Business News
Nigeria generated N311.94 billion VAT revenue in Q2, highest in 7 years
The latest report released by the National Bureau of Statistics (NBS) shows that Nigeria generated N311.94 billion revenue from Value Added Tax (VAT) in the second quarter (Q2) of 2019.
The latest report released by the National Bureau of Statistics (NBS) shows that Nigeria generated N311.94 billion revenue from Value-Added Tax (VAT) in the second quarter (Q2) of 2019.
According to the report, the VAT generated in the second quarter represents a 7.92% increase in VAT revenue when compared with what was generated in Q1 2019. Also, the sum of N266.7 billion was generated in Q2 2018, as against the N311.94 billion generated in Q2 2019.
VAT breakdown: The report further shows that year-on-year, VAT generated rose by 16.95% in Q2 2019. The VAT generated was put at N269.79 billion in Q1, while it rose to N311.94 billion in Q2 2019.
- Out of the total amount generated in Q2 2019, N151.56 billion was generated as Non-Import VAT locally while N94.90 billion was generated as Non-Import VAT for foreign. The balance of N65.48 billion was generated as NCS-Import VAT.
- A closer look into the report reveals VAT revenue by sector. Other manufacturing, professional services and commercial trading top the chart for the highest contribution of VAT generated.
- Specifically, other manufacturing sectors generated the highest amount of VAT with N34.43 billion and closely followed by Professional Services with N29.58 billion VAT, while commercial and trading ranks 4th to generate N16.27 billion. According to the NBS report, other manufacturing has been the biggest contributor to Nigeria’s VAT in several quarters.
- On the other hand, mining generated the least and closely followed by Pharmaceutical, Soaps & Toiletries and Textile and Garment Industry with N50.60 million, N250.09 million and N316.91 million generated.
[READ MORE: Petrol sells at lowest price in North-East Nigeria – NBS]
Biggest Growth: According to the latest statistics on VAT generated across sectors in Nigeria, this is the biggest quarterly VAT revenue generated in over 7 years.
On the other hand, in terms of growth recorded between Q1 and Q2 2019, transportation and haulage services recorded the biggest growth in VAT revenue. Transportation and haulage services posted 205.35% VAT revenue growth.
Similarly, hotels and catering ranks second in terms of growth in VAT revenue. The sector recorded a 31.38% growth in VAT revenue. State Ministries and Parastatals, Petrol-Chemical and Petroleum Refineries rank top to record with the biggest growth in VAT revenue.
On the other hand, sectors that recorded a major decline in VAT remittances include Mining, Gas, Conglomerate, Pioneering and Stevedoring, Clearing and Forwarding.
More VAT? As published by Nairametrics on Monday, effective from January 2020, the FIRS has announced that it would begin to impose VAT on online transactions, both domestic and international.
Speaking on the new development, the FIRS boss noted that a lot of countries had identified Nigeria as a good market and many of them were into online businesses. He added that there was a need to tap the potentials to generate more revenue for the country.
Upshots: While the Federal Inland Revenue Service (FIRS) recorded the biggest quarterly growth in VAT revenue, it remains unknown if the total tax collection in 2019 would meet the 2019 target. A look at the FIRS website shows that in Q2 2018, tax revenue collection was 77% of the total target.
Recall that the Federal Government recently queried the Chairman of FIRS, Babatunde Fowler, over the shortfalls in tax revenues. The FG questioned the FIRS on why tax revenue shortfall became widened and worse off in previous years (2017 and 2018).
Meanwhile, the FIRS Boss has responded, explaining that the dip recorded in tax in 2015 and 2016 happened because the Nigerian economy nose-dived owing to the global crash in world oil price.
Understanding VAT: VAT is a consumption tax placed on a product from production to the point of sale. It means a higher VAT on goods is borne by the final consumer of such goods.
In Nigeria, VAT is payable on goods and services consumed by any person, whether government agencies, business organization or individuals.
VAT in Nigeria is calculated at a flat rate of 5% of the cost of services and products and is charged on a wide array of goods and services. According to Section 8 sub 1 of the VAT Act, businesses are expected to register for VAT within the first six months of the start of the business in Nigeria.
[READ MORE: FG’s VAT charges on online transactions to commence]
Coronavirus
Lagos to open churches, mosques from June 19, limits gatherings to 40% capacity
Religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
Lagos State government says religious gatherings would be allowed to reopen on June 21, 2020. This was disclosed by the State Governor, Babajide Sanwo-Olu on Thursday during a press briefing at Government House, Marina.
According to the Governor, mosques are to reopen from June 19 while churches are to begin services from June 21 and only Friday and Sunday services should be held for now, as other regular services, including night vigils, must be put on hold.
He said, “There will now be restricted openings of religious houses based on compliance that we have seen and reviewed with the Safety Commission.
“From 14 days time, precisely on the 19th of June for our Muslim worshippers and from the 21st of June for our Christian worshippers, we will be allowing all of our religious bodies to open at a maximum of 40% of their capacity and we’ll be working with them as being expected by the Lagos State Safety Commission.
“But we know that these places of worship have different sizes but even if your 40% capacity is really so large, you cannot have beyond 500 worshippers at once, and keeping that maximum 40% capacity is really important.
“We will be encouraging people to have more than one service and ensure that they keep their premises clean, disinfect before another round of worship can take place.
“We will also be advising that there should only be mandatory Fridays and Sunday services. All other night vigils and services must be put on hold for now until we review our current situation.
Sanwo-Olu added that the state will also be advising that persons below the age of 15 because of how well they walk around should be excused from the places of worship and citizens that are above the age of 65 should not be allowed into these places of worship.
Coronavirus
FG may lift ban on interstate movement on June 21
Interstate movement may resume on June 21.
The Federal Government may lift the ban placed on interstate movements on June 21, 2020.
This was disclosed by special adviser to President Muhammadu Buhari on new media, Bashir Ahmad on Thursday via his Twitter handle.
He stated, “Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr Dani Aliyu, gave the hint recently, as domestic flights expected to resume on June 21.”
READ ALSO: U.S dollar gains, America sanctions Chinese Airlines from flying into the U.S.
Interstate movement may resume on June 21, the National Coordinator of the Presidential Task Force on COVID-19, Dr. Sani Aliyu, gave the hint recently, as domestic flights expected to also resume on June 21.
— Bashir Ahmad (@BashirAhmaad) June 4, 2020
Meanwhile, the FG last Monday, June 1, 2020, announced a cautious advance into the second phase of the national response to COVID-19. As part of the measure in the new phase, the FG has announced the full reopening of the financial sector.
This was announced by the national coordinator of the presidential task force on COVID-19, Dr Aliyu Sani. He said that the banks will now be allowed to operate at normal working hours five days a week as against the restricted time of 2 or 3 pm that was announced during the first phase of the easing of lockdown.
READ ALSO: Osinbajo sets up committee on reopening of Nigerian economy, suspends loan deductions for states
The Presidential Task Force also gave the green light to hotels to reopen but must do so based on the guidelines rolled out by the National Centre for Disease Control (NCDC). They are to maintain non-pharmaceuticals intervention. However, gyms, cinemas, parks, nightclubs and bars are to still remain closed until further evaluation.
The restaurants, other than those in hotels must remain closed to eat-ins but are allowed to prioritize and continue to practice the takeaway measure that has been in place since the first phase.
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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