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Columnists

What you need to know about AfCFTA Phase II Negotiation

The Phase II Negotiation hopes to complement the efforts already recorded in the areas of Tariff Concession and the Rules of Origin for trade in goods.

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In my inaugural column on the African Continental Free Trade Area (the “AfCFTA”), I had opined that the regime of Trade in Goods appears to be gradually taking shape (though not yet at an appreciable level), particularly with the commencement of trading in January this year, and that the progressive framework for the negotiations of specific commitments by the member-states in the area of Trade in Services, is meant to afford Nigeria (and other AfCFTA member States) the platform to ensure that the service sectors benefit from the huge opportunities provided under the AfCFTA.

Suffice to say that pending the conclusion of the Schedule of Specific Commitment on Trade in Services, intra-African trade in services will be guided by the existing principles such as the WTO Most-Favoured Nation rules or as provided for by specific Regional Economic Community (REC) arrangements.

The Phase II Negotiation will therefore complement the efforts already recorded in the areas of Tariff Concession and the Rules of Origin for trade in goods. In the world of knowledge and service economy, both trade in goods and services must co-exist in order for Africa to harness the gains and objectives of the AfCFTA.

The ongoing negotiations provide a platform for trade experts and stakeholders to make contributions in order to enrich Nigeria’s Schedule of specific commitments. It may be recalled that Nigeria deposited her instrument of ratification on December 5, 2020, becoming the 34th country to ratify the AfCFTA treaty.

Based on the latest update, 36 countries have so far ratified the Agreement with the last two being Malawi that ratified on January 15, 2021, and Zambia that ratified on February 5, 2021.

Phase II negotiation covers the (i) Protocol on Intellectual Property Rights; (ii) Protocol on Competition Policy and (iii) Protocol on Sustainable Investment. The Protocol on eCommerce dovetails into the Phase III negotiation.

The Nigerian Office for Trade Negotiations (“NOTN”) has called on the public including the private and public stakeholders, the academia, policymakers, trade experts, legislators, jurists, trade practitioners, women groups, trade unions, professional bodies to submit memoranda and position papers in relation to their views, opinions, constituents of Nigeria’s AfCFTA Phase II negotiation priorities and positions.

NOTN is an agency of the Federal Government of Nigeria responsible for leading, managing and coordinating all trades and trade-related negotiations on behalf of Nigeria. Submissions of memoranda and position papers shall commence from the 29th March 2021 and run till the 30th of April 2021, As noted in the information circular signed by the Acting Chief Trade Negotiator/Director General of NOTN, Victor Liman, which was made available on NOTN’s Twitter page, the public and stakeholders are urged to adhere strictly to the submissions and resubmissions deadline. Submissions can be sent to NOTN Contact Address or mailed to [email protected]

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The above call has provided opportunities to the various professional bodies such as the Nigerian Bar Association (“NBA”) to galvanize its intellectual powerhouse and ensure that the profession is not left behind as most of the areas under consideration impact on legal practice in Nigeria. The NBA Section on Business Law through its various committees on International Trade Law, Consumer Protection and Competition Law, Information Communication and Technology, Intellectual Property.

Taxation and the Committee on Media Law is urged to utilized this opportunity to collate members’ views and send across to the NOTN. Other stakeholders such as the Intellectual Property Law Association of Nigeria should equally take note and do the needful. Intellectual Property right has been the subject of constant discussion in Nigeria with critics blaming the government for not putting in place effective enforcement mechanism for the protection of IP rights in Nigeria. With the expanded market provided under the AfCFTA, proper coordination and synergy amongst the member States is required.

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The Federal Competition and Consumer Protection Act (“FCCPA”), 2018 has led to some tractions in development of competition law in Nigeria, which hitherto had only enjoyed lip-service with only sector-specific legislations that cater to few sectors such as telecommunication and mining.

The Investment Protocol on its part should be negotiated with a view to advancing the movement of capital and natural persons as well as to make intra-Africa investment climate conducive by eliminating non-tariff barriers to investments such as excessive bureaucracy; lack of transparency and disclosure of investment-related information; inefficiency and corruption; multiplicity of investment laws and taxes.

Some commentators have even suggested the adoption of the Organization for the Harmonization of Business Laws in Africa (OHADA) model for the AfCFTA in order to improve the investment climate in Africa as investors would naturally prefer jurisdictions where the legal system is effective, efficient and investment-friendly.

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Lastly, the information circular indicated that comments will be accepted in respect of eCommerce which has been integrated into the 3rd phase of the negotiation. e-Commerce captures commercial transactions or production, distribution, marketing, sale or delivery of goods and services occurring through electronic channels.

The exponential growth and expansion of eCommerce on the continent, (from 260 e-commerce startups in 2017 to over 630 in 2020), AfCFTA member-states need to address the issues of data localisation, cross-border data flows, consumer protection, information protection, prohibition of customs duties, promotion of e-commerce, most-favoured-nation treatment, taxation amongst others.

The recent Flutterwave becoming a unicorn after raising $170 million which shot its valuation above $1 billion, clearly demonstrates the huge potential in the tech and eCommerce space within the continent. The stakeholders should seize the opportunity provided by the ongoing negotiations and make their inputs. Relatedly, the NOTN is urged to ensure that the final product of the negotiation reflects the inputs of stakeholders and experts.

Prince is a lawyer at Paul Usoro & Co and leads one of the Commercial Dispute Resolution & Litigation Teams of the Firm. As an international trade lawyer, he has advised and represented both local and international clients and organizations on a wide range of issues involving cross-border trades disputes, maritime and international arbitration.Prince recently worked with the Nigerian Bar Association (NBA) AfCFTA Committee charged with the responsibility of coordinating the NBA inputs on the AfCFTA Phase I Negotiations in 5 priority service sectors particularly as it relates to legal services. The Committee interfaced with the Nigerian Office for Trade Negotiations and AfCFTA National Action Committee in discussing the Schedule of Specific Commitments on Trade in Services.Prince has also written several articles including on the AfCFTA.

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    Columnists

    Biden tax opportunity for Nigeria

    Nigeria should create a fiscal “Delaware” where any foreign incorporated company can open an office and pay zero taxes on imported capital, no need to be present in Nigeria.

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    Biden's election is a reminder that democracy is the best form of government - Buhari

    America is a nation of 50 states? No. America is a State with 50 nations.

    Each of those nations has its fiscal policies and rules. Forty-five states in America charge a Sales Tax. Colorado has the lowest State Sales Tax at 2.9%, California has the highest States Sales Tax at 7.25%. The State with the highest tax burden to the taxpayer is New York which charges a total tax of 12.79%. The lowest tax burden State is Alaska.

    These tax rates that differ from state to state creates opportunities for legislation to be created by US State Houses of Assemblies to target and attract businesses to their state. Take Delaware, 66.8% of all Fortune 500 companies incorporate in Delarewe. Google and Coca-Cola are incorporated in Delaware, why? First, you don’t need to be resident in Delaware to incorporate a corporation in the State. Delaware will also not impose a state tax if you do not conduct business in the state.

    Texas Vs California

    The former Governor of Texas, Rick Perry conducted many “Business Recruitment Trips” to the State of California to lure jobs to Texas. Texas State ran radio ads in California to market Texas as a business destination. Chuck DeVore of the Texas Public Policy Foundation states, “job growth has been running 80% stronger in low tax states than in high tax states since the passage of the tax cuts Act of 2017. For California, the lost opportunity adds up to 153,000 positions since December 2017.” Elon Musk and Joe Rogan have all left California and moved to Texas. Apple, the largest company in America by capitalization is building a new campus in Austin Texas.

    In 2020, For the first time, California has posted a population loss.

    What about nations?

    The data is not so direct when looking at nations.

    Companies make decisions based on maximizing shareholder return on equity. If taxes are higher in one nation, then the cash will flow from that nation to another. When the US passed the tax cut legislation in 2017, it eliminated the tax obligation on repatriation of foreign profits. In response, more than $1 trillion flowed from foreign subsidiaries to their US HQ. These funds flowed from low-tax nations of Bermuda, Netherlands, and Ireland, according to the Wall Street Journal.

    Biden Tax Proposal

    President Biden seeks to raise taxes on American taxpayers to pay for a $3 trillion infrastructure plan. In summary, the plan will raise the corporate income tax from 21% to 28%. With a 15% corporate global tax on companies posting incomes above $100 million.

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    President Biden knows that when taxes are hiked, American business will simply leave the profits earned outside the tax jurisdiction of the United States, e.g., Exxon Mobil will simply leave the cash it makes from the Nigerian Qua Iboe oil fields in banks in Ireland, rather than send them to banks in the US.

    Hence the plan B for Biden is a global minimum tax that will tax all companies including US companies that do business globally. The Biden administration’s plan is simple, if the global tax equals or is less than what US companies pay in Ireland, then they will simply repatriate that cash back to the US and pay a lower tax.

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    However there is one problem, why will Indonesia or Ireland tax ExxonMobil and lose revenues like California? They will not, thus Ireland will become the new Texas, as more American firms will site “international operations” HQ in Ireland, book profits, and accumulate cash offshore.

    What should Nigeria do?

    Nigeria should create a fiscal “Delaware” where any foreign incorporated company can open an office and pay zero taxes on imported capital, no need to be present in Nigeria. Nigeria can create and offer special $Eurobonds targeting liquidity. ExxonMobil can invest her crude oil sales JV profits with NNPC in $ denominated bonds held by Nigerian banks, shielded and excluded from all taxes and mandates from the CBN.

    There will be American firms seeking to set up a manufacturing base outside the American continent (GE is already in Calabar). How about making that State a Special Economic Zone for only US business, no taxes, no import duties, no levies? What about the Yaba IT cluster? Mack Zuckerberg of Facebook and Jack Dorsey were also in Yaba, can Nigeria create an IT economic zone for services? China is far away and, in conflict with America’s geopolitical interest, Vietnam and the other Asian tigers have seen their wages rise, they are becoming uncompetitive in wage terms.

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    Nigeria still has low wages and an English-speaking young population. This is a good time to fiscally reform. It will not be easy, Nigeria must change many rules, it must be more open, more transparent, and protective of international property rights, but this is an opportunity.

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    Columnists

    A typical football viewing centre experience in Nigeria

    The centres are stadium-like atmosphere with banter, laughter, pre-match and post-match analysis that sometimes become heated.

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    Nigerian Bars are killing the viewing centre business, further threatening MultiChoice 

    It’s a hot Saturday afternoon in Lagos and as you drive down the narrow street lined with cars to attend the naming ceremony of your colleague’s newborn son, a horde of young men come rushing onto the street from a nondescript building at the corner.

    Your first reaction is to slow down and watch their next move, another part of you wants to quickly get out of the way to avoid any untoward occurrence. There is a brief and palpable fear inside the car as you scan the faces of the crowd passing by, trying to make out their words and expressions. Suddenly, your eyes light up. Alas! The furore is a simple football banter.

    Scenes such as the one described above are a regular occurrence in Lagos and most parts of Nigeria; welcome to the weekend ritual and the allure of the Football Viewing Centre.

    From mid-day on weekends and some midweek evenings during the European football season, you will find young men crammed into halls, rooms, makeshift theatres, sports lounges and every available space to watch football, mainly the English Premier League (which is the most popular league), the Spanish La Liga and the UEFA Champions League. It is a thriving multi-million naira industry born of the love Nigerians have for football and the widely available broadcasts from Multichoice (DSTV) in Nigeria.

    The public viewing of football matches taps into the communal nature of Nigerians that makes viewing matches alone uninteresting and very ‘unNigerian.’ The period of DSTV’s entry into Nigeria coincided with the peak of Nigerian football when the Super Eagles were African Champions and qualified for their first World Cup. Stadium attendance was very high. The public viewing centres became an extension of the Stadiums and sprung up in locations all over the nation.

    A typical viewing centre is a bungalow-like structure or shed with rows of wooden benches arranged to face the different tv screens showing the matches on offer. Outside, a handwritten display on a chalkboard shows the scheduled matches and their viewing times for the information of the prospective attendees. To keep out the prying eyes of those who want to watch matches for free, a tarpaulin cover is installed around the structure to ensure only paying customers can watch the matches.

    Consequently, giant fans are provided to ease the inevitable heat from a mass of bodies all crammed together. These days, UPS and Inverters are installed to keep the decoder running before the generator is put on; when the inevitable power cut occurs. This ensures the audience does not miss out on any exciting moments of the match while the decoder reboots after a power cut.

    Payment is made at the entrance of the hall, most times per match but regular patrons are allowed to make payment ahead for the total number of matches they might wish to view. Patrons are handed a ticket as proof of payment and the cost of viewing a match on average is N100, while N200 is charged for matches showing simultaneously. Average occupancy is between 50 – 100 patrons and for eagerly anticipated matches, viewership can be even beyond the original occupancy levels of the centre. A typical Saturday line up in the EPL has the games scheduled one after the other and patrons are encouraged to pay a flat rate of N200 for 3 games in a row or pay N100 for each individual game. At the end of each game, the centre is emptied out and paid customers let back in before the commencement of a new game.

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    Viewing centres have evolved over time from single-screen locations in the early 2000s to multi-screen locations, with some of them offering other forms of entertainment such as snooker tables and video games like PES and FIFA to maintain patronage. In the age of sports betting, many viewing centres have also incorporated betting shops as one of their offerings. People place their bets and are encouraged to stay behind to watch the games and see the progression of their betting tickets.

    Once the patron has made the requisite payment and is allowed entry, he gets to sit in one of a row of seats (mostly wooden as rowdy fans have been known to occasionally destroy plastic chairs), usually seating up to 5 persons. The screens are arranged in a way to create the impression of being able to watch multiple matches at the same time; though, in time, the patron finds out that it is easier to focus on one match.

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    It is a raucous, stadium-like atmosphere with banter, laughter, pre-match and post-match analysis that sometimes become heated. As is typical of any place where young Nigerians are gathered, there is always the inevitable shift to politics and other burning national issues.

    Viewing centres do not sell alcoholic beverages but sell other kinds of drinks to provide refreshment to the patrons and act as a source of additional income for the owners. On a typical weekend in the thick of the Football Season, a regular-sized viewing centre that can sit between 50 – 100 people showing an average of 4 matches per day can rake in upwards of N56,000 over a busy weekend before deducting expenses and exclusive of income from drinks and other refreshments.

    In most middle income / affluent neighbourhoods, sports lounges have emerged as both an alternative and another form of the viewing centre. The sports lounge is basically a watering hole that encompasses drinks, food and other edibles in a cool and comfortable environment. Here, the patrons do not have to pay an entry fee but are required to purchase drinks or food.

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    The typical patron is a young, urbane and upwardly mobile professional looking for fun and an alternate way to unwind. The attraction for patrons is the ambience, comfort and the ability to mingle with friends while watching their favourite team play. Due to the availability of space, the arrangement of a sports lounge is markedly different from that of a viewing centre. The seats are plush and more comfortable and are arranged around tables in small clusters with a TV screen as a focal point.

    The drinks are usually pricy with alcoholic beverages starting at N1000 per bottle and high-end spirits selling from as much as N16,000 per bottle. Due to the absence of a gate fee, the onus is on the operators of the sports lounge to find new innovative ways to attract more patronage and to increase the sale of their different offerings.

    The key expenses for both the viewing centre and the sports lounge are the cost of subscription for DSTV, generator costs and rent. These costs differ substantially based on the location, availability of public power supply and any ancillary cost peculiar to the establishment. Power is an ever-present cost for any business operating in Nigeria and consists of both the cost of powering and maintaining a generator (either diesel or petrol) and payment for public power consumed (prepaid or postpaid).

    All in all, the viewing centre business, though a cyclical one dependent on the Football season in Europe, is a lucrative one if well run and managed.

     

    KEYSER SOZE…

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