Finance

Foreign Firms Repatriate $5.86 Billion from Nigerian Economy in 6 Months

Published

4 weeks ago

September 5, 2023

The Central Bank of Nigeria has revealed that foreign firms repatriated $5.86 billion from the Nigerian economy during the period between October 2022 and March 2023.

This disclosure comes from the bank’s latest ‘Economic Report, First Quarter 2023.’

The majority of these repatriated funds, approximately $5.13 billion, took the form of dividends paid to foreign investors.

However, this surge in dividend payments to non-residents has led to an expansion of the deficit in the primary income account, which reached $2.69 billion in Q1 2023, up from $2.26 billion in Q4 2022, according to the report.

The primary income account encompasses the compensation of employees and investment income. As the Quarterly Statistical Bulletin (Volume 11, Number 3, September 2022) explains, investment income includes profits, interest, dividends, royalties, and other income received by or paid to both direct and portfolio investors.

It can also comprise interest and commitment charges on loans (Other Investment Income).

Breaking down these figures, the Central Bank stated that the primary income account deficit expanded by 18.7%, largely due to a 34.9% increase in investment income payments to $3.09 billion, up from $2.77 billion in 2022Q4.

Direct investment income in the form of dividends saw a 12.1% increase to $2.71 billion, compared to $2.42 billion in the previous quarter.

Similarly, interest payments on portfolio investments rose to $0.09 billion, up from $0.05 billion in 2022Q4, while interest earnings on reserve assets increased by 35.7% to $0.20 billion, up from $0.15 billion in 2022Q4.

In contrast, interest payments on loans declined slightly by 0.7% to $0.30 billion.

The compensation of employees’ account, on the other hand, remained in a surplus position, rising by 6.2% to $0.06 billion in comparison to the previous quarter.

A 2019 report titled ‘Current Account Balance and Economic Growth in Nigeria: An Empirical Investigation’ highlights that the primary income account has consistently shown a deficit due to increased debt service payments and repatriation of dividends, income, and profits by foreign-owned companies.

This outflow of funds has been a hindrance to the development of the Nigerian economy, diverting foreign exchange resources that could be used for growth and development.

The report notes that profits that should be reinvested for economic growth are being sent overseas by foreign-owned companies operating in Nigeria.

In recent years, there has been a reduction in the net deficit in the income account due to lower outpayments of dividends and distributed branch profit and other interest payments.

A recent report highlighted that foreign airlines managed to repatriate $4.66 billion from Nigeria through ticket sales over 15 months.

However, these airlines still faced challenges in accessing their funds due to the scarcity of foreign exchange supply in the country.

President Bola Tinubu, in his inaugural address, pledged to address these issues, stating, “I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxation and various anti-investment inhibitions. We shall ensure that investors and foreign businesses repatriate their hard-earned dividends and profits home.”

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Finance

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

Published

2 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

2 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

3 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.