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No where to hide with VAIDS




Reminiscing my days in school, the scene of an interesting public finance class in my final year keeps popping up. It pointed out self interest (of politicians and bureaucrats) as the justification for hike in public expenditure according to Buchanan’s Public Choice Theory. For the very first time, an exposé by a lecturer attracted so much attention that rounds of applauds accompanied. This inspired this write-up concerning VAIDS please enjoy.

It’s no news that the Nigerian economy which has been pampered by black gold (oil) for several years suffered a set-back in 2014. Prior to 2014, the tiers of government had been so carried away by juicy oil revenues that it soon forgot to monitor the tax compliance of citizens.

However, the downswing of both price and quantity due to international (US shale) and domestic (pipeline attack) reasons respectively culminated in a recession and called for alternative sources of revenue. Although, the government initially resorted to blocking leakages for corruption through the consolidation of public revenues into a Treasury Single Account as well as the establishment of a whistle-blowing unit, yet like Oliver Twist, the eyes of the Federal Government were still red for more cash.

In the midst of the recession, the government retraced its steps by reviewing its adherence to the Keynesian prescription for public revenue – “Taxes” as opposed to oil price benchmarks that has been relied on as the chief source of revenue. However, this time the government simply advises the defaulters to confess their sins in full and receive forgiveness on certain conditions. Thus. average tax evader finds himself in what is christened “The Prisoner’s Dilemma”.

The Prisoner’s Dilemma theory is a concept in game theory used to analyse the rational behaviours of two alleged thieves with no established evidence to prosecute them. They are locked up in different cells and enticed to confess in order to lessen their jail terms. If one confesses and the other declines to, the jail term of the former is reduced while the latter faces a longer jail term and vice-versa. However, if both confess, they would serve an equal jail term. If neither of them confesses, they would suffer a shorter jail term. Obviously, silence appears to be the best option, but their captors have an unfair advantage – since they are not interrogated in the same place, the other could be lured to betray his ally. In other words, each prisoner pre-empts that his co-prisoner will act in self interest in order to reduce his sentence by confessing. Eventually, both confess and serve an equal jail term. Therefore, such a situation where individual choose an unfavourable outcome over the best outcome due to information asymmetry is what is commonly referred to as the Prisoner’s Dilemma.

Lets take a look into preparatory investigations for the case at hand;

According to statistical records, Nigeria has a 6% tax-to GDP ratio compared to 26.2% in South Africa, however there’s more to this information than meets the eye, below are some mouth-watering findings–

  • Out of 14 million registered labour force, 96% are captured through the PAYE tax system while only 4% (or 560,000) file returns through direct assessment as self-employed and high net-worth individuals.
  • Only 943 people pay N10m or more in personal income tax (including 214 who paid N20 million or more)
  • 941 of them reside in Lagos and 2 in Ogun state. This implies that there is no billionaire or multi-millionaire in other states and the FCT. This is a pointer to gross evasion or under payment of taxes by high net worth individuals.

In response to this, the Federal Government has astutely devised a fair hit below the belt in fishing out looted funds from their captors by capitalising on the betrayal of accomplices or acquaintances. You know well what I’m talking about – Whistleblowing. In fact, unlike the conventional game theory, one of the prisoners wilfully presents himself to the authorities, admitting he has information about public monies that cannot be seen by banking revolutionary technologies (like BVN). Like the biblical Joseph who was dumped in a pit but was later needed to solve the then global famine, public funds kept hostage in apartments and graves happened to be a source of replenishment to the depleting national treasury.

In order to solve the massive evasion plague, the government embraced a successful fiscal policy that has been tested in over 40 countries in past years. On the 29th of June, 2017, VAIDS was born.

Short for Voluntary Assets Income Declaration Scheme, VAIDS is an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities. Defaulters are obliged to make full and honest disclosure in return for some incentives – waiver of interest and penalty, immunity from prosecution, confidentiality of information supplied, exemption from tax  audits for the periods covered by the disclosure and flexible payment of tax due.


On the flip side, non-compliant evaders are to pay interest and penalties in addition to full payment of tax liabilities. In addition, they will undergo comprehensive tax audits, face prosecution and risk having their names published in the “name of shame” list. When a similar list was released in Greece, 4000 people were named including a famous basket ball player and musician. This happens to be a strong emotional downplay on tax defaulters as the anticipated damage of personal image from such an occurrence could be irrecoverable.

Initially, tax evaders were given 9 months to reconcile their tax records and take advantage of the programme. However, the deadline was recently extended to 30th of June, 2018 as various professional bodies, institutions and individuals have constantly bombarded the hotlines so as to reconcile their tax positions few days to the eve of the new deadline that clashed with a festive period.

Interestingly, another dilemma comes up in the mind of the average evader. How will the government dig up the dirt? What if I am not captured in the exercise? Could there be enough information available to the tax authorities?

A sneak into the tax man’s files reveals desperate measures in tracking down non-compliant evaders including reviewing BVN records, forex allocation returns and Bureau de Change records, ownership of prime properties, land ownership records, private jet ownership records, whistle-blower tips amongst other data sources.

Skimming through the information on the official website, I was taken aback by the depth of investigations carried by the authorities in tracking down defaulting “entertainers”. In short, tax officials are going to take advantage of self-announced assets, tours and invitations so as to evaluate their tax compliance. No wonder, like the markets, entertainers have suddenly become discreet on display of personal assets for popularity gains.

On a more serious note, international sources have joined hands in helping in the dedicated search for evaders. For example, the Unexplained Wealth Order established by the United Kingdom (one of the countries with the best property markets in the world) enforces outright seizure and takeover of properties with unclear sources of funding. VAIDS provides an escape route to an UWO action provided the individual can provide evidence of tax payments regardless of when the property was purchased.

Given the attention of the authorities in this exercise and partnership with international forensic firms, the Central Bank, EFCC and various organisations, an average evader is left with no other option but to regularise his status in due time as the benefits outweigh the costs.

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Compliance would make the government more accountable to the people. If people pay taxes duly, people would want to monitor their hard-earned contribution to the national treasury. This will increase non oil revenue, reduce debt burden, improve credit ratings, stabilise exchange rate, control inflation, encourage savings and investment as well as enhance the quality of lives.

With access to this information, I feel the uncertainties have been demystified and the puzzle solved. It’s a win-win situation for all and sundry. Hence, declare and keynesize our economy again.

Are you compliant?

Keep paying your taxes

Are you defaulting?

Take advantage of VAIDS

Unlike AIDS, VAIDS no dey kill o



Omoyemi Ibukun is writing from Lagos

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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    GlaxoSmithKline in big trouble as losses mount

    The results were less than impressive with several key indicators showing a year-on-year decline.



    GSK Consumer Nigeria Plc records 3.34% increase in 2020 9M revenues.

    GlaxoSmithKline Consumer Nigeria Plc (“GSK Plc” or “the Company”) is a public limited liability company with 46.4% of the shares of the Company held by Setfirst Limited and Smithkline Beecham Limited (both incorporated in the United Kingdom), and 53.6% held by Nigerian shareholders.

    The ultimate parent and controlling party is GlaxoSmithKline Plc, United Kingdom (GSK Plc UK). The parent company controls GSK Plc through Setfirst Limited and SmithKline Beecham Limited.

    The Company recently published its unaudited first quarter (Q1) 2021 consolidated financial statements for the period ended 31 March 2021.

    READ: GSK Consumer Nigeria Plc records 3.34% increase in 2020 9M revenues

    The results were less than impressive with several key indicators showing a year-on-year decline. For example, Group revenue (turnover) declined from ₦4.99 billion in Q1 2020 to ₦3.46 billion in Q1 2021 a drop of over 30.66%. The revenue drop was due to a sharp decline in the local sale of its healthcare products.

    Total loss after tax as of Q1 2021 was ₦238.07 million compared to a profit after tax of ₦113.47 million for the same period to Q1 2020.

    The company is essentially divided into two segments viz: Consumer Healthcare and Pharmaceuticals. While the Healthcare segment was largely profitable in Q1 2021 (making a profit before tax of ₦ 8.73 million by March 31, 2021, the pharmaceuticals segment made a loss of ₦262.93 million in the same period.

    READ: GlaxoSmithKline Nigeria announces changes in its board


    The Consumer Healthcare segment of the company consists of oral health products, digestive health products, respiratory health products, pain relievers, over the counter medicines, and nutritional healthcare; while the pharmaceutical segment consists of antibacterial medicines, vaccines, and prescription drugs. While goods for the consumer healthcare segment are produced in the country, the pharmaceuticals are all imported.

    The largely imported pharmaceutical products are thus exposed to the vagaries of foreign currency fluctuations coupled with a negligible to no revenue from the foreign sale of its healthcare products (same as in Q1 2020) as it barely exports its products out of the country.

    The cost of importing the antibacterial, vaccines and prescription drugs, and the significant local operating expenses wiped off the marginal gross profits made by the pharmaceutical segment of the company. In effect, the gross profit of ₦508.12 million made by the pharmaceutical segment of the company was eliminated by an operating expense of ₦735.7 million and this resulted in a net loss for the pharmaceutical segment of the business.

    READ: Nigerian Breweries posts N7.66bn as Q1 2021 profit, shares gain 2.2%

    Apart from the impact of imported pharmaceutical products as already discussed, other issues that affected the company’s Q1 2021 results and are likely to continue to affect its performance in future include:

    1. A limited product mix that has only the likes of Macleans and Sensodyne (Oral Healthcare); Pain relievers (Panadol and Voltaren); Digestive Health (Andrews Liver Salt); and Respiratory Health (Otrivin and Panadol Cold and Catarrh) all within the Consumer Healthcare segment.
    2. Increased competition, particularly from local pharmaceutical manufactures of similar over the counter medicines and other prescription medications and vaccines.

    In addition, in October 2016, GSK Plc divested its drinks bottling and distribution business that manufactures and distributes Lucozade and Ribena in Nigeria, and other assets including the factory used for the drinks business to Suntory Beverage & Food Limited. The loss in revenue from these popular brands continues to impact its topline.

    GlaxoSmithKline (GSK) is a global healthcare company and is well-known and acknowledged for its pioneering role in discovering and distributing vaccines for the likes of hepatitis A and B, meningitis, tetanus, influenza, rabies, typhoid, chickenpox, diphtheria, whooping cough, cervical cancer and many more.

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    It is also renowned for its manufacture and distribution of prescription medicines such as antibiotics and treatments for such ailments as asthma, HIV/AIDS, malaria, depression, migraines, diabetes, heart failure, and digestive disorders.

    Perhaps GSK Plc’s fortunes may change if the company is able to obtain the parent company’s licence to manufacture GSK-owned vaccines and prescription medicines within the country while also exploring the possibility of extending the sale of its products outside the shores of the country.

    Since different expertise is required for vaccines and prescription drug manufacture and distribution as compared to manufacture and sale of consumer healthcare products, perhaps another alternative may be for the company to create two separate companies with one company being a 100% vaccines and prescription drug pharmaceutical manufacturing and distribution company while the second company specializes entirely in the manufacture and sale of consumer healthcare products.

    As a result of the Q1 2021 performance, the company’s earnings per share (EPS) dropped to -20 kobo compared to the 9 kobo earnings per share reported in Q1 2020. At the start of 2021, GSK Plc’s share price was ₦6.90 but the company has since lost over 10% of its price valuation as the company’s share price closed at ₦6.20 on April 30, 2021.

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    NB Plc’s share price and dividends keeping shareholders happy

    It was not all hunky-dory for the company as its cost of sales jumped from N48.3 billion in Q1 2020 to N66 billion in Q1 2021.



    Jordi Borrut Bel, Nigerian Breweries Plc

    Nigerian Breweries Plc (“NB Plc” or the “Company”) reported its first-quarter (Q1) 2021 results on April 23, 2021.

    The company’s performance was impressive considering the headwinds it faced late in 2020 and early 2021 from inflationary pressures, poor consumer purchasing power, lethargic economic growth, and increase in the company’s beer prices which took effect from Q4 2020.

    The company achieved a net revenue for the three months to March 31, 2021 of N105.68 billion compared to N83.23 billion for the same period to March 31, 2020 — a 27% increase compared to the Q1 2020 results.

    It also achieved a N39.67 billion gross profit — a 13.7% increase in gross profit compared to Q1 2020.

    Quarter-on-quarter EBITDA rose by 22.8% from N19.82 billion in Q1 2020 to N24.34 billion in Q1 2021. Other positive outcomes quarter on quarter were the increase in operating income (from N10.94 billion to N14.49 billion), profit before tax (from N8.3 billion to N11.51 billion), and profit after tax (from N5.53 billion to N7.66 billion).

    It was not all hunky-dory for the company as its cost of sales (direct costs attributable to NB Plc’s production) jumped from N48.3 billion in Q1 2020 to N66 billion in Q1 2021, an increase of N17.7 billion. According to the company, its costs are subject to seasonal fluctuations as a result of weather conditions and festivities. As a result, the company’s results and volumes are dependent on the performance in the peak‐selling season, typically resulting in higher revenue and profitability in the last quarter of the year.

    The total cost of sales, marketing and distribution, and administration expenses grew from N72.47 billion in Q1 2020 to N91.63 billion in Q1 2021 – a jump of 26.43%. This jump was largely attributable to the cost of raw materials and consumables which grew to N46.53 billion (compared to N30.2 billion for the same period in Q1 2020).

    The raw materials cost pressure has been a trend since Q2 2020 driven by the rising commodity prices, foreign exchange devaluation and domestic inflationary pressures. As a result, the cost of the raw materials to net income ratio has continued to rise. This ratio was 36.3% in Q1 2020 but has risen to 44% in Q1 2021.


    What may be a source of particular concern for the company is how well working capital is being managed from a liquidity and leverage perspective. The company reported cash and cash equivalents of N30.37 billion in Q1 2020, this had dropped to N18.43 billion by Q1 2021. In the same period, trade debtors and other receivables (i.e., those that owe the company for purchases that have not been paid for) had increased from N11.42 billion in Q1 2020 to N23.48 billion in Q1 2021, an increase of over 105% in just 12 months!

    More worrying, in terms of magnitude, are trade creditors and other payables (i.e., those that the company owes payments for goods and services purchased) which grew from N139.2 billion in Q1 2020 to N145.41 billion in Q1 2021, a rise of N6.21 billion (or 4.5%) in just 12 months.

    While the company’s loans and borrowings had reduced significantly (short-term loans in Q1 2021 was N35.65 billion versus N39.64 billion in Q1 2020; and long-term loans in Q1 2021 was N15.87 billion versus N51,81 billion in Q1 2020), the cost of borrowing, that is, interest expenses that the company paid on borrowed funds, rose from N2.7 billion in Q1 2020 to N3 billion in Q1 2021. This suggests that while short term and long-term borrowing have reduced, working capital needs are being refinanced at a higher cost or alternatively, most of the reduced short term or long-term borrowings have simply been restructured from longer-term loans to shorter-term overdrafts and commercial papers with a higher interest expense. The balance sheet as of Q1 2021 showed a liability in the form of bank overdraft and/or commercial papers of N21.44 billion which was not in the books in Q1 2020.

    The first-quarter report also showed that as of March 31, 2021, the company had revolving credit facilities with five Nigerian banks to finance its working capital with the approved limit of the loan with each of the banks ranging from N6 billion to N15 billion (total N66 billion). N9 billion of the available amount was utilized at end of March 2021 (2020: Nil).

    It should be noted that NB Plc’s financial statements for the 3 months ended 31st March 2021 are yet to be independently audited, so the results may be further improved or be worse, depending on the views and professional opinion of the external auditors in terms of accounting treatments and management judgement on significant transactions.

    From the company’s numbers and explanations, the results are clearly driven by:

    (1) Benefits from its increased pricing with the raised prices taking effect from December 10, 2020. The increases ranged from 5.2% to 6%, mainly on selected brands packaged in aluminium cans and on the 600-ml Star Larger returnable glass bottle.

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    (2) Volume growth in its premium brands (particularly Heineken) and non-alcoholic portfolio (particularly Maltina).

    (3) Relative inelastic demand for its portfolio mix despite price increases, availability of substitutes, and stagnate consumer wages eroded by inflation. In economics, inelastic demand occurs when the demand for a product remains static or changes less than changes in price.

    Overall, the company achieved outstanding results that would have confounded analysts’ estimates. Given continued inflationary trends and currency depreciation, it would be interesting to see whether turnover and profitability growth are sustainable over the remaining quarters of the year. On its financial year 2020 performance, the company paid a final dividend of NGN0.69 in April 2021 (interim of NGN0.25 paid in December 2020). If the trend is sustained, it can only be good news for NB Plc in terms of increases in its share price and dividends for its shareholders.

    Heineken Brouwerijen B.V owns 37.73% of the company to which NB Plc pays annual technical service fees and royalties.

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