Economy & Politics
Petroleum Tax Falls By N390bn – FIRS
The Petroleum Profits Tax collection for the year has dropped by N390bn from a target of N1.48tn to N1.09tn, the Acting Executive Chairman, Federal Inland Revenue Service, Mr. Babatunde Fowler, has said.
According to him, over 200 oil and gas companies operating in the country have not filed their tax returns for the year.
Due to the significant drop in oil prices, he said that a huge gap existed between the revenue generated by the FIRS and the total revenue by other government agencies like the Nigerian National Petroleum Corporation, Department of Petroleum Resources and the Nigeria Customs Service between July and September this year.
Speaking at the KPMG tax breakfast meeting and the unveiling of it’s Tax Risk Management Survey in Lagos on Thursday, Fowler said that while the FIRS contributed N852.365bn to the Federation Account in the three months, the other three revenue generating agencies contributed N491.975bn.
He pointed out that the decline in oil revenue had made it necessary for the Federal Government to focus on non-oil taxes.
As a result, he explained that compliance was expected by all organisations and that the agency was prepared to remove bottlenecks associated with tax collection, adding that one such way was joint tax audits of companies by the FIRS and the states’ Boards of Internal Revenue.
Other interventions, according to him, are “nationwide tax registration drive, with focus on Value Added Tax, which commenced on October 12, 2015, to bring in all unregistered taxpayers into the tax net; 35,650 corporate taxpayers and 22,000 individual taxpayers registered in 26 days.
“A nationwide VAT and Withholding Tax compliance check was also commenced on the same date. Tax registration forms have been simplified for ease of use by taxpayers. The forms, which are currently in use nationwide, were reduced from 13 pages to one page, and the fields to be filled were reduced from 115 to 20 for corporate organisations, and 35 for individuals.”
In addition, he announced that structures that would make compliance easy for taxpayers such as the Integrated Tax Administration System, which would automate the registration, filing and audit of taxes, as well as multiple tax payment channels, such as e-tax pay and VAT auto collect, would be activated in 2016.
The acting FIRS executive chairman noted that the three public notices that had been issued on VAT and WHT compliance check, payment of tax without Tax Identification Number and payment of tax on declaration of interim dividends had generated over N117bn from September to date.
To encourage compliance, Fowler said, “As a start, we have written letters to the major firms, including KPMG, identifying some of their non-compliant clients. KPMG has acted commendably in this regard as a number of its clients have filed returns after we sent out the letter.
“We urge you to ensure that the rest file their returns before the month end.”
Economy & Politics
NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel
The Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.
To cushion against the volatility in the global crude market and strengthen profitability, the Nigerian National Petroleum Corporation (NNPC) has announced that it is building up business portfolios in the housing, power, and medical sectors.
This is one of several measures the corporation is taking to sustain revenue generation for Nigeria, and cope with the boom and bust cycles which are gradually becoming a feature of the global crude oil market.
NAN reports that this was contained in a statement from the Corporation Chief Operating Officer, Ventures and Business Development, Mr. Roland Ewubare, and signed by NNPC Spokesman, Kennie Obateru.
According to Ewubare, the NNPC will establish Independent Power Plants using the Ajaokuta-Kaduna-Kano (AKK) pipeline network, and consolidate its presence in the power sector.
(READ MORE: COVID-19: Nigerians react as CBN partners NNPC to feed, accommodate Nigerian returnees)
The statement reads in part; “NNPC is creating an energy company that would have portfolios in renewable energy; we have initiatives on solar that is ongoing.
“We have got biofuels agreements with some state governments that would soon be activated. We do have a lot of non-core businesses that are aggregated under the Ventures and Business Development Autonomous Business Unit of the NNPC.
“This would be expanded through effective collaboration and partnership with the private sectors,”
Lower costs, more profits
As part of moves to improve profitability, the NNPC also announced plans to drive crude oil production cost down to 10 dollar per barrel by Q4 2021,
This according to the statement would be done by systematically and gradually beating down logistics costs.
The Corporation’s revenue took a major hit in 2020 due to the slump in global oil prices, and this in turn affected the Nigerian budget given that oil proceeds account for a significant fraction of her income.
“When you have a low commodity price regime, as the case now, the only way we are able to squeeze out some reasonable cash and financial gain to the nation is by curtailing and constraining our costs in line with the GMD’s aspiration to push for a 10 dollar per barrel cost of production,” Ebuware said.
(READ MORE: NNPC pipeline vandalism up by 50% in January, may suspend crude oil production)
There is also an ongoing collaboration with selected partners to commercialise flared gas in order to preserve the flora and fauna of the country.
This would be done by converting it to Compressed Natural Gas (CNG) and Liquefied Natural Gas, for sale to consumers.
The NNPC is partnering with private developers to reduce the housing deficit in the country and also partnering with medical centres to provide innovative healthcare for Nigeria.
Business News
The conundrum in the retail pricing of PMS
Considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol.
The decision of the Petroleum Products Pricing Regulatory Agency (PPPRA) to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, to N121.50 per litre from N123.50 per litre has been met with stiff resistance from oil marketing companies (OMCs). The Independent Petroleum Marketers Association of Nigeria (IPMAN) have also stated that it impossible for its members to sell petrol at the new price floor of N121.5 per litre.
We recall that on 18 March 2020, the Federal Government (FG) reduced the retail price of Premium Motor Spirit (PMS) by c.14% to N125/litre from N145/litre, following the global pandemic which led to an unprecedented decline in oil prices and by extension a reduction in the landing cost of petrol. Subsequently, the FG announced a further reduction to N123.50 which took effect on April 1, 2020. Earlier this month, the FG directed a reduction in the pump price of Premium Motor Spirit (PMS) for the third time to N121.50 per litre. We note that the adjustments in the retail price is in line with the directive from PPPRA on a monthly review of the pump price, depending on prevailing market realities.
READ MORE: The good, bad and ugly of low oil prices for Nigeria
In our view, considering the landing cost of petrol is largely influenced by the prices of crude oil in the international market, we think prospects of continued recovery in crude oil prices is likely to put upward pressure on the cost of importing petrol. With the gradual relaxation of lockdown measures by countries who are starting to reopen their economies alongside the historic production cuts of OPEC+ which took effect last month (a 9.7mb/d oil production cut for May and June), we think the risks to oil prices are tilted to the upside in the near term.
Since hitting a two-decade low of US$19.33 on 21 April when the retail price of petrol was pegged at N123.50, brent crude prices have gained c.105% to close at US$39.54 on 3 June. Against this backdrop, we expect that the retail price of petrol should rather be adjusted upwards to reflect current market realities. The current situation appears no different from historical trends where the FG becomes reluctant to effect an upward adjustment in the retail price of petrol during periods of rising crude prices. This has often resulted in the renewed payments of the age-long fuel subsidy. We also think oil marketing companies (OMCs) who have only recently begun to import petrol alongside the Nigerian National Petroleum Corporation (NNPC) due to more favourable pricing could halt importation once again if domestic retail prices become unfavourable.
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Economy & Politics
NLC hastens House of Reps to criminalise casualization of workers
NLC has appealed with Speaker of the House of Representatives to hasten the labour act amendment and put an end to the casualization of workers.
The Nigerian Labour Congress (NLC) has appealed to Femi Gbajabiamila, Speaker of the House of Representatives to hasten the labour act amendment and put an end to casualization of workers.
He added that when amending the Labour Act, labour unions should be made more independent and every Nigerian worker should be allowed to join the union of his choice.
According to the NLC Chairman, Mr Ayuba Wabba, the prevalent practice of casualising workers has become a form of ‘modern day slavery’ and should be ended through legislation, NAN reports.
Wabba, who visited the Speaker, alongside other members of the NLC leadership urged the green chambers leader to strengthen the union through its legislations, as can be seen in other countries.
(READ MORE: Nigerians are enraged as lawmakers reject Innoson cars for latest Toyota Camry)
Gbajabiamila assured the congress leaders that the house of representatives is willing to work with the union, in line with its motto “Nation Building, a Joint Task”.
He noted that the House of Representatives already has plans to amend the Labour Act, and urged the union leaders to speedily bring in their input as time is of essence.
“You should do that on time because time is of the essence so that we pass it very quickly,” Gbajabiamila said.
He assured them that strengthening the NLC, which happens to be an umbrella body of unions in the formal and informal sector, is key as it would encourage a stronger democracy in the country protecting the interest of Nigerians.
READ ALSO: FG exempts tuition fees, basic food items, others from 7.5% VAT
What you should know
Casualisation is the practice of employing temporary staff for short periods and is often aimed at saving costs.
The Labour Act (Amendment) Bill 2019 awaiting second reading by the House proposes criminalising employing of workers on casual contracts beyond six months. It also proposes that any casual workers sacked by an employer after six months will be entitled to the benefits of full-time workers for six months, and prohibits outsourcing to third parties.
