Lagos State becomes the first sub-national government to activate the framework for the unlocking of the $1 trillion Nigerian Green Bond Market Development Programme to finance key infrastructure projects.
On Tuesday, Governor Babajide Sanwo-Olu signed a Memorandum of Understanding (MoU) with FMDQ Group and Financial Sector Deepening (FSD) Africa, which are the programme’s implementing partners on the proposed N25 billion (over $60 million) financing.
The historic event, held at the State House in Marina, came less than 24 hours after Lagos was upgraded to AAA(nga) rating from AA+(nga) by Fitch International for the State’s good standing on debt sustainability and resilience.
Sanwo-Olu said the green bond programme, which is supported by the UK Agency for International Development (UK Aid), would raise the capacity of the State Government to deliver more key infrastructure and social projects that would keep Lagos on the path of prosperity.
Launched in 2018, the Green Bond Market Development Programme is to facilitate the development of a green bond market to support broader debt capital markets reforms that will impact the sovereign and non-sovereign bond markets in the country.
The programme is to empower State Governments to champion sustainable finance for development.
Sanwo-Olu said the MoU was the crucial first step being taken by Lagos towards creating viable financing options for future green and sustainability projects. The funding opportunity, he said, will advance the adoption of innovation and technologies to provide green jobs, thereby promoting economic and climate resiliency.
He said: “As a Government, we are committed to utilising our limited resources more efficiently to create a circular economy, which is a promising and viable alternative. Public spending and investments may not be enough to deliver our key objectives; therefore, the need to tap into more private investments for the transition to a zero-waste and circular economy, as well as achieving crucial items of the Sustainable Development Goals (SDGs).
“I strongly believe that the Green Bond programme will open the doors of deeply sustainable funds for infrastructure and social development for Lagos. Being the biggest player in the sub-national capital market, Lagos’ experience can open new doors for a lot of others. As a State, we embrace the transparency and commitment that comes with a Green Finance framework. We believe it sends an important signal to investors in the market about who we are: a State that is fiscally responsible, prudent and disciplined.”
Sanwo-Olu said Lagos’ credentials in investment sustainability made the State take the bold step to activate the framework to benefit from the programme.
He said the initiative would go a long way in ensuring that key deliverables in his administration’s T.H.E.M.E.S agenda are actualised while pledging that the State would continue to blaze the trail of leadership, financial accountability, innovation and sustainability.
Special Adviser to the Governor on SDGs and Investment, Solape Hammond, said the journey to get the framework approved started last year, disclosing that the MoU highlighted key projects to be delivered by the State Government to actualise economic sustainability.
She said the finance would be invested in green projects, adding the implementing partners had created a mechanism to ensure funds earmarked were disbursed judiciously.
Commissioner for Finance, Dr Rabiu Olowo, said Lagos had 20 years of experience in raising bonds, assuring implementing partners and capital market operators of the State’s commitment to the terms highlighted in the framework.
Chief Executive Officer of FMDQ Group, Bola Onadele, said Lagos had built a reputation and “incredible potential” for catalysing broad-based sustainable development, which explained the partners’ readiness to support the State in unlocking the capital to fund key projects.
He said: “ I have no doubt that the implementation of this MoU and the impact thereof will ensure that Lagos continues to set itself apart, support its developmental aspirations and highlight its sustainability efforts at the global green and sustainable financial ecosystem. We are excited about this opportunity to support the developmental aspirations of Lagos.”
Also, FSD Africa CEO, Mark Napier, saluted the Governor’s energy and his commitment towards providing infrastructure which future generations can rely on.
He said: “It’s truly a significant event that the economic powerhouse of Africa’s largest economy is signing the green bond investment and I can say this is leadership being demonstrated by the Lagos State Government. I expect other States to follow this path.”
The high point was the signing of the MoU by all parties under the supervision of the State Attorney General and Commissioner for Justice, Moyo Onigbanjo, SAN and witnessed by the British Deputy High Commissioner, Ben Llewelly-Jones.
Federal Government to End Petrol Subsidy by June 2022 as World Bank Condemns N2.9 Trillion Funding
The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, said the Federal Government had made plans for petrol subsidy only up to the end of June 2022.
The minister disclosed this while speaking at the 27th National Economic summit on Monday in Abuja.
She said the Federal Government only factored in subsidy for the first half of the year. In the second half of the year, the Government is looking at complete deregulation of the sector, thereby saving foreign exchange and potentially earning more from the oil and gas industry.
This comes as the World Bank decried the continued spending by the Nigerian Government on petrol subsidy, which it said is on track to gobble up to N2.9 trillion this year. The Country Director for the World Bank in Nigeria, Shubham Chauduri speaking at the National Economic Summit, said the country could channel money being spent on petrol subsidy to primary healthcare, basic education, infrastructure such as rural roads, and industries.
He went on to say that Nigeria is on track to spend N2.9 trillion on Petrol subsidy this year, more that is spent on health in the country, and likened Nigeria to a malnourished individual needing urgent treatment.
He said “I think the urgency of doing something now is because time is going in terms of retaining the hope of young Nigerians in the future and potential of Nigeria. The kinds of things that could be done right away – the petrol subsidy; yes, I hear that six months from now, perhaps with the Petroleum Industry Act coming into effect, it might go away. But the fact is, can Nigeria afford to wait six months? There is a choice being made; N2.9 Trillion to Petrol subsidy which is depriving states of much-needed revenue to invest in basic services.
Meanwhile, the Chairman of the President Economic Advisory Council, Prof Doyin Salami, said he had argued for a very long time that petrol subsidy needs to go.
A petrol subsidy is a program in which the Government or any other organization pays for a portion of gasoline, heating oil, or some other fuel. Nigeria is the biggest producer of crude oil in Africa but still needs to import Petrol, this situation made subsidizing petrol necessary as the exchange rate in which it is being imported puts the price out of the reach of the average consumer.
FIRS Proposes Road Infrastructure Tax
The Federal Inland Revenue Service (FIRS) says it is proposing the introduction of Road Infrastructure Tax in Nigeria, to make the informal sector contribute to building a modern society.
The Executive Chairman of the FIRS, Muhammad Nami, disclosed this on Thursday while receiving a delegation of the Nigeria Union of Journalists (NUJ) led by its National President, Chris Isiguzo, in his office, in Abuja.
Mr. Nami reportedly said the proposed Road Infrastructure Tax, to be administered by FIRS, will provide the government with adequate funding for road construction, rehabilitation, and maintenance, as well as providing the needed security for roads in the country.
According to the FIRS Executive Chairman, “The only way to make the informal sector contribute to building a modern society is by making them pay when they use the roads.” He stated.
“That is why we are proposing that government should consider introducing Road Infrastructure Tax in Nigeria.“
He noted that “in many jurisdictions, road users pay for the use of road infrastructure as such it shouldn’t be seen as an additional burden on our citizens because it has the potential of making life better for all of us.”
Speaking further, Mr Nami stated that Nigeria’s economy presently relies heavily on non-oil revenues to discharge its statutory responsibility of paying salaries and providing social amenities to the citizenry.
“Without the tax that you pay governments at all levels would not be able to fulfill their mandate to the electorates. Tax money also helps to ensure the roads you travel are safe and always in good condition,” he said.
Mr. Nami also stated that despite sharp practices by some companies who were in the habit of evading taxes, by shifting their capital and profits to tax havens, as well as low revenue from Petroleum Profit Tax, due to the shortfall in crude oil production among other factors, the FIRS has been putting forward critical reforms that have been yielding positive impact on the Service’s operations.
“Adopting technology in tax administration is crucial in improving domestic revenue mobilization in view of dwindling oil prices in order to avoid falling into a debt crisis. It is against this backdrop that the TaxPro-Max became the channel for filing Naira-denominated tax returns effectively from 7th June 2021.
“The TaxPro-Max enables seamless registration, filing of returns, payment of taxes and automatic credit of withholding tax as well as other credits to the Taxpayer’s accounts among other features. The technology also provides a single-view to Taxpayers for all transactions with the Service,” Mr. Nami explained.
The tax agency official also noted that the management of the Service had established two critical units, the Intelligence, Strategic Data Mining & Analysis Department (ISDMA) and the Tax Incentive Management Department (TIMD) as part of institutional reforms to generate more revenue and forestall revenue leakages.
“While the TaxProMax will serve as the flagship tool for mining data, it will be complemented by other tools that the Intelligence, Strategic Data Mining and Analysis Department department may deploy, with the data engineers in the Department carrying out necessary distillations.
“Management also established the Tax Incentive Management Department to manage, implement and report on tax incentives as provided by relevant extant laws and regulations. The TIMD is specifically in charge of the tax affairs of companies/enterprises enjoying tax exemptions and holidays. Companies enjoying Pioneer incentives, Non-Governmental Organizations (NGOs), Cooperative Societies, companies in Export Processing Zones (EPZ), Free Trade Zones (FTZ), Oil and Gas Export Processing Zones (OGEFZ), those engaged in Downstream Gas Utilization and all others enjoying tax holidays are being managed by the TIMD to forestall revenue leakages, such that these companies/enterprises do not use their status as a cover to earn taxable income and refuse to pay tax on such income,” the FIRS chief said.
He added that the service created 10 Value Added Tax (VAT) Regional Coordination Offices across the country to drive the collection of VAT.
COVID-19 Has Permanently Lowered Path of Real GDP in sub-Saharan Africa – IMF
The IMF is predicting that the pandemic has permanently lowered the path of real GDP in sub-Saharan Africa, suggesting a loss of real per capita output of close to 5.6 percent in the latest issue of the sub-Saharan Africa Regional Economic Outlook report released Thursday (October 21) in Washington, D.C.
“We estimate that sub-Saharan Africa’s economy will grow by 3.7 percent this year and 3.8 percent in 2022. The recovery is being supported by favorable external conditions on trade and commodity prices. It has also benefited from improved harvests and increased agricultural production in a number of countries. And the recovery, of course, follows the sharp contraction in 2020 and is, of course, very much welcome,” said Abebe Aemro Selassie, head of IMF’s African Department.
The region is on a different recovery path from much of the world. Such global divergence, which is expected to persist over the medium term, reflects sub-Saharan Africa’s slow vaccine rollout and stark differences in policy space.
“Sub-Saharan Africa has been hit by a third wave of the pandemic, this time with the more contagious Delta variant, with infection rates often rising to triple, quadruple the rates seen in earlier waves. Thankfully, this wave has now eased over the past months or so, but there is little reason to believe that there won’t be repeated waves going forward. This is also because vaccination efforts in sub-Saharan Africa have been slower than other regions due mostly to stockpiling by advanced countries, export restrictions by major vaccine manufacturing countries, and additional demands for booster shots that we’re seeing in advanced economies that could further compromise supply. At the moment, only around 3 percent of the population in sub-Saharan Africa has been fully vaccinated, in sharp contrast to most advanced economies that are close to the 60 percent or more level of vaccination,” explained Selassie.
The region’s recovery remains highly vulnerable to changes in the global outlook, including a tightening of global financial conditions.
“Policymakers in sub-Saharan Africa need to navigate an increasingly difficult and complex policy environment. Against the backdrop of a context of weaker than expected growth, policymakers need to navigate among three formidable pressures, pressing spending needs to address the many social and human capital and infrastructure needs they face, limited borrowing capacity given the already high public debt levels in most cases, and the time consuming and politically difficult nature of mobilizing tax revenues. How deftly countries navigate this trilemma, as we’ve been calling it, will have a huge bearing on macroeconomic wellbeing of countries as well as economic growth prospects,” said Selassie.
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