Business

Govt must use windfall tax revenue for critical infrastructure projects-OAU Prof of Economic History

Published

4 months ago

July 27, 2024

Govt must use windfall tax revenue for critical infrastructure projects-OAU Prof of Economic History

A Professor of Economic History at the Obafemi Awolowo University, Ile Ife, Adetunji Ogunyemi, speaks on the amendment of the Finance Act 2020 by the National Assembly to accommodate windfall levy on banks’ profits on foreign exchange transactions. The lawyer, public finance expert submits that the policy is perfectly in order, asking banks to see it as contribution to national development. Excerpts:

The windfall levy generated some debate in the polity with government justifying it as the right thing to do in order to strike a balance in the key sectors of the economy. How justified is this levy on banks’ foreign exchange gains?
Nigeria is currently in dire straits financially and generally speaking economically. It is within the power of the government of the Federation going by its stated exclusive jurisdiction in the First Schedule Part I of the constitution of the Federal Republic of Nigeria to make such laws and to direct such policies and actions as to ensure peace, good order and good government in Nigeria. Therefore, if Nigeria is in dire straits and some Nigerians, whether persons or bodies or corporate organisations, that have been feeding fat on the system, especially when that feeding fat is not directly a function of their own productive energies, then it behoves the Federal Government to ensure a balancing of duties and responsibilities within the system such that a resource-deficient sector of the economy can benefit from the resource-surplus part through what is called economic stabilisation. So, to me, it is perfectly in order to amend the Finance Act 2020 in order to accommodate the collection of this one-off levy on the windfall that the banks in the financial system have benefited from on foreign exchange transactions in the last one year. To me, it is perfectly in order and it is part of the duties of the government to stabilise the economy and also redistribute wealth.

Part of the arguments of those kicking against the policy is that allowing the windfall levy on banks may create uncertainty about the future as government may come with another windfall tax in some other sectors. Is this fear justified?
A situation of paralysis needs a shock therapy to bring it to normalcy. In 1929 up to 1932, there were decisions made in the United States under Herbert Hoover to stabilise the economy by ensuring that government deliberately pumps into the economy huge expenditure financed under public-private partnership arrangement. Nigeria is in such a situation now as the United States was under Hoover. So, it is not out of place to request that that banks that have made unplanned, spontaneous, unpredicted, sudden income to donate to the system a portion of their profits. This levy is actually on their windfall which is not part of their projections in their respective budgets. So, there is nothing that is malicious about this levy. After all, the levy is not for the benefit of persons. It is for the benefit of the public and it is in order.

Naturally, the Chartered Institute of Bankers of Nigeria (CIBN) has risen in defence of the banks to say asking them to pay a windfall levy amounts to double taxation because banks have already paid Companies Income Tax. What do you make of this argument?
I disagree absolutely with such stance from CIBN. What of the progressive deductions that the banks have been making with respect to ATM withdrawals by both the depositors and the withdrawers? Banks charge N20 per transaction and at times N50. Many of these deductions are actually illegal and the CBN should have asked them to return the money to their customers. These deductions run into billions of naira. But it would seem that the CBN did not want to rock the boat and has allowed the banks to earn some income for their stabilisation so that when a request for re-capitalisation would come, they would have something to use for that purpose. So, the banks can’t approbate and reprobate at the same time. They can’t be placing unlimited charges on their customers and expect government not to come in with a decision to stabilise the system. The windfall levy is a patriotic call made on the banks to contribute to the system. The banks should not see it as a tax. After all, it is a one-off levy. At any rate, why are the banks trying to shy away from their responsibility of contributing to the system? Their wealth comes from the commonwealth of Nigeria. Is that not? If your wealth comes from the commonwealth of a country and that country is in dire straits and it calls upon you to pay a levy on profits arising from your unpredicted income, I don’t think that it is out of place for them to obey such call to help fatherland.

Are there special benefits from a windfall tax?
The benefits are many. One, insofar as the government will not pump the revenue arising from this windfall levy on banks into the general budget, then there is no problem. But if government puts the revenue into the general budget and uses it to fund recurrent expenditure, that is going to be unacceptable. However, if government pumps the money from the windfall tax specifically into certain projects, for example, the Sokoto-Badagry Highway, the coastal road, the Port Harcourt-Maiduguri railway, etc, it is going to be absolutely correct. It can also be used for industrial development through the Bank of Industry or specifically into some agricultural projects such as dam development and so on. These are the specific areas the money can be channelled into. But I would advise that the government uses the revenue to fund critical projects such as the Lagos-Calabar Coastal road, the Sokoto-Badagry Highway, Port Harcourt-Maiduguri rail line, expansion of the standard gauge from Ibadan to Abuja and then onward to Kaduna. These are the critical projects that will create a trickle-down effect on the economy to jumpstart it from its doldrums and provoke productive enterprises among business concerns.

The three tiers of government have been smiling to the banks every month on account of huge revenue collected by the FederaI Inland Revenue Service (FIRS) for the Federation. Shouldn’t focus shift to the other two tiers of government who have been getting more money since the removal of petrol subsidy by President Bola Tinubu?

That is what we call financial injustice in the system.

Actually, many governors in Nigeria, maybe for political correctness, did not say much about the issue of workers conflicting with the Federal Government on the issue of minimum wage neither did they support the Federal Government to do at least some defence within the realm so that citizens will not be unnecessarily agitated and then begin disturbances. But the truth of the matter is that the respective governments of the states of the federation today are now earning at least 40 per cent more than what they were earning before. It behoves them to come forward to explain to Nigerians why some A, and B, C policies have been done in their favour by the Federal Government. For example, the removal of subsidy from petrol has helped states that were previously in debts like Osun State to begin to successfully and significantly exit those debts and be able to pay workers. But do they give the credit to the Federal Government? The answer is No. The states have been giving the credit to themselves as if they conjured up the fat allocations they are now getting. Whereas, we know it is directly as a result of the fact that the FAAC has been to get more money through removal of subsidy and the efficient revenue collection by FIRS. This is why the states have now been financially strong to do their capital projects. Some of these states are even doing a kind of subtle blackmail to give a dog a bad name in order to hang it. Otherwise, if your income has increased as a result of government policy, why can’t the states explain to their citizens and spend the money to make things better for the citizens in their respective states? They have put all the burden on the Federal Government. It is a shame.

Do you think the recent Supreme Court judgment which states that allocations should be paid directly into the accounts of local government areas will also help bring down tension and enhance development at the grassroots?
I support the Federal Government’s view, position and policy on this and for the Attorney General of the Federation to approach the Supreme Court for interpretation of the constitution and to make declarative orders. This is perfectly in order. This is actually how to govern a country. Do not forget that the local government councils in Nigeria are 768 and not 774. This is provided in Section 3 subsection 6 of the 1999 Constitution as amended. There six area councils in Abuja and if you add this number, you will get 774. But the area councils in Abuja are not local government councils.

The Supreme Court ruled on this in 2002 in the Attorney General of the Federation versus Attorney General of Abia State and 35 others. But let us not go there. The truth of the matter is that the 768 local government councils in Nigeria will now directly benefit from their allocations pursuant to Section 162 of the Constitution. The Supreme Court judgment is just half of the battle won. The other half of the battle to be won is to ensure that election into local government councils is not conducted by State Independent Electoral Commissions (SIECs). There should be an amendment to the Electoral Act for that purpose so that the same election will be conducted by INEC in order that there will be a level-playing field. The SIECs are actually not independent of the governors who appoint their officers. But it is a good thing that local governments are now going to get their allocations directly from FAAC beginning from this month, that is July.

Quote “The windfall levy is a patriotic call made on the banks to contribute to the system. The banks should not see it as a tax. After all, it is a one-off levy.”

Business

Zacch Adedeji: And The Revenue Keeps Increasing By Rabiu Usman By Rabiu Usman

Published

11 hours ago

November 15, 2024

Sahara Weekly

Zacch Adedeji: And The Revenue Keeps Increasing By Rabiu Usman

By Rabiu Usman

It was President Bola Tinubu that declared that in the first half of this year, the revenue of Nigeria soared to over N9.1 trillion, compared to the first half of 2023.

For instance, N5.2 Trillion accrued into the Federation Account for the period January to June 2023, while a total of N7.3 Trillion accrued into the account for the period July to December, 2023.

However, for June this year, accruals into the Federation Account rose to N2.483 trillion in June 2024. It was N2.324.792 trillion in May, meaning for the two months of May and June this year alone, about N4.8 trillion accrued into the Federation Account while N5.2 trillion accrued into the account for the first six months of last year.

The President attributed the revenue increase to the government’s efforts in blocking leakages, introducing automation, and mobilizing funding creatively, all without placing an additional burden on the people.

A few days after the President spoke glowingly of the considerable increase in the revenue of the country, a process being powered by the Federal Inland Revenue Service (FIRS), under the Chairmanship of Dr Zacch Adedeji, the Nigeria’s Zaccheus the Tax Collector, the World Bank also confirmed the progress being made in the area of revenue generation.

The World Bank projected that following the recent increase in government revenue, Nigeria’s revenue-to-GDP ratio could rise to over 10.5 percent by the end of 2024.

Ndiamé Diop, World Bank country director for Nigeria shared the forecast during an interactive session on ‘Fiscal Reforms for a More Secure Future’ at the 30th Nigerian Economic Summit, held in Abuja last month.

Also, according to data released in September by the National Bureau of Statistics (NBS), Nigeria’s Value Added Tax (VAT) revenue increased by 99.82% year-over-year in the second quarter of 2024.
During this period, total VAT revenue reached N1.56 trillion, a 9.11% increase compared to the previous quarter.

The NBS report highlighted that the revenue growth was driven primarily by local payments, which brought in about $484 million, while foreign payments contributed $242 million. VAT on imports generated $228 million.

However, despite the level of progress already made, the FIRS under Dr Zacch Adedeji is not done yet.

Various innovations are daily being introduced to ensure seamless payment of taxes by Nigerians.

Last week, the Taxpayer Services Department of the FIRS launched the new USSD code *829#, aimed at revolutionizing taxpayer engagement and access to essential tax services.

According to the FIRS, the initiative was aimed at “simplifying tax processes and providing a seamless, efficient service experience.”

With the *829# USSD code, taxpayers can now effortlessly access a range of services, including TIN retrieval, Tax Clearance Certificate (TCC) verification, and general inquiries all from the convenience of their mobile phones and with no need for internet access.

Also, Zacch Adedeji is everywhere, explaining the four tax bills currently before the National Assembly, assuring that it will not reduce the funding or operational efficiency of government agencies.
Last week Wednesday, Adedeji addressed the heads of the National Agency for Science and Engineering Infrastructure (NASENI), the National Information Technology Development Agency (NITDA), and the Tertiary Education Trust Fund (TETFUND) at the Revenue House in Abuja. He allayed concerns surrounding the proposal to rename the FIRS as the Nigeria Revenue Service (NRS), clarifying that the change is intended to streamline and improve agency efficiency.

He said the main goal was to align government revenue practices with current fiscal demands to ensure all agencies are well-funded and effective.

Adedeji further highlighted that the proposed legislation would enable government agencies to concentrate on their core responsibilities without the added task of revenue collection.

“The bills, once enacted, will allow agencies to focus on their primary functions instead of managing tax collection duties,” he explained.

Adedeji, who appears to have taken up the job of an Explainer concerning the new tax bills, further pointed out that the bills were the aftermath of President Tinubu’s administration recognition of the need for a unified tax code to reduce complexity and stimulate economic growth.

Perhaps, by the time this is being read, Dr Zacch Adedeji, will be standing before another audience to explain the ideas behind the new tax bills and their capability to further sore up the revenue base of the country, because for him, the revenue must keep increasing.

Usman, a public affairs commentator lives in Abuja.

Business

Wema Bank Announces Grand Finale of Hackaholics 5.0: Set to Reward Winners With ₦75 Million Worth of Prizes

Published

17 hours ago

November 15, 2024

Sahara Weekly

*Wema Bank Announces Grand Finale of Hackaholics 5.0: Set to Reward Winners With ₦75 Million Worth of Prizes

Wema Bank, Nigeria’s foremost innovative financial institution and pioneer of Africa’s first fully digital bank, ALAT, has announced the grand finale of the 5th edition of its flagship youth and startup-focused tech competition, Hackaholics.

Launched in 2019, Wema Hackaholics is a groundbreaking initiative designed to harness the creativity and entrepreneurial spirit of Nigeria’s youth, providing them with a platform to turn their tech-driven ideas into reality. The highly anticipated Hackaholics 5.0 grand finale will take place on November 27th, 2024, under the theme, “Meta Idea: Capitalizing Africa’s Growth Through Innovation.” This year’s theme aims to showcase how tech-driven solutions can fuel Africa’s development by tapping into the continent’s growth potential through innovation and digital transformation.

The grand finale will bring together the brightest innovators from universities and tech communities across the country. These innovators will pitch their Digi-Tech solutions designed to solve real-world problems and contribute to Africa’s economic and social progress. The event promises to be the culmination of months of intensive competition, collaboration, and mentorship, providing a platform for youth-led tech ideas to reach new heights.

Announcing the date of the grand finale, Moruf Oseni, MD/CEO of Wema Bank, highlighted the bank’s vision for Hackaholics. “Hackaholics is more than a competition; it is a movement to equip Nigeria’s youth with the skills, networks, and resources needed to drive Africa’s digital transformation. The Meta Idea theme for this year is a call to action for young innovators to think beyond the present and design solutions that will capitalize on Africa’s growth. We are excited to see how our participants envision and build the Africa of tomorrow.”

Speaking on the prizes, the MD/CEO said “At the grand finale, participants will compete for exciting cash prizes, grants, and access to Wema Bank’s extensive network of investors, mentors, and industry experts. The total worth of prizes for this year is ₦75,000,000. The winning team will receive ₦30,000,000, the first runner-up will receive ₦20,000,000 and the second runner-up will receive ₦15,000,000 worth of prizes. Additionally, we will be awarding a special grant of ₦10,000,000 worth of prizes to the female-led team to encourage gender diversity in tech innovation.” He concluded.

Wema Bank’s Hackaholics is a testament to the Bank’s commitment to shaping Africa’s future through innovation and entrepreneurship. Hackaholics 5.0 began with a nationwide call for entries earlier in the year and has engaged over 10,000 aspiring tech innovators and entrepreneurs across Nigeria. With 2,297 applications across 8 physical pitch centers and 1 virtual pitch center, 34 innovators across all locations are set to pitch their ideas at the pre-pitch stage ahead of the grand finale scheduled to hold in Lagos.

Through Hackaholics, Wema Bank has provided a platform for youth to channel their creativity and entrepreneurial spirit into actionable tech solutions that address Africa’s most pressing challenges. Over the years, Hackaholics has grown into one of the largest and most influential tech competitions in Nigeria, impacting thousands of young minds.

The competition not only offers winners cash prizes and grants, but also access to mentorship, industry networks, and resources to help scale their innovations globally. This initiative is a key part of Wema Bank’s broader strategy to harness technology as a driver of socio-economic growth in Africa.
Interested individuals can register to attend the grand finale via https://hackaholics.wemabank.com/grandfinale

Business

ATMs empty as banks ration withdrawals

Published

2 days ago

November 14, 2024

Sahara Weekly

ATMs empty as banks ration withdrawals

The Automated Teller Machines of Deposit Money Banks have consistently remained empty in recent months as banks grapple with a sustained low cash supply.

It was also gathered on Wednesday that some DMBs, particularly in the Federal Capital Territory, have begun another round of cash rationing, restricting maximum over-the-counter withdrawals to a daily limit between N5,000 and N20,000.

While banks struggle to get cash, Point-of-Sales operators have been fulfilling the cash needs of customers.

Speaking at the Facts Behind the Rights Issue Presentation of FBN Holdings at the Nigerian Exchange Limited recently, the Executive Director/Chief Financial Officer of First Bank, Patrick Iyamabo, said that the matter was an industry-wide one and not peculiar to a specific bank.

He said, “It is an industry problem. Most customers after exhausting the options available in other banks, tend to settle at FirstBank to address their cash needs. The challenge differs by location but we know it is a challenge that the regulator is looking into to address. But as we speak of physical cash, we must appreciate that the direction of the industry is to go digital.

“A lot of our customers do most of their transactions digitally, and you heard the GMD speak to this, very often people don’t want to transact in cash. In terms of this new order, your bank, FirstBank is very well positioned so if you look at the statistics and I’m speaking to independent statistics, just pick up your NIBSS report, the bank with the most stable platform meaning availability to always transact digitally is FirstBank. So, all our customers have the benefits of having their cash in First Bank and having access to this cash anytime anywhere and as necessary. It’s a huge advantage.”

Speaking anonymously with The PUNCH, a banker at a tier-1 bank put the blame on the Central Bank of Nigeria.

As a result, many people have turned to Point-of-Sale operators, who have become the primary channel for cash withdrawals, albeit often at higher transaction fees.

Major commercial banks visited by one of our correspondents on Wednesday claimed not to have sufficient cash allocation hence the ration withdrawals to serve more customers.

The banks visited include Guaranty Trust Bank, Zenith Bank along Airport Road, and EcoBank at Jabi in Abuja.

A bank customer at EcoBank, who spoke without mentioning her name, said she was only allowed to withdraw N5,000 from N20,000 previously allowed.

“I was just informed that I can only withdraw N5,000 from my account. Can you imagine? The amount will can’t even take me home.”

Our correspondent received the same answer when he attempted to obtain cash.

At GTBank and Zenith Bank along the airport road, customers were permitted a maximum withdrawal of N20,000 from N100,000 previously disbursed as a daily limit.

A customer, Mr Faith, who visited the bank expressed shock about the new limit. He said the banks didn’t give any cogent reason for reducing the withdrawal limit.

“I just visited these banks, and I was informed that I can only withdraw N20,000 from N100,000, which was the previous limit. They didn’t even give any reason for reducing, now I have to start looking for cash elsewhere. This country is just so annoying,” He vented.

Cash scarcity became a recurring and widespread issue across Nigeria after the Central Bank of Nigeria introduced a controversial policy in January 2023, which significantly reduced the daily and weekly cash withdrawal limits to N100,000 daily, N500,000 weekly for individuals, and N5m for business entities.

This decision, aimed at encouraging a cashless economy, led to long queues at ATMs, increased difficulty in accessing physical cash, and a general disruption of daily financial transactions for millions of Nigerians.

The policy’s impact was felt particularly by those in rural areas and lower-income groups, who rely heavily on cash for their day-to-day needs, exacerbating economic hardships across the country.

Last week, data from the CBN showed that currency in circulation climbed 56.1 per cent year-on-year to reach N4.31tn, up from N2.76tn in September 2023, reflecting an increase of N1.55tn.

This is just as currency outside banks surged by 66.2 per cent in September 2024, reaching N4.02tn compared to N2.42tn in September 2023, a notable rise of N1.60tn in just one year.

This indicates that the volume of currency retained outside the banking sector outpaced the total released for circulation within the past year.

Compared to August 2024, currency in circulation rose by 4.0 per cent month-on-month, adding N166.2bn from the previous figure of N4.14tn.

The CIC is the amount of cash–in the form of paper notes or coins–within a country that is physically used to conduct transactions between consumers and businesses. It represents the money that has been issued by the country’s monetary authority, minus cash that has been removed from the system.

Earlier in September, the CBN announced plans to sanction banks that fail to dispense cash through their automated teller machines, as part of efforts to improve cash availability in circulation.

The CBN also revealed plans to release an additional N1.4tn into circulation over the next three months to ease cash flow within the banking system.

This strategy aims to ensure that ATMs and bank branches have sufficient cash, addressing ongoing challenges faced by customers over cash shortages.

Efforts to get a reaction from the apex bank on the new situation proved abortive as the acting Director, Corporate Communications, Sidi Ali Hakama, did not respond to enquiries sent to her phone number.