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FG rejects calls for tax reduction, offers tax relief for donors to intervention funds

FG has rejected calls from some experts for reduction of taxes as part of the palliatives to reduce the adverse socio-economic effect of the coronavirus.

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FG warns Nigerians about on-going N3million COVID-19 grant scam, IMF, World bank loans, Over 56% of 2019 budget expenditure was released for capital projects , FG changes decision to sell stake of oil assets in JVs, Finance Bill: Nigeria exempts small businesses from Company Income Tax , Finance Bill is for the good of Nigerians – Finance Minister, Zainab Ahmed, Nigeria, five other West African countries reject ‘Eco’ as ECOWAS single currency, FG rejects calls for tax reduction, tax relief for donors to intervention funds, Nigerian economy going into recession, might contract by -8.9% - Finance Minister, Nigeria to spend $33.20 billion in 2021 up 17.2%, will spend 25% of budget on debt servicing - Finance Ministry, COVID -19: FG accesses $750m loans from World Bank for states

The Federal Government has rejected calls from some critics for the reduction of taxes as part of the palliatives to reduce the adverse socio-economic effect of the coronavirus outbreak.

This was disclosed by the Minister for Finance, Budget and National Planning, Zainab Ahmed, on Tuesday, April 7, 2020, during an interview on a monitored television programme.

The Minister said the government would rather be looking at the option of tax deferral than tax reduction, as the tax deduction might not really have the desired effect.
She said that the corporate organizations and individuals could get tax relief based on their donations towards the relief fund for the COVID-19 pandemic.

During the interview, the Minister said, “It was fortuitous when we did the finance bill in 2019, we were looking at how to strengthen the economy and enhance the growth of small-medium businesses and we made a provision that now allows by law for small businesses to pay no company income tax, so they pay zero tax and the medium-sized businesses paid a reduced tax of 20%’

‘’This is an action that other countries are taken now, but this is something we had planned not even knowing that there was going to be an economic downturn.

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‘’Then I said for the big corporates whose companies’ income tax is at 30%, we are going to be looking at options of deferral, not reduction of taxes, so we could defer their taxes, and also encouraging corporate or even individuals to support the COVID-19 response and any support you provide will be tax-deductible, so it’s also a tax relief.”

[READ MORE: FG sets committee to support tech start-ups with affordable internet access amid lockdown)

Going further, Ahmed said that government was engaging various sectors of the economy to find out what they needed to make them function better, as they might require different incentives other than tax reduction.

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While answering questions, she said due to the recent economic downturn and low revenue, government had to do a review of the development and agreed to redirect resources to first of all, solve the current health crises occasioned by the coronavirus pandemic, continuous payment of salaries and pensions.

The minister expressed fears that if the trend continues, Nigeria might go into recession in 2020, so to prevent that, government has to take some radical and unusual decisions.

President Muhammadu Buhari, early this year, signed the new Finance Bill that increased VAT rate from 5% to 7.5% with some critical goods being exempted. The bill was meant to help boost government revenue while also protecting the micro, small and medium businesses.

The statement by the minister will definitely dampen the hopes of experts who had called for reduction or even suspension of taxes as some form of relief for households and businesses during this economic downturn and lockdown globally.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Financial Services

CBN to bar exporters with unrepatriated export proceeds from banking services

The CBN will from January 31, 2021 bar all exporters with unrepatriated export proceeds from accessing banking services.

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CBN to restrict foreign exchange on more food imports

The Central Bank of Nigeria (CBN) has announced the prohibition of all Nigerian exporters who are yet to repatriate their export proceeds, from banking services effective from January 31, 2021.

The apex bank had in an earlier circular warned that failure to repatriate exports within 90 days for oil and gas and 180 days for non-oil exports constitute a breach of the extant regulation.

Analysts believe that the directive is part of a monetary control mechanism by policymaker to maintain relative stability in the exchange rate, especially after the pandemic created a wide disparity between the official exchange and the parallel market rates, eliminating incidences of over-invoicing, transfer pricing, double handling charges, etc.

In lieu of this, all concerned exporters are urged to comply with the directive before the specified date.

What you should know

  • According to Bloomberg sources, the new directive applies to exports up until June last year.
  • In a bid to ensure prudent use of foreign exchange resources, the Central Bank of Nigeria had earlier instructed authorised dealers and exporters to only open forms M for letters of credit, bills for collection and other forms of payment

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Financial Services

Niger Insurance Plc gets shareholders nod to restructure business

Niger Insurance Plc has announced plans to restructure its insurance business into distinct but mutually dependent business entities.

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Edwin Igbiti

Niger Insurance Plc has obtained shareholders’ approval to restructure its insurance business into general, life and business insurance, with each segment to be structured as a separate legal entity.

This is part of the resolutions passed at the 50th Annual General Meeting of Niger Insurance Plc., held on 20th of January, 2021 at Peninsula Hotel in Lekki, Lagos.

The decision to restructure the company is in a bid to make it more efficient and profitable to stakeholders, especially as efforts are geared towards overturning a loss of about 1,1723.2% Year-on-Year, earlier made by the company in its last reported financial statement, Q2, 2020, as reported by Nairametrics.

Other key decisions reached at the 50th AGM include;

  • The re-appointment of Mr Ebi Enaholo and Mrs. Olufemi Owopetu as Directors of the company.
  • Acceptance of the presented financial statement for the year ended December 31, 2019 and the report of the audit committee, directors and auditors.
  • Directors were authorized to fix the remuneration of the auditors.
  • Directors were authorized to appoint external auditors to replace retiring auditors of the company.
  • The appointment of four individuals as members of the audit committee.
  • A decision to restructure the company’s business capital was also reached.

In case you missed it: The shareholders of Niger Insurance Plc in the 49th Annual General Meeting approved the decision by the company’s board to raise additional capital to the tune of N15 billion, in a bid to meet the revised recapitalization targets for general and life insurance companies.

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What you should know: The House of Representatives had in December 2020 directed NAICOM to suspend the mandatory deadline for the first phase of 50%-60% of the minimum paid-up share capital for insurance and reinsurance firms.

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Energy

Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure

ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil exports as production resumes.

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ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil export terminal, as crude exports resume for the first time in almost six weeks after a fire at the terminal halted operations.

This is according to a company spokesman yesterday, who confirmed the company had lifted force majeure on Qua Iboe crude loadings.

Qua Iboe production started to ramp up to normal levels of 200,000 b/d in the past week, according to sources, with the release of both the February and March loading programs.

The VLCC Dalia was also in the process of loading a 1-million-barrel stem at the Qua terminal since January 21, 2021, according to data intelligence firm Kpler. This will be the first export of Qua Iboe since December 15, 2020, after a fire hit the facility and injured two workers.

The company has been under pressure since the closure and prices have taken a hit as a result of the disruption. S&P Global Platts last assessed the grade at a discount to Dated Brent of 50 cents/b, down from a premium against the benchmark in December.

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Bonny Light, a mainstay Nigerian crude which typically trades at roughly the same level as Qua Iboe, was last assessed 30 cents/b higher.

What they are saying

One trader said: “If you get a cargo of Qua now it could be 50 cents to a dollar below Bonny even – a January cargo is completely out of cycle and the reliability issues mean people won’t touch it.”

Another trader stated that: “[The return of Qua Iboe] is not what West African crude assessments (WAF) differentials needed.”

What you should know

  • Qua Iboe is one of Nigeria’s largest export grades, and is very popular among global refiners, with India, the US, Canada, Italy, Spain, Indonesia, and the Netherlands being key buyers.
  • Qua Iboe is light sweet crude, which has a gravity of 36 API and sulfur content of 0.13%. The crude, produced from fields 20-40 miles off the coast of southeast Nigeria, is brought to shore at the Qua Iboe terminal via a seabed pipeline system.
  • Indian demand has steadied following a buying spree late last year, and European demand has been hit by renewed coronavirus lockdowns in the region.
  • Prices for Nigerian crude have suffered in recent weeks, even with lower supply due to the outage.
  • February and March loading programs have been issued for Qua Iboe averaging 169,643 b/d and 153,226 b/d respectively.
  • Production of this key grade ranged between 180,000-220,000 b/d in 2020, according to S&P Global Platts estimates.

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