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Nigeria’s Tax Structure not Investment-friendly, Says LCCI

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tax relief
  • Nigeria’s Tax Structure not Investment-friendly, Says LCCI

The Lagos Chamber of Commerce and Industry has faulted the renewed tax drive in the Nigerian economy, saying that it was focused more on investors than consumers.

The chamber stated this in a document setting economic diversification agenda for the Federal Government on Sunday.

In the document signed by the Director General, LCCI, Mr MudaYusuf, the chamber stated, “The Federal Inland Revenue Service has scant regard for due process in its drive for revenue. It is, therefore, inherently a disincentive to investment and economic diversification.

“The three tiers of government target investors more than consumers. This is not in consonance with best practice principles in taxation.”

In an economy which is almost 50 per cent informal, the taxation structure is not investment-friendly, the chamber maintained, recommending that the tax structure should be reversed to aid economic diversification.

Yusuf faulted the use of banks as collection agents for the FIRS, noting that it was very disruptive, distracting, arbitrary, oppressive and unfair to investors.

The LCCI insisted that such practice was a serious disincentive to investment and the promotion of financial inclusion.

“This approach should be discontinued. Taxation should not be seen only as an instrument of revenue generation; it is also a potent instrument for stimulation of investment,” he said.

The chamber stressed that for there to be a sustainable economic diversification, the government needed to get the policies, institutions and infrastructure right and ensure they were properly aligned.

It added that the policy mix must be right for the desired outcomes to be achieved.

He advised the Central Bank of Nigeria to moderate its monetary tightening stance adding that this would moderate interest rate and also drive domestic investment.

He said, “It is difficult to drive domestic investment at current levels of interest rate which is well over 25 per cent for most economic players. The economy needs investment, especially domestic direct investment to drive diversification.”

He advised against a foreign exchange regime that ‘perpetuates a rent economy’, saying that it created opportunities for arbitrage, corruption, resource misallocation, impeded the inflow of investment, and created transparency issues in the allocation of forex.

“The current multiplicity of rates is inimical to sustainable economic diversification,” he pointed out.

The chamber advised that trade policies that determine exports and imports should be guided by sectoral competitive and comparative advantage.

“Institutional capacity to enforce the policies should also be considered in trade policy formulation. The Nigeria Customs Service needs to demonstrate better sensitivity to the plight of investors.

“One of the biggest headaches of the business community is the Nigeria Customs Service. Policies should be focused on incentivising resource-based industries which typically have a competitive advantage and good impact on the economy because of the high multiplier effect. The relativity of tariffs between Nigeria and the neighbouring countries should also be considered in the formulation of trade policy.”

Yusuf advised that procurement policy should be structured to favour sectors that had the potential to be diversification champions as well as leading backward integration firms.

He advised government agencies to facilitate investment growth rather than see themselves as revenue generating organs.

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.

Finance

More Retirees Quit Pension Scheme, Collects N28.46 Billion

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Pensioners

114,837 Retirees Quit Pension Scheme, Collects N28.46 Billion

Thousands of retirees whose employers did not adequately fund their Retirement Savings Accounts and retired with balances below N550,000 have collected their contributions and quit the Contributory Pension Scheme (CPS).

A total of 114,837 employees who retired after attaining the age of 50 and had less than N550,000 in their CPS account had collected their contributions and left the scheme as of the end of June 2020.

This includes contributors from the state, federal and private sectors.

In the quarterly report released on Friday by the PenCom, these retirees withdrew a total sum of N28.46 billion since the inception of the scheme till June.

The report showed about 6,561 of the total retirees that left the program were from the Federal Government sector while 3,879 and 104,397 were from the state and private sectors, respectively.

The report also showed that some of those who collected their contributions included foreign nationals who retired and returned to their countries of origin.

A further breakdown showed as of the end of third quarter of 2019, a total of 109,284 retirees with similar low balances withdrew N27.09 billion. While by the final quarter of 2019, 2,241 retirees withdrew about N569.27 million.

In the first quarter and second quarter of 2020, about 2,227 and 1,085 retirees withdrawn N531.95 million and N274.09 million, respectively. Bringing the total from inception to N28.46 billion.

PenCom stated in its Q2 report on en-bloc payments that, “The commission granted approval for the payment of the entire RSA balances of the categories of retirees whose RSA balances were N550,000 or below and considered insufficient to procure a programmed withdrawal or annuity of a reasonable amount over an expected life span.

“Approval was also granted for payment of RSA balances to foreign nationals who decided to return to their home countries after making contributions under the CPS.

“Accordingly, the sum of N274.78m was paid to 1,085 retirees, which comprised 140 from the public sector retirees (FGN and state) and 1,085 from the private sector retirees during the second quarter.

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Finance

Central Bank to Promote Zero Balance Account Opening to Drive Financial Inclusion

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Central Bank

Banks Now Accept Zero Balance Account Opening to Deepen Financial Inclusion

In an effort to boost financial inclusion in the country, the Central Bank of Nigeria has said it would start promoting zero balance account opening to encourage and lure the unbanked into the banking system.

The apex bank disclosed this in its report titled ‘Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021’.

The report read in part, “As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilisation during the 2020/2021 fiscal years.

“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.

“Banks are also encouraged to develop new products that would provide greater access to credit.”

The apex bank said the Shared Agency Network Expansion Facility, launched to deepen provision of financial services in under-served and unserved locations and drive financial inclusion through agent banking, would continue in the 2020/2021 fiscal years.

Banks, mobile money operators and super-agents would also continue to render returns in the prescribed formats and frequency to the CBN.

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Finance

Investors Oversubscribed for FGN Bonds by N205.87 Billion in October

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bonds

FG October Bonds Oversubscribed by N205.87 Billion

The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.

The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.

Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.

The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.

The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.

The amounts allotted for each of the bids were N20bn and N25bn respectively.

According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.

However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.

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