The aggressive drive by Federal Government to generate more revenue to fund its expenditure is making a nonsense of its poverty alleviation programmes.
Many Nigerians are already groaning under the weight of taxes and charges as well as an increase in prices of commodities occasioned by land border closure.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said recently that the government had sent a Finance Bill to the National Assembly and the bill has several proposals.
“One of them is the increase in VAT from five per cent to 7.5 per cent and we believe the National Assembly will do justice to the finance bill. Our target is to ensure that the finance bill is passed within the same period that the budget is passed and we feel it will enhance our capacity to be able to fund the 2020 budget,” she said in Washington.
Besides the tax raise, FG has also indicated that it will tax luxury goods and carbonated drinks, although the FG hasn’t said by how much.
“In January this year, we launched the Strategic Revenue Growth Initiative, which was put together by all the revenue-generating agencies in the country led by the ministry of finance. Our objective is to be able to harness the existing revenue streams that we have by ensuring that enforcement is effective, to expand the tax base and also to identify new revenue streams that we can add to expand the revenue base,” she explained.
“But there is a process in doing these things. Any tax that you are introducing will involve a lot of consultations and also amendments of some laws or introduction of new regulations,” she noted.
From CBN’s end, two major charges have irked the customers in the industry – the recently re-introduced stamp duty charge and the deposit handling charge.
FG recently mandated Central Bank of Nigeria (CBN) to strictly implement Merchant Service Charge which would impose more charges on all point of sale (PoS) transactions.
The new policy covers every transaction that occurs on the PoS platform, rather than the previous regime where charges are allied on aggregate transactions.
Thus, for every PoS transaction of a thousand naira or more, a stamp duty of N50 will be collected.
Financial expert Vincent Nwani, Managing Consultant/CEO, RTC Advisory Ltd has said the return of N50 stamp duty is capable of weakening the financial inclusion drive and financial development goal as a whole, especially within the environmental sphere of business activities which point to the enormous size of the informal market.
Nwani said: “It is instructive that citizens are aware that this directive has gone out, they must be aware that it does not change the prices of goods and services they seek to buy, but they will have to pay extra 50 if they use POS machine as a means of settlement.
The new circular is a tax on the volume of transactions and could rake in billions in stamp duty charge for the government.
Nwani further explained that “It is also noted that the stamp duty charge is an anti-financial inclusion policy as it is capable of discouraging small businesses and the very poor from engaging in banking activities.
“We suggest that CBN should make a presentation to the authorities for a certain set of businesses, accounts and payment platforms such as the PoS to be exempted from the stamp duty charges.”
Only last month, CBN approved additional charges for cash deposits and withdrawals above 500,000 for individual accounts and 3 million for corporate accounts.
The apex bank, in a circular, directed deposit money banks (DMBs)to charge on deposits, in addition to already existing charges on withdrawals, 3 per cent processing fee for individual accounts, withdrawals above N500,000.00 and 5 per cent for Corporate account withdrawals above N3 million. It also introduced processing fees for cash lodgments of 2 per cent above N500,000.00 for individual accounts and 3 per cent for lodgment above N3 million for Corporate accounts.
CBN explained that the new charges on cash-based transactions are aimed at reducing the amount of physical cash circulating in the economy while encouraging more electronic-based transactions (payments for goods, services, transfers).
“If we are discouraging cash-based transactions, and at the same time imposing multiple charges on electronic-based transactions, the system may be running the risk of policy inconsistency that is capable of aggravating the already tensed ease of doing business environment in the country,” Nwani said
In a related reaction, Manufacturers Association of Nigeria (MAN) expressed its concern over the possible implication of such a policy.
Director-General of MAN, Mr Segun Ajayi-Kadir, said: “Even though one may agree with CBN Governor that it is in the public interest to promote an efficient payment system via the cashless policy, there is need to examine the route you choose to achieve that objective, and I think this is the crux of the matter and appears to be a recurring decimal in the administration of our monetary policy interventions.”
Mr Uju Ogubunka, the president of Bank Customers Association of Nigeria (BCAN), in his reaction said: “If we look at the peculiarities of our environment, we may be encouraging people to keep money in their houses with this kind of provision and if that becomes the outcome, are you then encouraging cashless or discouraging it?
“We may be trying to solve a problem and end up escalating it. Right now, this amounts to a penal charge for banking transaction because there are multiple charges on a single deposit and withdrawal.”
Airline operators groan over multiple charges, hike in fuel price
For airline operators, the operating environment under Buhari’s administration has been a mixture of blessing and discomfort. This is largely due to the rising cost of operations.
Chairman of the Airline Operators of Nigeria (AON), Mr Nogie Megisson, said airlines pay no fewer than 30 different charges. This has reduced their profit margin even as most of them are struggling to remain in business.
From April 2016 till date, price of aviation fuel known as Jet A1 has risen by over 110 per cent. From N105 per litre in 2016, Jet A1 now costs almost N300.
From 2016 till date, the operators have also experienced epileptic supply of the product and most times acute shortage resulting in flight delays and cancellations.
Up till today, the operators are yet to heave a sigh of relief.
FG hiked electricity tariff in 2016, plans higher rates for 2020
Federal Government hiked electricity tariff payable by customers of the 11 Distribution Companies (DisCos) in 2016.
The rates increased by an average of 100 per cent. It drew protests from consumer groups and organised labour.
The rates under the Multi-Year Tariff Order (MYTO) 2015 were to be reviewed every six months, but that was not done until August 2019.
As of August, the agency in charge of electricity rates review and implementation – the Nigerian Electricity Regulatory Commission (NERC), approved five minor electricity tariff reviews that were pending since June 2016.
That ought to cause a spike in the average cost of electricity payable by consumers nationwide. NERC said the reviews approved were up to 2018, leaving out the first half tariff review of 2019.
The 11 DisCos revealed that there is an increase of at least N8 to over N13 per kilowatt-hour ( kwh ) of electricity supplied to the over eight million DisCos’ customers in Nigeria.
However, it has not been implemented by NERC pending the major review which ends in December.
By January 2020, result of the major review will spike electricity tariff.
A sample of the 2016-2018 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2019’ document for Abuja DisCo shows that its end-user cost-reflective tariff remains at N46.44 kobo for customers.
However, NERC said it will allow DisCo to collect N32.66/kwh. Residential customer of this DisCo had paid N24.30/kw before the new Order, indicating a difference of N8.
NERC said it computed N102.2 billion tariff shortfall for Abuja DisCo for the four years from 2015 to 2018 and will be reflected in tariffs. It also projected another shortfall of N52.1bn for 2019 and N6.2bn for 2020 which it will recognize in subsequent reviews.
In spite of the N102bn NERC recognized from 2015 to 2018, the tariff document shows that N73bn shortfall has not been catered for.
Consumer groups kick over hike
Many electricity consumers have reacted to the new orders for the DisCos, describing the tariff increase as sudden, and without proper customers’ consultation.
Chairman, Nigerian Electricity Consumers Advocacy Network (NECAN), Mr Tomi Akingbogun, said his group was studying the tariffs on how they affect consumers. “We are going to meet. We just heard about it today. In the next few days, we will be able to give a collective decision.”
President Nigeria Consumer Protection Network, Mr Kunle Olubiyo, urged NERC to heighten its customer consultation, saying they were not properly carried along during the process of the minor tariff review which held in 2018.
Fuel price hike under Buhari
When President Muhammadu Buhari assumed office on May 29, 2015, the pump price of Premium Motor Spirit (PMS) otherwise called petrol was N87 per litre.
The government under his administration increased the price from N87 to between N143 and N145 on May 11, 2016.
The price has remained within the 143-145 price band since then, although NNPC has continued to bear the burden of having to subsidise the product as the combined factors of rising oil price, inadequate FX for private importers and logistics problems have made the N145 per litre price unsustainable.
Daily Trust
