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Labour, Stakeholders Says no to 50% VAT Increase

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Nigeria Labour Congress - Investors King
  • Labour, Stakeholders Says no to 50% VAT Increase

The Nigeria Labour Congress (NLC) has kicked against the approved 50 percent increase in Value Added Tax (VAT) to 7.5 percent from the current 5 percent.

The Federal Executive Council (FEC) had approved the Federal Inland Revenue Service (FIRS) request to increase VAT by 2.5 or 50 percent of the current 5 percent to 7.5 percent.

A move Nigerians described as anti-people and instituted to wipe off the gains of the new minimum wage.

The Nigeria Labour Congress (NLC) and the Nigeria Employers’ Consultative Association (NECA) said the move would render the N30,000 new minimum wage useless.

Comrade Emma Ugboaja, General Secretary, NLC, noted that the increment would hurt new job creation as it wasn’t well thought-out.

He said: “We reject the increase as it clearly seeks to erode whatever purchasing power the new minimum wage may bring. We see it as a move not well thought through with the welfare of Nigeria wage earners in mind. Its impact on Nigerian manufacturers and job creation and retention will be nightmarish. It is clearly insensitive to the plight of the ordinary Nigerians. What the government needs to do is to widen the tax net and get people to pay tax and not to over tax those that are at present in the net.”

Mr Timothy Olawale, NECA’s director-general, who also condemn the increment, argued that it would neutralise the benefits of the recently increased minimum wage.

He said with the economy growing at a slower pace than expected and unemployment at a record high of 23.1 percent, it is counterproductive to hike VAT.

“Also, International Monetary Fund (IMF) has recently revised downward its global economic growth forecast to 3.2 per cent due to sluggish in global economy.

“Therefore, this suggests, that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies,” Olawale said in a statement he issued in Lagos.

A financial expert, Dr Suleyman Ndanusa, former director-general, Securities and Exchange Commission (SEC), also warned that the move would hurt consumer spending and weigh on sales.

“The timing is quite wrong; at this point in time, our economy needs to be helped by policies that would ginger more consumption and more disposable income for the people. The paradigm for me has to change. Are we increasing tax just for the purpose of revenue or managing our fiscal policy taxation for growth?

“The paradigm has shifted from revenue-driven taxation to growth-driven taxation,” Ndanusa stated.

He advised that “Nigeria should be thinking on what to do to create the genetic energy for our economy at this time, where we are growing at 2.5 per cent.”

People’s Democratic Party Position on VAT

The opposition party, the People’s Democratic Party (PDP), said the party rejected the decision of President Muhammadu Buhari to raise VAT, saying it would further hurt Nigerians.

Kola Ologbondiyan, the national publicity secretary, PDP, said: “Indeed, only an administration that does not have the mandate of the people can seek to adopt such oppressive stance against its citizens.

“President Buhari ought to be aware that an increase in VAT will worsen our decrepit economy and put more pressure on families and business as it will result in increase in costs of goods and services that have direct bearing on the welfare of the people.

“Our party charges the Buhari Presidency not to further punish Nigerians by imposing harsh tax regime to make up for its crass incompetence and lack of capacity to effectively harness and manage our resources to create wealth for the benefit of the people.

“It is even more painful that the Buhari Presidency cannot give account of the huge resources at its disposal, including the taxes it has been collecting in the last four years, most of which are frittered to service the wasteful lifestyle of the cabal at the Presidency and All Progressives Congress (APC) chieftains.

“Instead of foisting more tax burden on Nigerians, the PDP charges President Buhari to account for and recover the over N14 trillion oil money established to have been stolen under his watch in the last four years.

“It is disheartening that at the time Nigerians ought to be enjoying the economic recovery and empowerment blueprint set out by Atiku Abubakar, which included slash in taxes and levies, they are rather faced with an unjustifiable and indefensible tax increase,” the party added.

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.

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Economy

Ogun Records N13.3B Internally Generated Revenue Monthly in Q1 of 2021

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Revenue - Investors King

Ogun State Government has recorded an average of N13.3billion monthly as Internally Generated Revenue (IGR) in the first quarter of 2021.

The government said it is also planning to raise its yearly Gross Domestic Product (GDP) rate from the current single digit by 25 percent.

The Commissioner for Finance, Dapo Okubadejo disclosed this to newsmen in Abeokuta ahead of the state’s investment summit tagged: ‘OgunIseya21: Becoming Africa’s Model Industrial and Logistics Hub’, slated for July 13th-14th, 2021.

Okubadejo who doubles as the State’s Chief Economic Adviser noted that the state’s IGR had experienced an upward movement after last year’s shortfall due to the Covid-19 pandemic and the attendant lockdown.

“We had a significant turnaround in the first quarter of this year. In fact, as of April, we have done almost N40bn in the Internally Generated Revenue. Our target this year is to exceed all the previous records we have set in IGR. That’s why we have put in place, all these transformation initiatives, friendly policies and also facilitate this investment summit to further showcase Ogun State as the preferred industrial destination,” he said.

The Finance Commissioner was supported in highlighting the investment potentials of the summit by his counterparts from the Ministries of Industry, Trade and Investment, Mrs. Kikelomo Longe; Works and Infrastructure, Ade Adesanya; Culture and Tourism, Toyin Taiwo; Budget and Planning, Olaolu Olabimtan and the Director-General, Public-Private Partnership, Dapo Oduwole.

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Unemployment To Push More Nigerians Into Poverty – NESG

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Nigerian Economic Summit Group- Investors King

On Friday, The Nigerian Economic Summit Group said that many more Nigerians are expected to fall into the poverty trap amid rising unemployment in the country.

The NESG, a private sector-led think-tank, noted in its economic report for the first quarter of 2021 that the country’s economic growth in the period under review was relatively weak.

It said, “Nigeria’s economic growth trajectory is better described as jobless and less inclusive even in the heydays of high growth regime in the 2000s.

“While the Nigerian economy recovered from the recession in Q4 of 2020, the unemployment rate spiked to its highest level ever at 33.3 percent in the same quarter.

“With the COVID-19 crisis heightening the rate of joblessness, many Nigerians are expected to fall into the poverty trap, going forward.”

The group noted that the World Bank estimated an increase in the number of poor Nigerians to 90 million in 2020 from 83 million in 2019.

“This corresponds to a rise in headcount poverty ratio to 44.1 percent in 2020 from 40.1 percent in 2019. The rising levels of unemployment and poverty are reflected in the persistent insecurity and social vices, with attendant huge economic costs,” it said.

According to the report, huge dependence on proceeds from crude oil, leaving other revenue sources unexplored, indicates that Nigeria is not set to rein in debt accumulation in the short to medium term.

The NESG noted that public debt stock continued to trend upwards, with a jump from N7.6tn ($48.7bn) in 2012 to N32.9tn ($86.8bn) in 2020.

It said public debts grew by 20 percent between 2019 and 2020, adding, “This is partly due to the need for emergency funds to combat the global pandemic and alleviate its adverse economic impacts on households and businesses.”

According to the group, Nigeria needs more than an economic rebound, and there is a need to improve growth inclusiveness.

It said, “Nigeria has struggled to achieve inclusive growth for many decades. Since recovery from the 2016 recession, the economy has been on a fragile growth path until it slipped into another recession in 2020 due to the COVID-19 pandemic.

“This suggests that the country needs to attain high and sustainable economic growth to become strong and resilient.

“The relationship between economic growth and unemployment rate in Nigeria suggests that economic growth has not led to a reduction in the unemployment rate – jobless growth.”

The NESG said to reverse this recurring trend, there was an urgent need for collaborative efforts between the government and relevant stakeholders towards addressing the constraints to value chain development in high-growth and employment-elastic sectors, including manufacturing, construction, trade, education, health and professional services, with ICT and renewable energy sectors as growth enablers.

It noted that despite the re-opening of the land borders that the Nigerian government shut since October 2019, inflation reached a four-year high of 18.1 percent in April 2021.

“While we expect improved agricultural production in coming months to partially ease inflationary pressures, this positive impact could be suppressed by recurring key structural bottlenecks including insecurity in the food-producing regions, electricity tariff hike, fuel price increase and hike in transport and logistic costs,” it added.

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IMF Queries FG Strategies On Fuel Subsidy, Unemployment, Inflation

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IMF - Investors King

The International Monetary Fund has raised the red flag over Nigeria’s resumption of petrol subsidy payments, describing it as injurious to the economy.

It also reiterated the importance of introducing a market-based fuel pricing mechanism and deployment of well-targeted social safety nets to cushion any adverse impact on the poor.

In a report produced after a virtual meeting with Nigerian authorities from June 1 to 8, the IMF also expressed concerns over the rising unemployment and inflation rates, even as it admitted that real Gross Domestic Product was recovering.

The IMF team, led by Jesmin Rahman, further hailed the Central Bank of Nigeria for its efforts at unifying the exchange rate by embracing needed reforms.

The Fund said: “Recent exchange rate measures are encouraging, and further reforms are needed to achieve a fully unified and market-clearing exchange rate.

“The resurfacing of fuel subsidies is concerning, particularly in the context of low revenue mobilisation.

“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.

“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation. With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.

“The incipient recovery in economic activity is projected to take root and broaden among sectors, with GDP growth expected to reach 2.5 percent in 2021. Inflation is expected to remain elevated in 2021, but likely to decelerate in the second half of the year to reach about 15.5 percent, following the removal of border controls and the elimination of base effects from elevated food price levels.”

The IMF also recognised that tax revenue collections were gradually recovering but noted that with fuel subsidies resurfacing, additional spending for COVID-19 vaccines and to address security challenges, the fiscal deficit of the Consolidated Government is expected to remain elevated at 5.5 percent of GDP.

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