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Federal High Court suspends Lagos State Consumption Tax and Fiscalisation Laws





The Federal High Court (FHC) recently issued an Order restraining Lagos State Government (LASG) from enforcing both the Hotel Occupancy and Restaurant Consumption Law (Law) and the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulation (Regulations) pending the hearing and determination of the case.

Background Facts

In January 2018, Lagos State Internal Revenue Service (”LIRS”) issued the Regulations introducing Electronic Fiscal Devices (EFD) to effectively administer Consumption Tax. See our alert here. However, the Registered Trustees of Hotel Owners and Managers challenged the legality of both the Law and Regulations.

The substance of the suit is that since the Value Added Tax (VAT) contains provisions relating to consumption it had ‘covered the field’ and as such, no State law can impose any similar tax. The questions before the FHC are summarized below:

  1. Whether the VAT Act has not ‘covered the field’ on taxation of goods and services including those consumed in hotels, restaurants and event centres in Lagos State?
  2. Whether the Regulations are valid in view of the VAT Act?
  3. Whether by s. 7(1) of the VAT Act, the Federal Inland Revenue Service (FIRS) is the only agency to administer consumption tax in hotels, restaurants and event centres in Lagos State?

Doctrine of Covering the Field

The Doctrine of ‘Covering the Field’ operates in a federal system like Nigeria where legislative power is shared between the Federal and State governments. It requires that where a federal law regulates an item over which both the Federal and States have shared competence to legislate, then a State cannot introduce any other law inconsistent with the federal law.

Other decisions and legislation

In 2013, the Supreme Court (“SC”) in Attorney General Federation v Attorney General Lagos, when asked to determine who had powers to regulate hotel registration and licensing, held that only States could regulate licensing of hotels (see our alert here.) Though the SC decision was silent on whether Consumption Tax was inconsistent with VAT, it could be inferred that since States can regulate hotels and event centres, they can also impose Consumption Tax in such places.

In 2015, the Taxes and Levies (Approved List for Collection) Act was amended to include ‘Hotel, Restaurant or Event Centre Consumption Tax’ as one of the taxes which States can impose and collect. Consequently, some States introduced Consumption Taxes to operate alongside VAT.

In December 2017, the Supreme Court in Attorney General of Lagos State v. Eko Hotels Limited & Federal Board of Inland Revenue held that the VAT Act had covered the field of consumption tax as such any similar tax such as Sales Tax would be invalid. The Court also held that Sales Tax would result in double taxation.


The current suit provides an opportunity for the court to determine the constitutionality of Consumption Tax given that, like VAT, it also imposes 5% on some taxable goods and services. Under a federal system, States may claim a right to impose Consumption Tax since the Nigerian Constitution does not give the Federal government exclusive powers to legislate on taxes imposed on hotels, restaurants and event centres.

It is expected that the dispute would go all the way to the SC given that the Constitution does not vest either the State or Federal Government any exclusive or concurrent power to legislate on consumption tax.

A much earlier decision of the SC in Attorney General of Ogun State v. Aberuagba and Others alluded to the fact that States could be allowed to regulate intra-State trade and commerce provided such regulations do not conflict or interfere with interState trade and commerce.

The implication would be that goods and services consumed within a State would be liable to a State Consumption Tax Law whereas any inter-State consumption or sales should be liable to VAT. Alternatively, VAT could be centrally legislated but administered by states similar to personal income tax. This would address the concerns of double taxation and unfairness in the horizontal distribution of VAT amongst States (currently 50% Equality, 30% Population and 20% Derivation).

Pending when the FHC Order is reversed or vacated, Lagos state may not impose or enforce the tax.


This article was sent in by PwC

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Airtel Nigeria announces appointment of Surendran as new Chief Executive Officer

Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new MD/CEO with effect from August 1, 2021.



Like MTN, is Airtel Nigeria considering listing?

Telecommunications giant, Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new Managing Director and Chief Executive Officer with effect from August 1, 2021.

Surendran would be replacing the outgoing Managing Director and Chief Executive of Airtel Nigeria, Olusegun Ogunsanya, who has been elevated to the position of Chief Executive Officer of Airtel Africa Plc with effect from October 1, 2021.

According to a report from the News Agency of Nigeria, this disclosure is contained in a statement issued by Airtel on Wednesday, May 5, 2021, in Lagos.

READ: Airtel Africa signs new $500 million loan with Bank of America, HSBC, others

The statement says that Surendran would also be appointed to the Executive Committee (ExCo) as Regional Operating Director, reporting to the CEO of Airtel Africa plc, and onto the Board of Airtel Networks (Nigeria) Limited.

Airtel in its statement said, “Surendran has been with Bharti Airtel since 2003 and has contributed immensely in various roles across customer experience, sales and business operations.

He was the Chief Executive Officer of Karnataka, which is the largest circle in Airtel India, with over one billion dollars in revenue.

Surendran delivered an exceptional performance with significant movement in Revenue Market Share (RMS) over the last few years, currently at 54 percent. He has over 30 years of business experience, including 15 years at Xerox.’’


Airtel said that Surendran would transition into his new role from June 1, 2021, and spend the time onboarding into the business until July 31, 2021.

READ: Meet the latest billionaires on the Nigerian Stock Exchange

In case you missed it

It can be recalled that a few days ago, Airtel Africa Plc, a leading provider of telecommunications and mobile money services in Nigeria and 13 other countries, announced the appointment of Mr Olusegun Ogunsanya as the new Chief Executive Officer, following the notice of retirement given by the current Managing Director/Chief Executive Officer, Raghunath Mandava, to the Board.

In the notification sent by Airtel Africa to the Nigerian Exchange, Ogunsanya is expected to join the board of Airtel Africa with effect from October 1, 2021.

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Our First Bank loan is being serviced, reduced by 30% in 2 years – Honeywell Group

The credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.



Billionaire watch: Oba Otudeko’s stakes in Firstbank and Honeywell are worth N10.3 billion

The Honeywell Group has said that its loan with First Bank is being serviced as the conglomerate had reduced the facility by 30% in the last two and half years.

This was disclosed by the Group via a statement issued on Sunday and seen by Nairametrics.

According to the statement, the company and the bank have had a professional business relationship since 1975, which preceded the group’s investment in the bank over a decade later.

According to the Honeywell Group, the credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.

The Group further explained that following agreed terms, its facilities are adequately secured with First Bank with collaterals in place at over 170% of forced sales value and 230% at open market value.

It stated, “In 2015, First Bank under the directive of the Central Bank of Nigeria, drew our attention to a 2004 circular (BSD/9/2004) which requires that insider related facilities must not exceed 10% of paid-up share capital.

Based on this directive we subsequently entered negotiations with the bank to agree on an appropriate repayment structure and the final negotiated position was duly approved by the CBN.

In addition to the above, First Bank, on the directive of CBN, requested additional security in the form of FBN Holdings Plc shares held by the Chairman of Honeywell Group, Dr Oba Otudeko citing a 2001 circular. This was duly provided through an authorisation to place a lien on the shares.”

Honeywell Group has continued to meet all its obligations on its facilities with the bank according to agreed terms and has reduced its exposure by nearly 30% in 2.5 years. The facilities were charged at market rate and the bank continues to earn significant interest therefrom.”

What you should know

  • Nairametrics had reported when the Central Bank of Nigeria directed Honeywell to fully repay its obligations to First Bank within 48 hours, warning that failure to do so would cause the CBN to take regulatory measures against the insider borrower and the bank.
  • The Chairman of Honeywell Group, Oba Otudeko, also served as Chairman of FBN Holdings Plc until he was asked by the apex bank to go along with other directors on Thursday.
  • The apex bank had noted in a letter last Wednesday that First Bank had yet to comply with regulatory directives on divesting its interest in Honeywell despite several reminders.
  • Also, the CBN asked First Bank to forward evidence involving the divestment of interest in Honeywell Flour Mills and Bharti Airtel Nigeria Ltd within 90 days.

Download (PDF, 525KB)

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