Finance

Nigeria Launches Bold Tax Reforms to Wean Off Foreign Borrowing and Boost Economic Sovereignty

Published

2 months ago

August 9, 2023

Company Income Tax (CIT) - Investors King

President Bola Tinubu has unveiled an ambitious plan to bolster revenue collection and reduce the nation’s heavy reliance on foreign borrowing.

The president plans to streamline revenue collection while broadening the tax base to encompass a larger portion of the population.

Nigeria’s tax-to-GDP ratio is one of the lowest in the world at a mere 10.8% in 2021 and has prompted the administration to target a robust 18% within the next three years as work on aligning more closely with the World Bank’s recommended 15%-20% range for African countries.

The government projects that the reforms could raise $26 billion in revenues separate from those recouped from the scrapping of a gasoline subsidy that cost $10 billion last year and the removal some exchange rate restrictions

This proactive approach, if successful, could catapult Nigeria’s economic standing on the international stage.

Taiwo Oyedele, the visionary leader of the newly established panel charged with reshaping the nation’s fiscal policy.

“There’s a huge tax gap,” Taiwo Oyedele, head of a newly formed panel to revamp the country’s tax system and fiscal policy, said at an event on Tuesday in the capital, Abuja. “What that means is as of today, without introducing any new taxes, if you get everyone that needs to pay their taxes to pay, we will not be where we are.”

His candid assessment highlights the untapped potential within Nigeria’s population and the government’s determination to harness it for the country’s progress.

“Our revenue generation falls below even African standards, yet our collection costs are among the highest,” Oyedele, a former fiscal policy partner and Africa tax leader at PricewaterhouseCoopers LLP, said. The panel plans to slash the number of agencies that collect tax.

Muhammad Nami, the head of the Federal Inland Revenue Service, disclosed that Nigeria’s tax collection has witnessed substantial growth in recent times. In the first half of 2023, the nation amassed a record-breaking 5.5 trillion naira ($9.7 billion) in taxes. Moreover, the government has set its sights on an even more ambitious target of raising 25 trillion naira in 2024, signifying an unprecedented commitment to economic self-sufficiency.

Nigeria has forecast that it will raise about 7.5 trillion naira ($9.7 billion) in taxes in the second half of 2023, after a record haul of 5.5 trillion naira in the first six months of the year. It raised 10.1 trillion naira of taxes last year and set a target to raise 25 trillion naira in 2024, according to Muhammad Nami, head of the Federal Inland Revenue Service.

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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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Finance

Nigeria’s Tax Revolution: Shifting Burden to the Wealthy and Streamlining the System

Published

3 days ago

September 29, 2023

Samed Olukoya

President Bola Tinubu’s administration is set to revolutionize the nation’s tax system.

The ambitious plan seeks to redistribute the tax burden, making the wealthy pay their fair share while stimulating business growth through corporate tax cuts.

The cornerstone of this tax reform initiative is a push to increase Nigeria’s tax revenue from 11% to 18% of Gross Domestic Product (GDP) within three years.

Spearheading this transformation is Taiwo Oyedele, who leads a panel appointed by President Tinubu.

Oyedele articulated the primary objectives of the reform, saying “We aim to make the rich pay what is fair and protect those in poverty.”

This move is crucial in a country where extreme wealth disparities persist, with only a small fraction of the population enjoying immense riches.

Notably, the plan also includes a reduction in the corporate income tax rate, which currently stands at an effective rate of over 40%.

The aim is to benchmark this rate against Nigeria’s international peers, fostering a more business-friendly environment.

Nigeria’s tax system has long been plagued by complexity, with nearly 70 different taxes and overlapping jurisdictions.

The reform initiative seeks to simplify this by streamlining tax structures and drastically reducing the number of taxes to single digits.

Also, a tax amnesty is under consideration, aimed at encouraging tax compliance and offering relief for past debts. The hope is that by fostering transparency and accountability, more Nigerians will willingly contribute to the country’s fiscal health.

In a nation where government debt has surged dramatically in recent years, this tax revolution is seen as a pivotal step towards reducing the deficit and ensuring sustainable economic growth.

Finance

Federal Government’s $3 Billion Rescue Plan to Bolster Naira Stability

Published

3 days ago

September 29, 2023

Samed Olukoya

The National Economic Council (NEC) has confirmed the deployment of the $3 billion emergency loan-for-crude oil, secured by the Federal Government in August, for the stabilization of the national currency.

The naira’s value has been under siege, with fluctuations in the Investors & Exporters’ window and a parallel market rate that briefly hit N1000/$ this month.

Addressing reporters following the 136th NEC meeting at the Aso Rock Presidential Villa, Nasarawa State Governor Abdullahi Sule expressed confidence in the plan.

He stated, “With the plan that will come out and with all these items that have been listed on the improvement of revenue, the $3 billion shall be useful to us down the line.”

The emergency loan, secured from Afrexim Bank, was initially intended to relieve pressure on the naira, facilitate the settlement of taxes and royalties in advance, and provide the Federal Government with vital dollar liquidity for naira stabilization.

The recent nomination of Olayemi Cardoso as the new Central Bank of Nigeria (CBN) governor by President Bola Tinubu has already shown promise.

The naira experienced a boost in the black market, strengthening by N10 against the dollar, closing at N990/$1.

Governor Sule indicated that the implementation of the intervention would require careful planning and time.

He emphasized the need for the new CBN team to devise effective strategies. In response to inquiries about a supplementary budget, Sule stated that there is no immediate need for one, as the situation does not warrant it.

As Nigeria’s economic landscape faces evolving challenges, the NEC’s decision to harness the $3 billion loan offers a glimmer of hope for a more stable naira in the near future.

Finance

Former FIRS Chairman Muhammad Nami Accused of Controversial N6 Billion Payments After Sudden Exit

Documents reveal questionable approvals and alleged backdating, raising concerns over financial misconduct

Published

4 days ago

September 28, 2023

Samed Olukoya

Muhammad Nami, the former chairman of the Federal Inland Revenue Service (FIRS), is under scrutiny for approving payments totaling N6 billion to contractors and consultants just days after his abrupt removal from office.

Documents obtained by TheCable shed light on these controversial transactions.

Nami, who was succeeded by Zacchaeus Adedeji, greenlit the payments on September 16, two days after his removal on September 14.

Sources privy to the situation, although not authorized to speak publicly, claim that Nami directed staff to work over the weekend to finalize these transactions.

Additionally, files were allegedly moved from the FIRS headquarters to his residence, where they were purportedly “backdated and signed.”

Perhaps the most eyebrow-raising revelation is that Nami transferred approximately N5 billion from the FIRS account to the Joint Tax Board (JTB) without apparent justification.

It is reported that the FIRS director of finance and accounts reluctantly approved these payments after warning Nami about potential repercussions.

Nami allegedly reassured his subordinates that the incoming FIRS chairman would remain oblivious to these approvals.

Also, documents indicate that Nami approved significant payments, including N1.4 billion for a ‘Business Case for Strategic Leadership’ retreat, N250 million for FIRS Data Mining Management and Analytics in Taxation Course, and N221 million for a ‘Skill Development and Management Improvement Workshop Training.’

Curiously, Nami also appropriated over N81 million for a study visit to the Inland Revenue of Malaysia.

The FIRS, when contacted for comment, remained tight-lipped about the situation. Spokesperson Abdullahi Ismaila stated that he had no knowledge of the payments, while Tobi Johannes, Nami’s former media aide, distanced himself from the matter, emphasizing that his role ceased when Nami’s tenure ended.

These revelations have ignited concerns about financial misconduct within the FIRS and have raised questions about the oversight and accountability of government agencies. The full extent of these allegations is yet to be determined as investigations into the payments and their legitimacy continue.