Connect with us
nairametrics
UBA ads

Business News

Finance Minister, Zainab Ahmed says Nigeria’s VAT collection rate is low

The Minister of Finance has lamented Nigeria’s poor collection rate of VAT, saying it is 0.2%, lower than the African average of 0.33%.

Published

on

taxes, tax, IMF, business, FAAC disbursed N617billions in April, as South-South scoop N72billions, VAT, Finance Minister, Zainab Ahmed says Nigeria VAT collection rate is low, NBC, Rite Foods, others to pay new tax as FG identifies new revenue streams ,,Finance Minister reveals how World Bank, AfDB pushed FG into requesting Chinese loan 

As the Nigerian Government is trying to raise revenue through the increase of Value Added Tax (VAT), the Minister of Finance, Budget and National Planning, Zainab Ahmed has lamented Nigeria’s poor collection rate of VAT, saying it is 0.2%, lower than the African average of 0.33%.

This was made public at the 25th Nigerian Economic Summit (NES) yesterday.

UBA ADS

[READ MORE: Famfa oil boss, Folorunso Alakija reacts to VAT increment]

Reasons for VAT increase: Zainab Ahmed said poor collection rates, the need to meet capital expenditure and raise funds to finance the new wage requirement were reasons behind the proposal to raise VAT from 5% to 7.5%.

This Administration remains committed to increasing finance for investment health and education, to improve our human capital development indices. However, our target is also to increase funding for capital expenditure such that this constitutes at least 30% of Federal budgeted expenditures. Given these aspirations, the government has been compelled to review our fiscal policies including the proposed VAT rate increase.”

GTBank 728 x 90

Nigeria’s VAT as a share of GDP in Nigeria has declined from 1% in 2010-2013 to 0.8% in the last four years (2015 – 2018). This is significantly below the median of 5 percent of GDP in other comparable African countries. Nigeria’s low VAT-to-GDP is attributable to the low nominal VAT rate, which at 5% is the lowest in the African region (which averages at about 16%)” she noted adding that the efficiency of VAT collection, at 0.2, is well below the African regional average of 0.33,” Zainab said.

Recent Developments: Earlier in June, Zainab Ahmed stated that an upward review of VAT was a follow up on the agreement reached between the Federal Government and Labour Unions following the minimum wage increase. She stressed that such a marginal increase in VAT would enable the government to handle the incremental cost of increasing wages.

Minister of Financ, Zainab Ahmed

Similarly, the Federal Inland Revenue Service (FIRS) has announced that effective from January 2020, it would begin to impose VAT on online transactions, both domestic and international.

The commencement date of the VAT charges on online transactions, according to Fowler, would be subject to the government’s approval.

app

[READ MORE: Senate rejects VAT increase, proposes 9% tax on SMS, Data usage, others]

devland

What you should know: If approved by the federal lawmakers, the new VAT rate would take effect in 2020. In Nigeria, VAT replaced the sales tax in 1994 and was pegged at 5% by the military government of Sani Abacha.

In 2007, former President Olusegun Obasanjo increased VAT to 10% on the eve of his departure from office but it was reversed by his successor, Umaru Musa Yar’Adua, following opposition from the labour union.

In the meantime, despite wide criticisms that have greeted both the online VAT and the 7.5% VAT increase, the Federal Government considers it as the most potent channel to meet the new minimum wage implementation.

Reincarnated as a lover of stocks, Angel investors, seed funds, and anything aligned to tech or startups raising money, Joseph's work at Nairametrics involves following the money to wherever it leads. Before joining Nairametrics, he won an investigative journalism fellowship with ICIR, appeared in several national dallies, with hard-hitting opinions, features and investigative pieces. He has also engaged in content marketing and copywriting for a top e-commerce firm in Nigeria.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Coronavirus

COVID-19 reveals that many Nigerians have no emergency savings

The playout of events following the lockdowns resulting from the ongoing COVID 19 pandemic shows that Nigerians do not have emergency savings

Published

on

COVID 19 Shows that Many Nigerians have No Emergency Savings

Though we are still grappling with the effects  of COVID-19, it may not be too early to begin to take stock and find out what we did well during the pandemic and what we should have done better.

Almost everyone’s radar has been on the ill-preparedness or lack of appropriate response by the government, with little or no time for an inward look at ourselves. The type of government we have in Nigeria should not have left anyone surprised at their response to the pandemic, especially when it came to the welfare of the populace. What do you expect from a government that is dysfunctional, at best?

UBA ADS

With such government, it is time for Nigerians to begin to watch out for themselves and prepare for the unforeseen, like the times we are in currently. The playout of events following the lockdowns caused by the ongoing COVID-19 pandemic shows that Nigerians do not have emergency savings.

According to a recent publication from the Punch Newspaper, “Barely one month of a lockdown of Abuja, Lagos and Ogun state, millions of Nigerians had become stricken with hunger. Many could not bear an extension of the movement restrictions.” The ensuing protests were indicative of the fact that many Nigerians were living off their daily incomes with no savings to fall back on.

High Poverty Level

GTBank 728 x 90

Many may have asked how they could save without having funds, to begin with. Agreed, the level of poverty is high in Nigeria; however, people should know that having savings is not a luxury, but a necessity. It does not have to be large, but putting aside something, no matter how small on a regular basis goes a long way in times of emergency.

I have seen images of Nigerians who surprised themselves and others with how much they saved over time in their piggy banks. There is no hard and fast rule of how much one should have in emergency funds, but there seems to be an agreement among financial analysts and planners that having the equivalent of 6 months’ expenses in your emergency savings account is the ideal.

The author of the book “Richest Man in Babylon” stated it clearly that if you do not save, it means that you have paid everyone else but yourself.

How to Start Saving

Pay yourself first: In line with the instructions in “The Richest Man in Babylon,” when you receive your monthly salary or collect that sales proceed from your business, “pay yourself first” by saving at least 10% of your collections or salary. For the salary earner, set up a direct deposit account where the money would be taken out of your pay directly into a bank savings account. By so doing, you are forced to save.

(READ MORE: If you experience these signs then know your salary is not enough)

app

Cultivate the savings habit: Just as spontaneous buying is a habit, form the habit of saving. Do not see saving as putting aside the remnants (if any) after all your expenses. If that is your attitude to savings, then you fall into the group that pays everyone else but themselves.

devland

One thing is certain; as long as you have the money, there will always be something that is going to demand that money from you.

COVID 19 Shows that Many Nigerians have No Emergency Savings

Remind yourself to save: If you are a salary earner who does not want to set up a direct deposit from your paycheck or you are a businessman or woman of any means, you can set up a savings reminder around the time you receive your salary or around your peak business time.

One website that can help you with this is https://www.futureme.org/  With this website, you can send an email to yourself to be delivered around the time you expect to receive your pay or business income, reminding yourself to save. Just like you set an alarm on your mobile phone, you can do so with a reminder to save.

Start Small ASAP: The Bible says that if you are not faithful with small things, how can you be faithful with larger things. You do not need millions to start saving, all you need is the will, the determination, and consistency. So, start small and start now, but be consistent.

app

Reduce your Expenses: As already noted, one of the reasons that people do not save is because their expenses keep increasing, even when income sources are shrinking. If you find yourself in that situation (and you surely will, at one point or the other), cut down on your expenses and make them fall in line with trends in your income. Avoid spontaneous, emotional and flamboyant buying. Buy out of need, not out of want.

(READ MORE: Between saving, investing, speculating, trading & gambling)

Why It Seems Difficult to Save: To a whole lot of people, it is difficult to save because they live in the now. This is what financial psychologists call scarcity of attention. This scarcity of attention stops people from seeing what is really important and makes them see the urgent current expenses they need to cover.

5 Money Mistakes You Might be Making, COVID 19 Shows that Many Nigerians have No Emergency Savings

One reason why it is difficult to save is that while the expenses keep rising (out of increased need and inflation), sources of income keep shrinking or stagnating. The good thing however, is that we have the option to shrink our expenses in line with shrinkages in our income, but often times, we do not choose to do that. That is where the inability to save starts from.

Conclusion: If there is any lesson, we learned from the sudden outbreak of COVID-19, it is and should be that emergencies happen, and efforts should be made to cushion the financial impact of such emergencies by preparing for them in advance through emergency savings.


 

Written by  Uchenna Ndimele uchenna@mutualfundsnigeria.com

Continue Reading

Business News

IMF advises banks to suspend dividend payment

However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.

Published

on

IMF discloses immediate priority , Reduce funding oil subsidy - IMF to Nigeria , IMF: 40% of African countries can't pay back their debts , Nigeria among countries that pushed Global debt to $188 trillion - IMF , Coronavirus: World Bank, IMF to support Nigeria and other member countries affected, IMF, World Bank to hold meetings via conference call over Coronavirus epidemic, IMF advises banks to suspend dividend payment

In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.

According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.

UBA ADS

IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.

READ MORE: State Governments: Another cycle of non-payment of salaries to begin soon

In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).

GTBank 728 x 90

However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.

Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.

(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)

Deal book 300 x 250

That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.

IMF advises banks to suspend dividend payment

app

 

devland

CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,

app

NIGERIA.

 

 

 

Continue Reading

Economy & Politics

CBN reduces MPR to 12.50%, holds other metrics

Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.

Published

on

IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.

Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja.  Meanwhile, other parameters such as the Cash Reserve Ratio  (CRR) remained at 27.5%, Liquidity ratio at 30%.

UBA ADS

READ ALSO: Bankers decry rise in public debt, weak economy

Highlights of the Committee’s decision

  • MPC cuts MPR by 100 basis points to 12.50%
  • CRR stood at 27.5%
  • The Liquidity Ratio was also kept at 30%

Get the Nairametrics News App

GTBank 728 x 90

READ ALSO: Nigeria’s total debt to hit N33 trillion – Senate

According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate  was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.

He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.

READ MORE: AfDB’s Akinwumi Adesina hits back, denies allegations against him

On reopening of the economy, Emefiele emphasised the need for Government to work towards a gradual reopening in line with recommendations of the Presidential Task Force (PTF) and advice from medical experts, insisting that efforts must be directed at saving not only lives but also livelihoods. He said,

app

“This is to enable the resumption of economic activities necessary to stimulate growth, accelerate the pace of recovery and restore livelihoods, particularly the vulnerable in our society.

devland

“With respect to output, the Committee urged the Federal Government to continue exploring options of partnership with the private sector to fund investment in infrastructure. This would aid employment generation, support production and boost output growth.”

Continue Reading