Liquefied Natural Gas Limited (NLNG) has announced a significant milestone in its operations, boosting its annual production of liquefied petroleum gas (LPG), commonly known as cooking gas, to over 1.5 million metric tonnes.

This surge in production underscores NLNG’s commitment to meeting the rising demand for clean cooking energy in Nigeria.

The entirety of NLNG’s 1.5 million tonnes production is now being sold domestically within Nigeria.

Moreover, the company has initiated a landmark shift by starting to supply LPG in naira, moving away from the traditional practice of trading in United States dollars.

This move aligns with calls from stakeholders in the oil and power sectors advocating for naira transactions, especially amidst the challenges posed by currency fluctuations.

During a panel session at the 7th Nigeria International Energy Summit in Abuja, NLNG’s General Manager of Finance, Fatima Adanan, highlighted the company’s dedication to enhancing LPG penetration across the country.

Adanan emphasized NLNG’s vision to make Nigeria a better place by promoting the use of cleaner energy sources like gas.

While NLNG’s production surge is commendable, Adanan acknowledged that Nigeria’s LPG requirements surpass the current output, necessitating imports to bridge the gap.

However, NLNG remains committed to expanding its production capacity to meet the nation’s energy needs and drive increased adoption of LPG as a cleaner cooking fuel.

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Economy

CBN Raises Benchmark Interest Rate by 400 Basis Points to 22.75%

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 400 basis points to a record 22.75%.

The decision made by the Monetary Policy Committee (MPC) comes amidst rising inflationary pressures and growing uncertainty in Africa’s largest economy.

Nigeria’s inflation rate rose to 29.90% in January 2024, the highest in over two decades while the nation’s unemployment rate quickened to 5% in the third quarter of 2023. Suggesting that the rising costs have continued to drag on both new job creation and the existing ones.

This coupled with a series of policy adjustments implemented by President Bola Ahmed Tinubu has plunged economic productivity and eroded consumer spending as citizens grapple with high fuel prices, electricity tariffs, a record-high foreign exchange rate, and insecurities.

Therefore, it is surprising that the Monetary Policy Committee (MPC) led by the CBN will further increase borrowing costs by 400 basis points at a time when job creation is paramount.

While the economy reportedly grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, this growth is yet to crystalise as businesses and citizens have taken to the street protest against the harsh economic situation.

Economic experts have started questioning the data from the National Bureau of Statistics (NBS) given its lack of correlation between the data and economic reality.

 

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Economy

President Tinubu Unveils Geometric Power Plant in Aba After 20-Year Wait

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Geometric Power Plant

After two decades of anticipation, President Bola Tinubu, through his representative Vice President Kashim Shettima, inaugurated the long-awaited Geometric Power Plant in Aba, a significant milestone in the city’s quest for reliable electricity supply.

The event, which also saw the commissioning of three rehabilitated roads by Abia State Governor Alex Otti, symbolizes the culmination of years of perseverance and determination to transform Aba’s power landscape.

Addressing the audience, Vice President Shettima hailed the project as a testament to the power of visionary leadership and unwavering commitment to progress.

He said the Geometric Power Plant exemplifies the transformative impact of strategic infrastructure investments on local communities.

Governor Otti echoed similar sentiments, emphasizing the importance of the power project in positioning Aba as a hub for national and international business ventures.

He commended the efforts of Geometric Power Limited while urging them to uphold transparency and avoid exploiting consumers.

The inauguration of the Geometric Power Plant comes amidst growing concerns over Nigeria’s power infrastructure and the need for sustainable solutions to address electricity shortages.

The project, with a capacity of 188MW, holds promise for significant improvements in power supply across Abia State, benefitting nine out of seventeen local government areas.

The Managing Director of Geometric Power Limited, Ben Caven, underscored the scale of investment involved, totaling $800 million.

He highlighted the comprehensive nature of the project, which includes the installation of new power substations and a 27km natural gas pipeline, signaling a comprehensive approach to enhancing Aba’s energy infrastructure.

In conclusion, the inauguration of the Geometric Power Plant represents a transformative moment for Aba, offering renewed hope for economic growth and prosperity powered by reliable electricity supply.

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