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Government can unlock N4 trillion by removing these subsidies – PWC

Nigeria’s economy faces a double threat from the coronavirus pandemic and lower oil prices, which have badly affected its revenue

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PwC Nigeria, Taiwo Oyedele

Nigeria’s economy faces a double threat from the coronavirus pandemic and lower oil prices, which have badly affected its revenue and foreign exchange earnings.

In a chat with CNBC Africa, the Partner and West Africa Tax Lead at PwC Nigeria, Taiwo Oyedele, looked at how Nigeria could cope with the strain on revenue targets and options available to the Government.

Oyedele said, ”This is a very difficult time for the global economy, even more still for a developing country like Nigeria where there is a lot of reliance and dependence on crude oil revenue to fund the government as well as foreign exchange earnings”.

In the interview, Oyedele, pointed out that in a web dialogue series, the Minister for Finance, Budget and National Planning, Zainab Ahmed, and other top Government officials handling the economy disclosed that the Government was planning a further downward revision of the 2020 budget oil benchmark to $20 per barrel, which would be too low and probably below production cost.

(READ MORE: Local investors push Nigerian Stocks to post best monthly gains in over 2 years)

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Also, as a result of the impact of the coronavirus pandemic, the Federal Government revised downward the targets of revenue-generating agencies like Nigerian Customs Service, FIRS and others.

Even the recent receipt of the $311 million Abacha loot was deemed grossly inadequate to plug the huge revenue hole, created by the economic crisis.

On the palliative from the tax authority, he feels that the government should come up with measures that will have an immediate impact on businesses and add more cash to their businesses and not just extension of the filing deadline.

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He said, ”What we are seeing mostly from government, has been an extension of filing deadline which means that you don’t have to file your returns now, you can file it later, in a few instances, you have an extension of payment of taxes. Though I see that the extension of taxes will help with the cash flow but extension filing of returns does not solve the problem”.

The PwC tax partner admitted that Nigeria did not have the financial resources of some bigger economies to provide palliatives like cash transfers, so the citizens were in for rough times.

He suggested that although the Federal Government, through the CBN, was providing intervention funds for some SMEs and households, more of the intervention should be targeted at the most vulnerable sectors like hotels, hospitality, aviation, transportation and others. Even at that, special attention should be given to the most vulnerable people in this sector.

READ MORE: GTBank, Access, 2 others pay PWC, KPMG N3.17 billion as audit fees in 2019

Most importantly, Oyedele, said the Government needs to look at how they can raise revenue in these difficult times, without creating economic problems and dislocations.

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He said,  ”Government needs to look at areas where we seem to be wasting revenue, the subsidy is the biggest one. So we have a subsidy on petroleum products, particularly petrol. The government says we have removed subsidy but they are not paying attention to the fact that we have 3 components of subsidy. There is under-recovery, that is what has been removed; there is foreign exchange subsidy, that has not been removed; there is tax subsidy, that has not been removed”.

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These subsidies, which involve spending a lot of resources that could have been added to the country’s revenue, include:

(READ MORE: Manufacturers, construction companies to receive waivers from Lagos State during lockdown ease-up phase)

As for the foreign exchange subsidy, he pointed out that this can be removed by harmonizing the rate at which everyone gets the foreign currency. This will mean not given concessionary interest rates to petroleum products importers, but rather the market-driven rates.

Oyedele said that if you include that the taxes that should be on petroleum products like VAT and Excise duty, then the government should be looking at a revenue of about N2 trillion.

He also said, ”You have subsidy on electricity tariff, that’s about N1 trillion. The government needs to find a way to remove that. You also need to find out how do you harmonize the tax waivers and incentives that are not really adding value to the economy”.

READ ALSO: ABCON president explains how Nigeria is benefiting from the U.S-China trade war

The PwC boss said that by the time you put together the revenue that can be raised by doing away with these subsidies, one can easily raise between N3 trillion and N4 trillion in revenue, even with the biting economy. A tidy sum to help with the challenges faced by the country.

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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Coronavirus

Covid-19: African Union in talks with China and Russia over vaccine

The AU and Africa CDC have revealed that they have reached out to both China and Russia over the possibility of vaccine partnerships.

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Covid-19: African Union in talks with China and Russia over vaccine

The Africa Centres for Disease Control and Prevention and the African Union announced they have been in talks with China and Russia over the possibility of vaccine partnerships to ensure that Africa is not left behind when vaccines become available.

This was disclosed by John Nkengasong, Africa CDC Chief, at the Bloomberg Invest Africa online conference.

Mr. Nkengasong said that Africa would not limit itself to only one vaccine partner and that Africa was willing to work with as many partners as possible to provide a vaccine for its 1.2 billion people.

“We are not limiting ourselves to any particular partner. As a continent of 1.2 billion people, we are willing to work with any partner who adheres to our strategic plan for vaccine development and access in Africa.

“The continent is taking the access and development of vaccine very, very seriously. We really need to see clinical trials being done on the continent, so they address issues like background infections from other diseases.”
He disclosed that the Africa CDC resumed talks last week with China, to discuss partnerships with Chinese Drug Manufacturers and also clinical trials in Africa. He added that Russia has been approached with a similar plan.

He said that the WHO Covax programme only covers 20% of the population, but Africa will need 60% of its population vaccinated to achieve herd immunity.

There are multiple avenues being explored now to make sure Africa has the appropriate doses of vaccines and also that we have that in a timely fashion, not in a delayed manner,” Nkengasong said.

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He revealed that the AFREXIM Bank agreed to finance vaccine procurement with $5 billion and is waiting to see how much it will receive from World Bank’s $12 billion vaccine procurement fund for developing nations.

What you should know 

Nairametrics reported earlier this month that Pfizer Inc. disclosed that its experimental vaccine, which is jointly developed with BioNTech, was more than 90% effective in preventing COVID-19, based on initial data from a large study in the ongoing phase 3 trials.

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(READ MORE: COVID-19: AstraZeneca vaccine could be 90% effective against the virus)

Last week, a pharmaceutical company, Moderna Inc., stated that its COVID-19 vaccine was 94.5% effective in treating coronavirus, after preliminary analysis of a large late-stage clinical trial.

The G-20 nations also announced a pledge to pay for vaccine distribution to developing nations that could not afford it. The leaders also unveiled a debt extension programme to developing nations during the weekend’s G-20 summit.

The Federal Government of Nigeria also announced through the Ministry of Health, that it would inaugurate an 18-man Covid-19 Vaccine Task Team, in a bid to ensure vaccine security In Nigeria.

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Coronavirus

Covid-19: EU considers skipping vaccine patents to boost vaccine access

The EU has disclosed plans to increase its access to Covid-19 vaccines by offering financial incentives to vaccine production companies.

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AstraZeneca suspends COVID-19 vaccine final stage trial over safety concerns, COVID-19: J&J starts vaccine trials on humans after success on monkeys

The European Union says its planning emergency measures to increase its access to Covid-19 vaccines including sidestepping patent rights and offering financial incentives to vaccine production companies to move production to Europe.

This was revealed in an EU document on Wednesday and reported by Reuters. The Document says the EU may create an emergency coordination mechanism to be issued at short notice when the EU needs a vaccine license, which is different from fully patent waivers, discussed in the WTO last week.

The EU says the new move will ensure faster procedures during a pandemic, which will enable generic production in the EU without the consent of patent holders.

The Commission sees the need to ensure that effective systems for issuing compulsory licenses are in place, to be used as a means of last resort and a safety net, when all other efforts to make IP (intellectual property) available have failed,” the EU’s document said.

The EU’s actions may be triggered by its inability to access the antiviral drug, remdesivir, during the pandemic, as the United States ordered most of the stock.

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The EU also disclosed that it will begin a consultation process with pharmaceutical companies next year to address issues in its pharmaceutical value chains. They added that measures could be imposed to encourage manufacturers to move pharmaceutical production to Europe from China and India.

“The Commission calls on member states to ensure that the tools they have are as effective as possible; for instance, by putting in place fast-track procedures for issuing compulsory licenses in emergency situations,” the EU said.

They added that it is urgent “to assess whether manufacturing capacity for certain critical medicines may be required in the EU.”

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“We need to be able to rely on ourselves, not on others,” the Commission’s Vice President, Margaritis Schinas said. He disclosed that the EU is working on more compliance with drug supply need and increased stock levels by 2022.

What you should know

This comes as surprise considering the EU rejected a World Trade Organization (WTO) proposal last week to waive the intellectual property rights needed for the manufacturing of Covid-19 vaccines. The waiver would have made the vaccine access cheaper for developing nations.

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ENDSARS

#EndSARS Sanctions: Nigeria has reached out to the UK Government – Foreign Minister

Onyeama has stated that the FG has reached out to the UK Government over the parliamentary debate on the #EndSARS protests.

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Chinese Visa Restriction: Ministry of Foreign Affairs issues clarification, London evacuation flight rescheduled to July 14

The Minister of Foreign Affairs, Mr Geoffrey Onyeama, said that the Nigerian Government has reached out to the UK Government over the parliamentary debate on the #EndSARS protests.

The Minister disclosed this to Newsmen at the Federal Executive Council (FEC) meeting on Thursday, which was recorded by Channels TV.

He added that the UK Parliament did not speak for the UK government, and that the UK had heard the Nigerian government’s side regarding the incident at Lekki.

“On the issue of the UK parliament, yes, we have reached out to the UK government on this question. The meeting that took place was of Parliamentarians, they don’t speak for the UK government and the UK government which acts for the United Kingdom has also heard the side of the (Nigerian) government regarding everything that happened.

“So we are in touch with them and engaging with them. But, of course, as in any democracy, the Members of Parliament are able to also air their views, but what is important is that a balanced picture is made available to them all before they take any decision,” Onyeama said.

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What you should know 

Nairametrics reported earlier this week that the British Parliament had announced it would consider a petition by some groups and individuals, asking it to apply sanctions against the Nigerian government and officials for alleged human rights violations during the #EndSARS protest and Lekki shooting incident.

Also, the presidency earlier disclosed that the Vice President, Yemi Osinbajo, had a meeting with the UK Special Envoy for Humanitarian Affairs, Nick Dyer, accompanied by the UK High Commissioner to Nigeria.

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