Economy

Nigerian Manufacturers Witness a 29% Surge in Income Tax Payments in Q1 2023

Nigerian manufacturers paid 29% more income tax in the first quarter (Q1) of 2023 than in the same period of 2022, according to the latest report from the National Bureau of Statistics (NBS).

Published

3 months ago

June 19, 2023

Samed Olukoya

Nigerian manufacturers paid 29% more income tax in the first quarter (Q1) of 2023 than in the same period of 2022, according to the latest report from the National Bureau of Statistics (NBS).

The report showed that manufacturers operating in the country paid N62 billion in income tax in the quarter under review, compared to N44 billion paid in the first quarter of 2022.

The sector contributed the most in income tax payments followed by the information and communication technology (ICT) and financial services sectors.

In addition to the rise in income tax payments, VAT collections from manufacturers also saw a notable boost to N129 billion, a 13% increase from the N112 billion reported in the corresponding period of 2022.

The NBS report showed a 60% increase in the total taxes paid by manufacturers to the Federal Government in 2022 as manufacturers paid N839.6 billion, up from N524 billion reported in the previous year.

Furthermore, the statistics reveal a substantial increase in manufacturing company income tax, soaring from N235 billion to N468.59 billion. VAT collections from the sector also experienced a significant upturn, climbing from N288.4 billion in 2021 to N477.43 billion.

It is important to note that these tax figures represent the income tax and VAT payments made by manufacturers and do not encompass other duties and levies paid to other government agencies, such as the Nigeria Customs Service.

However, the sharp rise in tax rates has not been without its critics. Last month, Francis Meshioye, the President of the Manufacturers Association of Nigeria, urged the Federal Government to reconsider the 2023 Fiscal Policy Measures scheduled to take effect on June 1, 2023.

Meshioye expressed concern over the exponential and burdensome increase in excise duties, particularly targeting the beer and tobacco industries. The excise on beer products surged by approximately 200%, while the tobacco industry faced a tax burden five times higher than other sectors.

He said, “The rate of increase is exceptionally excessive and not consistent with best practice globally. For instance, the excise for beer was effectively increased by about 200 per cent, translating to a tripling of excise on the product.

“The increase is coming at a time when the manufacturing sector is immersed in unprecedented crisis and an acute recession, due to extraordinary challenges, namely: sustained scarcity of naira, which has led to a crash in consumer purchases; limited access to foreign exchange, which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs; record inflation, which further drive up cost of operation and prices of products and a struggling economy.”

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Samed Olukoya

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

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Economy

FG Pays N169.4 Billion for Subsidy in August to Keep Pump Price at N620/Litre

Published

2 days ago

September 21, 2023

Samed Olukoya

Amidst President Bola Ahmed Tinubu’s repeated assurances of subsidy removal, it has come to light that the Federal Government disbursed N169.4 billion as subsidy payments in August to maintain the pump price of petrol at N620 per litre.

This revelation has raised eyebrows and ignited discussions about the future of fuel subsidies in Nigeria.

Investigation, backed by a document from the Federal Account Allocation Committee (FAAC), reveals that the Nigerian Liquefied Natural Gas (NLNG) paid $275 million as dividends to Nigeria through NNPC Limited. Out of this, NNPC Limited allocated $220 million (equivalent to N169.4 billion at N770/$) to cover the Petroleum Motor Spirit (PMS) subsidy, keeping it artificially low.

This move effectively indicates a resurrection of the subsidy system, which the government had promised to eliminate.

Under former President Buhari’s administration, Nigeria saw record-high spending on petrol subsidies. Reports from the Nigeria Extractive Industries Transparency Initiative (NEITI) show that subsidies cost N1.99 trillion from 2015 to 2020.

In 2021 alone, NNPC reported a subsidy cost of N1.57 trillion, with an additional N1.27 trillion from January to May 2022. The government had allocated N3 trillion in the budget to cover subsidy costs from June 2022 to June 2023, amounting to N7.83 trillion spent on subsidies during Buhari’s tenure.

Global oil market dynamics are further complicating the subsidy issue. Brent crude prices exceeded $95 per barrel, while the naira depreciated against the US dollar, undermining Nigeria’s pledge to remove petrol subsidies.

Despite higher international crude prices and exchange rate pressures, the government has held the pump price at N620/litre.

The situation has also strained petroleum marketers, who face rising international prices, a weakening naira, and government-mandated price caps. International petrol prices, exchange rates, and additional costs have collectively driven up the landing cost of PMS to about N728.64 per litre.

The government’s strategy to sustain the N620 per litre price involved a $3 billion crude repayment loan with Afrexim Bank to bolster the naira. However, this loan has reportedly stalled due to the withdrawal of other lenders.

While the government claims the subsidy is a temporary measure to ease the economic burden on Nigerians, experts argue that it highlights the need for a functional refinery and currency stability.

Without these factors in place, petrol prices will remain susceptible to fluctuations in global oil markets and exchange rates, potentially impacting the masses.

Economy

The Federal Inland Revenue Service (FIRS) Reports Significant Growth in Nigeria’s Tax-to-GDP Ratio

Published

3 days ago

September 20, 2023

Investors King

The Federal Inland Revenue Service (FIRS) announced that it successfully increased Nigeria’s tax-to-Gross Domestic Product (GDP) ratio from 6.0 percent to 10.86 percent in 2022.

The revelation came during a sensitization program held yesterday in Lagos by the Director of Taxpayer Services at FIRS, Mrs. Saidatu Yero.

Mrs. Yero conveyed the agency’s commitment to further enhancing the nation’s tax-to-GDP ratio, with ambitious targets of 16.5 percent, aligning with the African average and subsequently aiming for 18 percent within the next three years.

Mrs. Yero proudly stated, “The FIRS Management has executed commendable reforms that have fundamentally transformed the landscape of tax administration in Nigeria, leading to a substantial increase in revenue collection for the government.”

The agency reported that its innovative measures have already culminated in the generation of N8.5 trillion as of September 14, 2023, demonstrating its unwavering commitment to achieving N12 trillion in revenue for the year 2023.

Elaborating further, Mrs. Yero said, “One of the primary objectives of the FIRS Management is to prioritize a ‘customer-centric’ approach, recognizing taxpayers as our key stakeholders within the tax ecosystem. To ensure that taxpayers comprehend their tax responsibilities and rights, it is imperative that we continuously inform, sensitize, engage, and educate them, facilitating their compliance without any hindrance.”

Addressing the event’s theme, “The Finance Act as an Innovation in the Nigerian Tax System,” Mr. Temitayo Orebajo, the Director of the Tax Policy and Advisory Department at FIRS, said that the 2023 Finance Act introduced substantial amendments to seven tax laws, four non-tax laws, and a total of 30 sections, signifying a significant leap forward in the country’s tax framework.

Economy

Euro-Area Inflation Eases, Fueling Debate on ECB’s Rate Hike Course

Revised Data Shows Modest Slowdown, But ECB Officials Divided on Further Hikes

Published

3 days ago

September 19, 2023

Investors King

In a surprising turn of events, revised data released today has revealed that inflation in the Eurozone moderated slightly in August, offering fresh fodder for the ongoing debate within the European Central Bank (ECB) on the necessity of further interest-rate hikes.

The latest figures show that consumer prices increased by 5.2% in August, down marginally from the initial reading of 5.3% while core inflation, excluding volatile elements like food and energy remained stable at 5.3%.

While the ECB recently raised the borrowing costs for the tenth consecutive time to 4%, the new data is reigniting discussions on whether this tightening cycle has concluded.

ECB Vice President Luis de Guindos, along with Madis Muller of Estonia and Peter Kazimir of Slovakia, have expressed their belief that the latest data supports the idea that no more interest-rate hikes are needed.

However, President Christine Lagarde has pushed back against such assumptions, and other hawkish officials from Austria, Latvia, and Slovenia argue that further moves may still be required to combat inflation effectively.

Economists, including Maeva Cousin of Bloomberg Economics, anticipate a marked deceleration in both headline and core inflation for September, potentially offering the ECB’s Governing Council the reassurance needed to assess whether the hiking cycle should indeed come to an end.

As Bank of France Governor Francois Villeroy de Galhau noted, the current rate is a “plateau,” and decisions will hinge on how inflation evolves as the economic “illness” diminishes.

In the face of these ongoing debates, patience remains key, with the ECB closely monitoring economic developments to determine the appropriate course of action for monetary policy.