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Ahmed: FG Plans to Raise VAT to 7.5% by 2020

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  • Ahmed: FG Plans to Raise VAT to 7.5% by 2020

A former Minister of Finance, Mrs. Zainab Ahmed, yesterday said the federal government was planning to increase the rate of value-added tax (VAT) to 7.5 per cent from the current five per cent by 2020.

This is as the government seeks to shore up falling revenue, according to Bloomberg.

Speaking at the Bloomberg Emerging & Frontier Forum in London, the former minister, whose tenure ended with President Muhammadu Buhari’s first term on May 29, said that her main preoccupation while in office was how to raise government’s revenue with only 55 per cent of targets being met.

Buhari, who was re-elected for a second four-year term, is yet to constitute a new cabinet.

She said: “We have developed a strategic revenue growth initiative, which we have started to implement.

“Our target is to increase revenue to 65 per cent minimum in 2019 so that in the next three years we are able to attain 80-85 per cent of our revenue target.”

However, earlier plans by government to increase VAT had been vehemently opposed by Nigerians.

In April, following a public backlash, Executive Chairman, Federal Inland Revenue Service ((FIRS), Mr. Babatunde Fowler, refuted reports it had proposed a 50 per cent increase in VAT when he appeared before the National Assembly to defend the agency’s 2019 budget.

But Fowler maintained that his position was misrepresented as he actually recommended an increase in the number of Nigerians and companies paying VAT and not the other way around.

A statement issued by his media department to debunk the claim stated: “Though he indicated that there should be an increase in the VAT rate by the end of the year, he never for once suggested a 50 per cent hike or any percentage increase at all.

“Rather, he promised improved collection in CIT, Petroleum Profits Tax, PPT and VAT in 2019 relative to the collection performance of the service in 2018.

“In 2018, FIRS collected the sum of N1.1 trillion in VAT; N1.42 trillion in Companies Income Tax (CIT); and N2.4 trillion in Petroleum Profits Tax (PPT).”

Also, Ebonyi State Governor, Chief David Umahi, had further opposed the proposed plan by the federal government to lift Value Added Tax (VAT) from five per cent to 35 per cent, stressing that it would put the country in difficult situations.

The governor had said that the plan, which was proposed by the federal government in order to pay workers’ salary with the implementation of the N30,000 minimum wage, was like digging a hole to fill a hole.

According to the National Bureau of Statistics (NBS), the federal government generated N1.10 trillion as VAT in 2018, representing a growth of 13.96 per cent (year-on-year) when compared to the N972.34 billion collected in 2017.

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

Economy

Buhari to Spend N729 Billion on 24.3 Million Poor Nigerians

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Group of People Waving Flag of Nigeria in Back Lit

Buhari to Spend N729 Billion on 24.3 Million Poor Nigerians

President Buhari is working on spending N729 billion on 24.3 million poor Nigerians despite the present economic recession, weak industries and zero new job creation.

Sadiya Farouq, the Minister of Humanitarian Affairs, Disaster Management and Social Development, disclosed this during the inauguration of the Federal Government’s emergency intervention database for the urban poor.

In a statement released by Nneka Anibeze, the Minister’s Aide, the financial intervention would help cushion the impact of the COVID-19 pandemic on identified people.

According to the Minister, the Federal Government would disburse N5,000 each to 24.3 million poor and vulnerable Nigerians for a period of six months. A total of N729 billion.

In part, the statement reads, “According to records, about 24.3 million poor and vulnerable individuals were identified at the end of 2020 and registered into the National Social Register.

“Each beneficiary will receive N5,000 for a period of six months.

The government is embarking on handouts despite the nation’s fiscal challenges and economic recession. The N5,000 or N729 billion can help build or support available industries, fast track economic recovery and improve job creation against sharing it with people it will has little to zero impact on their lives.

This is one of the numerous leakages being addressed by the same administration. The database can not be verified neither are the people to be paid.

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Economy

FG Paying N1.1 Billion Per Day as Subsidy

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petrol Oil

FG Paying N1.1 Billion Per Day as Subsidy

The recent jumped in crude oil prices means landing cost of Premium Motor Spirit (PMS), popularly known as Petrol, has increased but the Federal Government has maintained the old pump price of N161 – N165 per litre.

In a series of reports, the Petroleum Products Pricing Regulatory Agency (PPPRA) open market price, the price fuel marketers are expected to sell, is N183 per litre as of yesterday. A break down showed N160 is the landing cost per litre while the additional N23 is the Petroleum Products Pricing Regulatory Agency (PPPRA) pricing template.

Therefore, with the payment of additional N23 as stipulated in the PPPRA pricing template and the national petrol per day consumption figure at 50 million litres, the Buhari led administration is offsetting about N1.1 billion on petrol consumption daily.

The Nigerian National Petroleum Corporation (NNPC) has been deducting the amount before remitting balance of oil sales to the Federation Account, according to a Businessday report.

An anonymous person in the oil marketing industry said: “We are back to the era of subsidy and Nigeria is bleeding badly because of this.

With deregulation, the current price of petrol should not be less than N181, so who is funding subsidy of the product for Nigeria to buy at the current fixed price?“.

Another oil marketers said, “the government does not have the boldness to allow full deregulation of petrol because of the spiral effects on Nigerians, and bearing in mind that Nigerians are in very hard times.

Alao Abiodun, the Head of Energy Research, New Nigeria Foundation, explained that “Because of the loans from the IMF and World Bank that they got with the condition that petrol should be deregulated, I believe the government is trying to manage the problem.”

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Economy

Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start

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refineries

Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start

A year after shutting down all of its dilapidated refineries to figure out how to fix them, Nigeria still can’t say how much it will cost to do the work or where the money will come from.

Nigerian National Petroleum Corp. said it has finished the appraisal of its largest facility, but hasn’t completed the process at two others. Refining experts said the extended halt means the plants are at risk of rotting away and unlikely to restart on time.

“Things haven’t been looking good lately,” with Nigeria’s plants probably “completely out of action for some 18 months,” said Elitsa Georgieva, Executive Director at Citac, a consultant that specializes in African refining.

The dysfunction of its domestic refineries has long put Africa’s biggest oil producer in an ironic situation. It exports large volumes of crude to plants overseas, then pays a premium to import the fuels its customers produce.

Failed Attempts

Pledges to fix the facilities have been made and broken again and again over the years. For at least a decade, NNPC’s 445,000 barrels a day of refining capacity barely processed 20% of that amount.

The latest effort to fix the refineries was supposed to be different to the failed attempts that came before. The company had totally shut all three plants down by January 2020 to do a comprehensive appraisal, and set the ambitious target of having them all back up and running at 90% of capacity by 2023.

“The refineries have been deliberately shut down to allow for a thorough diagnosis,” said Kennie Obateru, an Abuja-based NNPC spokesman. “They can be fixed based on what the diagnosis reveals.”

The appraisal of the 210,000-barrel-a day Port Harcourt refinery has been completed and NNPC has called for bids for the necessary repairs, Obateru said. The company hasn’t determined how much the work will cost.

“It is when we close the bids, everything is analyzed and presented that we will know how much we need,” he said.

The diagnosis is underway at the 125,000-barrel-a-day Warri facility and should be complete before the end of the year, he said. After that, the study of the 110,000-barrel-a-day Kaduna plant will commence.

Major Challenge

One year into the process, refining analysts are skeptical that all this work can be done by 2023.

“I don’t think anyone has a good understanding technically of what’s wrong with those refineries,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie Ltd. “They’re probably corroding, which makes it a very difficult proposition.”

NNPC reaffirmed its deadline and said there’s no reason the refineries, which are at least 40 years old, can’t be restored to full operation.

“There are refineries that are over a hundred years old still running, so age is not necessarily an impediment,” Obateru said.

There are parallel efforts backed by private companies to add to Nigeria’s capacity. Aliko Dangote, Africa’s richest person, is building a state-of-the-art 650,000 barrel-a-day refinery, which Citac estimates will start production in 2023.

Bringing NNPC’s Port Harcourt refinery to the same clean-fuel standards as Dangote’s modern plant would cost about $1.3 billion for the equipment, on top of whatever other repairs are required to get the facility running, Georgieva said.

NNPC is talking to oil-trading firms about $1 billion of prepayment deals that could finance the repairs at Port Harcourt, Reuters reported last week. Obateru declined to comment on the report, but said “I don’t envisage that we will have a problem getting people to invest.”

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