28 Jun

Daily Watch – Tax law hinders informal sector, Enugu DISCO to go fully pre-paid

  • President Muhammadu Buhari has told a gathering of business leaders that he did not see the benefit of the naira’s currency peg against the U.S. dollar being removed. The naira ended at ₦282 to the dollar on Monday but was trading at round ₦350 on the black market. Buhari had consistently said he was opposed to the removal of the currency peg but, in an essay published in the Wall Street Journal earlier this month, appeared to back the adoption of a more flexible foreign exchange policy.
  • An increased pressure on liquidity has forced banks to borrow more from the CBN’s Standing Lending Facility last week. Borrowing rose 230.61 percent to ₦929.52 billion. Conversely, the Standing Deposit Facility declined 61.76 percent to ₦227.44 billion during the week, indicating that banks are also withdrawing heavily from their deposits in CBN. Banks use the CBN’s SLF to support their liquidity shortfalls and meet trading obligations on a short term basis, while keeping excess cash with the regulator in the SDF, also on a short term basis.
  • Nigeria’s minimum tax law, often regarded as an anti-tax avoidance measure, may be inflicting more damage than good on the economy, as it constitutes a major disincentive for attracting the country’s ₦38.7 trillion informal sector. A report in BusinessDay showed that the sector, which accounted for 41 percent of the country’s ₦94.1 trillion GDP in 2015 is bedevilled by challenges which cost government significant revenue losses, through persistent failure to pay taxes. Besides, the tax law stifles local investments in the economy and threatens to stretch unemployment figures beyond the current 12.1 percent in the first quarter of 2016. Nigeria’s tax to GDP is less than 5. The challenges with arbitrary exemptions and enforcement have further constrained tax receipts in the embattled oil producing nation. As contained in the Companies Income Tax Act, agro allied companies, whether local or foreign, and firms where at least 25 percent equity is imported are exempted. Start-ups which recorded losses for four years consecutively, are also left out; at least until they can find their feet.
  • The Enugu Electricity Distribution Company will soon stop estimated billing of its customers in the five South Eastern States having acquired enough pre-paid meters. The EEDC’s spokesman, Emeka Ezeh, said that they have acquired enough prepaid metres to be supplied to their customers. Ezeh said that they would commence the installation of the meters to their customers who applied for the CAMPI Meters. The meters would be installed on electric poles and monitored to ensure that there was no bye-pass and tampering of it by customers.
  • Minister of State for Petroleum Resources, Ibe Kachikwu, has said that the country is seeking to raise between $40 billion and $50 billion from Chinese investors in the next couple of days to bridge infrastructure funding gap in the Nigerian petroleum industry. He also said that Nigeria’s crude oil output has risen to 1.9 million barrels per day and would rise further to 2.2 million barrels by next month when repairs are completed on some of the damaged pipelines. Speaking at the NNPC-China Investors’ Roadshow 2016 in Beijing, Kachikwu also said that President Buhari’s visit to China a few months ago has started to yield positive results, as a potential deal for $8.5 billion of investment with North Huajin Chemical Industries Group Corporation under China North Industries Group Corporation has already been signed.