Business

All change!!! Nigeria is not an oil economy

Published

7 years ago

November 6, 2017

Descriptions of Nigeria’s economy often include such phrases as ‘Africa’s largest oil producer’ and ‘the oil rich African nation’ but oil economies are typically characterised by low population densities and abundant oil resources. Saudi Arabia with 10 million barrels of oil per day and 30 million people, Kuwait with 2.7 million barrels of oil per day and 4 million people and Qatar with 1.5 million barrels of oil per day and 2.5 million people are typical of such. These economies pursued an economic model that was built around a large government dependent almost entirely on oil revenue for funding. Such economies could afford to have low or in some cases no domestic revenue mobilisation, in the form of taxes. Tax to Gross Domestic Product (GDP) ratios of less than 10% against the OECD average of 34.6% could be justified especially in the era of high oil prices.

For over three decades, Nigeria pursued this model. But things are changing, with the election of President Muhammadu Buhari in 2015, who was propelled into office under the mantra of ‘change’. That clamour for change, in the areas of governance, security and economy, coincided with the collapse of global oil prices and a consequent huge deficit in government revenues. These circumstances provided the ingredients for an overhaul of the entire economic model. The first and rather numbing conclusion of that exercise was that Nigeria is not actually an ‘oil economy’. With just 2 million barrels of oil per day and over 180 million people, simple mathematics tells us that 90 Nigerians share a barrel of oil compared to 3 Saudis, 1.44 Kuwaitis and 1.69 Qataris. With oil at just 10% of GDP, Nigeria simply does not fit into the mould of the traditional oil economies.

Interestingly, even nations who did legitimately fit into this narrow mould of high oil revenues and low populations, are abandoning what is now considered to be a flawed model. Thus, the imperative for Nigeria was even more urgent. Nigeria recalibrated its target peer group from the oil economies to the ‘oil plus’ economies such as Mexico and Egypt. This new peer group have diversified economies and tax to GDP ratios of 20% and 16%, respectively, compared to Nigeria’s 6%. Consequently, the change mantra had to be urgently applied to revenue mobilisation.

Analysis of the data suggests that revenue mobilisation is potentially the master key to unlocking Nigeria’s huge growth potential by funding its ailing infrastructure including roads, power and rail. A cursory look at the effective tax rates paid by the huge multinational and local operators, as well as the data on illicit financial flows, indicates a pattern of systematic tax evasion at all levels. Recent statistics released by the Federal Ministry of Finance showed that Nigeria has just 14 million active tax payers from an economically active base of 70 million. Over 95% of these are salary earners in the formal sector, just 241 persons paid personal income taxes of N20m (US$65,573.77) in 2016. Taxing the high networth and Nigeria’s huge community of entrepreneurs constitutes a critical but yet attainable target. The statistics for corporate tax payment shows the debilitating effects of base erosion and profit shifting as well as abuse of an overly generous tax incentive and duty waiver system. The historical government apathy towards revenue mobilisation is one of the effects of the mistaken identity that saw Nigeria perceive itself as an oil economy. This Administration is determined to correct this identity crisis and all its concomitant effects.

In that spirit, we launched an ongoing and well received, tax amnesty, ‘The Voluntary Asset and Income Declaration Scheme’ (VAIDS) is affording a 9-month window for Nigerian tax payer’s, both corporate and individual, to regularise their tax status in exchange for a guarantee of no interest, penalties, tax investigation or further audit. This amnesty follows successful initiatives in a number of countries, where tax evasion is a problem, such as Indonesia, Argentina, South Africa and India. It has been programmed to end just as the Automatic Exchange of Information, which will provide Nigerian tax authorities with unprecedented levels of information on offshore assets, becomes effective.

The initial signs suggest that Nigerians are responding positively to the new revenue narrative. Despite the emergence from a recession, tax revenues are showing early signs of growth. VAT shows 18.97% year on year improvement. Over 800,000 companies, including some Government contractors, that have never paid taxes have already been identified and are being audited. This is an unprecedented initiative that entails cooperation between Federal and State Governments. The Federal Ministry of Finance has also commenced a database project that combines data from the various arms of government including bank records, property and company ownership, and customs records to create accurate profiles of those liable to pay taxes. The Ministry has also placed one of the world’s premier private investigation agencies on retainership to trace overseas assets.

Changing the Nigerian economic psyche is not an easy task. By its nature, tax mobilisation risks the popularity of any Government, but the present Administration understands that the short term lure of political expediency must give way to the long term best interests of Africa’s largest economy. Her energetic, young and growing population are deserving of the chance to experience a truly transformed, sustainable and growing economy.

Kemi Adeosun is Nigeria’s Minister of Finance

Business

UBA GMD Calls for Public-Private Collaboration, Joins Aviation Minister to Commission New MMIA Departure Section

Published

10 hours ago

December 22, 2024

Sahara Weekly

UBA GMD Calls for Public-Private Collaboration, Joins Aviation Minister to Commission New MMIA Departure Section

The newly renovated departure section of the Murtala Muhammed International Airport, Lagos, refurbished by United Bank for Africa (UBA) Plc, was officially commissioned on Friday, December 20th, 2024.

The laudable project, which marks a transformative moment in Nigeria’s aviation sector, underscores UBA’s unwavering commitment to national development and highlights the immense value of strategic public-private partnerships (PPPs).

The ceremony was graced by distinguished stakeholders, including the Honourable Minister of Aviation and Aerospace Development, Festus Keyamo, SAN; the Managing Director of the Federal Airports Authority of Nigeria (FAAN), Mrs. Olubunmi Kuku; other Directors, and Heads of Agencies operating at the Airport.

Speaking at the event, UBA’s Group Managing Director/CEO, Oliver Alawuba,lauded the collaboration that brought the project to fruition as he emphasised the need for public and private institutions to come together to build and revamp the nation’s assets.

“This renovation is a testament of UBA’s belief in the transformative power of investing in national assets. By modernising our airports, we not only enhance infrastructure but also position Nigeria as a global hub for tourism, trade, and investment,” he stated.

Alawuba took time to highlight the broader economic impact of such initiatives, urging increased private-sector participation in national development. “Public-private partnerships like this demonstrate what can be achieved when we unite for a shared vision of progress and investing in infrastructure catalyses economic growth, improves travel experiences, and creates opportunities across various sectors of the economy,” he added.

Alawuba reflected on the power of unity and collaboration, quoting Helen Keller: “Alone we can do so little; together we can do so much.” The commissioning of the renovated departure section serves as a reminder of what strategic partnerships can achieve in driving national development and elevating Nigeria’s global standing.”

While commissioning the project, Keyamo commended UBA for executing the project, a feat he termed a landmark achievement in Nigeria’s aviation sector. “This renovated departure section exemplifies the bank’s commitment to elevating aviation infrastructure, improving passenger experiences, and fostering international partnerships. It is a proud moment for the ministry and all stakeholders involved, and I thank the management of UBA for pioneering this initiative,” he remarked.

The minister highlighted other key achievements of his ministry, including compliance with the Cape Town Convention, the launch of a consumer protection portal, and advancements in major infrastructure projects such as the second runway at Abuja Airport and solar energy integration in airport operations.

The Managing Director/Chief Executive of FAAN, Mrs. Olubunmi Kuku, commended UBA and other stakeholders for their contributions, adding, “This project reflects FAAN’s dedication to delivering world-class aviation infrastructure. The enhanced departure section not only elevates passenger experiences but also strengthens Nigeria’s competitive position in global aviation,” she said.

She called for more private-sector participation, emphasising that “partnerships like these are essential to transforming the aviation sector into a beacon of excellence.”

The newly renovated departure section boasts cutting-edge facilities designed to enhance efficiency and passenger comfort. This upgrade reaffirms the Murtala Muhammed International Airport’s status as a critical gateway to Nigeria and a major hub for international travel in Africa.

United Bank for Africa is Africa’s Global Bank. Operating across twenty African countries and the United Kingdom, the United States of America, France and the United Arab Emirates, UBA provides retail, commercial and institutional banking services, leading financial inclusion and implementing cutting edge technology. UBA is one of the largest employers in the financial sector on the African continent, with 25,000 employees group wide and serving over 45 million customers globally.

Business

Dangote Hails Tinubu on Impact of Crude for Naira Swap Deal

Published

2 days ago

December 21, 2024

Sahara Weekly

Dangote Hails Tinubu on Impact of Crude for Naira Swap Deal

…As Dangote Refinery partners MRS to sell PMS at N935 per litre nationwide at its retail outlets

Sahara Weekly Unveils That The Foremost entrepreneur and President of the Dangote Industries Limited, Aliko Dangote has commended President Bola Ahmed Tinubu for the positive impact of the naira for crude swap deal on the Nigerian economy, which has led to reduction in prices of petroleum products in the country.

To provide succour to Nigerians, Dangote recently reduced the price of Premium Motor Spirit (PMS) from N970 to N899.50 at its Refinery loading gantry and provided generous credit terms to marketers.

“To ensure that this price reduction gets to the end consumer, we have signed a partnership with MRS to sell petrol from its retail outlets nationwide at N935 per litre” he added. This price has already commenced in Lagos, and it will be offered nationwide from Monday.

In his statement, he called on other oil marketers such as the NNPC Retail and all other marketers, “to work with us to ensure that Nigerians enjoy high-quality petrol at discounted prices.”

According to him, “The Dangote Refinery is for the benefit of Nigeria and Nigerians. We will therefore continue to work with various value chain players to deliver high quality petrol at cheaper prices. Our aim is for all Nigerians to have ready access to high quality petroleum products that are good for their vehicles, good for their health, and good for their pockets.

Recall that in September, the Federal Executive Council (FEC) under the leadership of Mr. President approved the sale of crude to local refineries in Naira and corresponding purchase of petroleum products in Naira. The move, which commenced on October 1, led to reduced pressure on the dollar and ensured the stability of the local currency.

Dangote thanked Nigerians for their unwavering support and the government for creating an enabling environment for the domestic refining industry.

Business

Port Harcourt Refinery Stays Active: NNPC Denounces Sabotage Rumors

Published

2 days ago

December 21, 2024

Sahara Weekly

Port Harcourt Refinery Stays Active: NNPC Denounces Sabotage Rumors

NNPC Debunks Shutdown Rumors, Confirms Port Harcourt Refinery Fully Operational

The Nigerian National Petroleum Company Limited (NNPC Ltd) has dismissed reports circulating in certain media outlets claiming that the Old Port Harcourt Refinery, which was re-streamed two months ago, has been shut down.

In a statement released by Olufemi O. Soneye, the Chief Corporate Communications Officer of NNPC Ltd, the company clarified that the refinery is fully operational. The statement noted that the facility’s operational status was recently verified by former Group Managing Directors of NNPC during a site inspection.

“Preparation for the day’s loading operation is currently ongoing,” the statement confirmed, emphasizing that allegations of the refinery’s shutdown are baseless and intended to create panic or artificial scarcity in the fuel market.

NNPC Ltd urged members of the public to disregard such misleading reports, labeling them as the work of those seeking to exploit Nigerians.

The Old Port Harcourt Refinery has been in operation since its re-streaming, and the company remains committed to ensuring stability in the supply of petroleum products across the country.