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Investors may lose N2.5 billion annually to VAT enforcement – Reports

Following the expiration of the 5-year Value-Added Tax (VAT) exemption on Stock Exchange transaction commissions, it has been revealed that investors may lose about N2.5 billion yearly as additional costs on transactions.

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Following the expiration of the five-year Value-Added Tax (VAT) exemption on Stock Exchange transactions, it has been revealed that investors may lose as much as N2.5 billion yearly as additional costs on transactions.

Reports said stakeholders in the Nigerian capital market have been expressing concerns on the matter just as the non-reversal of VAT payment takes its toll on stock market transactions.

The reports also showed that market charges have increased total costs of transactions-on both sides (buying and selling) from 3.7% as at July 24 to 3.9% by July 25.

The background: The VAT exemption on stock exchange transactions expired on July 24,  thus investors and dealing members of the capital market are now required to pay VAT for transactions carried out on the NSE.

  • A former Minister of Finance, Dr. Ngozi Okonjo-Iweala, had in 2014 exempted VAT deductions from commissions earned on the traded value of shares, commissions payable to the SEC and commissions payable to the Central Securities Clearing System (CSCS).
  • Following the expiration, the deduction of VAT took effect from on July 25.
  • Hence, the commissions that attracted VAT include the ones earned by Dealing Members on traded values of shares and the ones payable to the NSE and the CSCS.

[READ: NSE to enforce VAT on Stock Market transactions]

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Transactions Cost up: Further details had revealed that the re-imposition of 5% VAT, commission payable to stockbrokers increased from 1.35% per transaction to 1.41%. Commission payable to the NSE also increased from 0.3% to 0.31% while the commission payable to CSCS rose from 0.36% to 0.378%. Besides, investors will pay stamp duty of 0.075% on each transaction.

  • A further breakdown in the report showed that the total costs per transaction on the buy-side increased from 1.72% as at July 24 to 1.79% by July 25, while total costs on the sell-side rose from 2.02%t to 2.12%.
  • Specifically, investors paid an average of N2.49 billion yearly or N207 million monthly, based on transactions in the past two years.
  • This means an estimated additional cost to be paid by investors may be in the region of N2.5 billion

Stakeholders concerns: Meanwhile, stakeholders in the capital market have decried the inconsistency in government’s fiscal policies and its understanding  of the fragile capital market.

According to the Chief Executive Officer of Sofunix Investment and Communications, Mr. Sola Oni, the re-imposition of the VAT was a bad omen for the stock market and  it may further stifle investors’ confidence in the capital market.

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“It will obviously increase transaction costs and make our market more uncompetitive. High transaction cost is at variance with global best practices. The policy is an overkill at a period when investors’ confidence in the market is still fragile,” Oni added.

[READ FURTHER: Here’s how to invest in US stocks from Nigeria]

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Energy

NNPC says local operators must improve capacity to achieve low cost of oil production

The NNPC has mandated local oil companies to improve capacity to so as to reduce oil production cost.

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NNPC unveils covid-19 contacts tracing app, marketers to buy petroleum products online

The Nigerian National Petroleum Corporation (NNPC) has said that indigenous companies operating in Nigeria’s oil and gas sector must upscale their capacity for global competitiveness in order to achieve the target of reducing the cost of oil production in Nigeria on a sustainable basis.

This was disclosed by the Group Managing Director of NNPC, Mallam Mele Kyari, at a virtual stakeholder’s consultative summit which was organized by the Senate Committee on Local Content.

According to a press release by NNPC, which was signed by its Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, the NNPC GMD said that there was need to amend the Local Content Act to reflect current realities in the industry.

Kyari, who was represented by the Group General Manager, Corporate Planning & Strategy (CP&S), Mrs Eyesan Oritsemeyiwa, argued that there was a need to have a legislation to resolve the issues of funding challenges faced by local players, stressing that oil and gas business required high technical skills and competence to compete favourably at the global stage.

Speaking further on the need for greater capacity building on the part of indigenous companies, the GMD said the nation’s education system has a great role to play in the development of highly skilled technical manpower, adding that any legislation on Nigerian content development that fails to embrace issues of investment in the educational system was not likely to achieve much.

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He said, “In terms of the interaction between industry and education, we think these new bills would present a good model that we should work with. People are the greatest assets of any nation. If you have the best brains in the industry today, as long as you are not getting a good replacement for them from the educational sector when they grow old and retire, then your industry will collapse,”

The NNPC boss pointed out that the nation has made some good progress from the era when there was no single indigenous operator in the oil and gas industry to the current situation where local operators have risen to double digits, stressing that the trend should be encouraged.

He praised the National Assembly’s initiative to review and amend the Local Content Act and urged the committee to ensure that it is carried out in a timely fashion in order for the law to deliver maximum value for the nation.

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The GMD commended the legislators for the plan to extend the local content law beyond the oil and gas industry to other sectors of the nation’s economy, stressing that it would open up the non-oil sectors to growth and development.

The local content initiative has been identified as being very critical to the development of Nigeria’s oil and gas sector as the Federal Government plans to reduce the cost of production of crude oil to $10 per barrel in the face of the recent crash in crude oil prices.

The Federal Government has provided the sum of $350 million as the Nigerian Content Intervention Fund to help support local participation in the oil and gas sector.

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Energy

NNPC signs gas development and commercialization deal with SEEPCO

NNPC and SEEPCO have signed a gas development and commercialization deal.

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The state oil giant, Nigerian National Petroleum Corporation (NNPC) has signed a gas development deal with Sterling Exploration and Energy Production Company (SEEPCO).

The agreement between the 2 oil firm is for the development and commercialization of gas from Oil Mining Lease (OML) 143 that could help reduce gas flaring in the country.

The disclosure was contained in a press statement that was issued by the Group General Manager, Group Public Affairs Division of NNPC, Dr Kennie Obateru, on Saturday, September 26, 2020, in Abuja.

According to the statement, the Group Managing Director of NNPC, Malam Mele Kyari, while speaking at the agreement-signing ceremony which held at the NNPC Towers, described the execution of the deal as a great milestone as well as a testament to NNPC’s commitment to facilitating the nation’s transformation into a gas-powered economy.

Kyari disclosed that the deal would not only help reduce gas flaring and its environmental hazards but would also promote gas production and utilization in the domestic market.

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The NNPC boss also commended SEEPCO for its unwavering commitment to gas development and commercialization in the country which has led to the establishment of a Special Purpose Vehicle that will help expand gas utilization in the country as a cleaner, cheaper and more reliable alternative form of energy.

On his part, the Chairman of SEEPCO, Mr Tony Chukwueke, described the deal as an essential partnership that would help the company fulfil the pledge it made to support the efforts of the Nigerian government to eliminate gas flaring by monetizing it.

He commended NNPC and the Group Managing Director for ensuring the execution of the agreement which he described central to the achievement of the company’s cardinal objective of boosting the production of Liquefied Petroleum Gas (LPG), condensate and dry gas for the Nigerian market, adding that the company has invested about $600 million for that purpose.

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This is coming at a time when the Federal Government is shifting focus to gas utilization as an alternative source of energy especially with the increase in the retail pump price of petrol. This is one of the various initiatives by the government as represented by the NNPC towards providing alternative sources of energy.

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Energy

Buhari reappoints 3 Chief Executives of agencies under Federal Ministry of Petroleum

3 Chief Executive Officers of agencies under the Federal Ministry of Petroleum Resources have been reappointed.

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BREAKING: President Buhari retains portfolio as Petroleum Minister

President Muhammadu Buhari has renewed the appointment of 3 Chief Executive Officers of parastatals under the Federal Ministry of Petroleum Resources with immediate effect.

The appointments that were renewed by the president include that of Dr Bello Aliyu Gusau as the Executive Secretary of Petroleum Technology Development Fund (PTDF), Ahmed Bobboi as the Executive Secretary/Chief Executive Officer of Petroleum Equalization Fund (PEF) and Simbi Wabote as Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB).

The disclosure was made through a series of tweet posts by the presidency on its official Twitter handle on Friday, September 25, 2020.

The statement disclosed that the renewal of the appointments followed recommendations to the President by the Minister of State Petroleum Resources, Timipre Syla.

It stated that Dr Aliyu Gusau was credited to have run the PTDF successfully in the past four years, keeping faith with the Seven Strategic Priorities he had introduced in January 2017.

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These are Domestication, Cost cutting, Sustainable funding, Efficient internal processes, Linkages with the industry, Utilization of centres of excellence, and Pursuit of home-grown research.

It also stated that Bobboi got his reappointment for having run PEF in a way that made it a key and strategic player in the administration’s oil and gas reforms, especially in stabilizing the supply and distribution of petroleum products across the country, among others.

Going further, it stated that the NCDMB boss, Wabote, won his pips for managing the NCDMB and completing its headquarters building. Wabote was also credited to have initiated many landmark projects that were widely commended by industry players.

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