News
Nigeria Tax Spat Reignites Federalism Debate
A legal battle between the federal government and states over sales tax is fueling fierce debate about federalism in the country as politicians jockey for position before 2023 elections.
The spat –- whether federal or state governments have the right to collect value-added tax (VAT) –- may be about money, and the sum at stake runs into billions of dollars.
According to AFP, but the squabble also reflects long-standing questions about how Nigeria is governed and how wealth is shared in the continent’s top oil producer.
How the dispute ends may open up more state autonomy, analysts say, as wealthier southern regions test federal management of issues from oil resources and security policing to cattle grazing rights.
In August, a court in southern Rivers State, Nigeria’s petroleum heartland, ruled states should be responsible for collecting VAT and not the Federal Inland Revenue Service (FIRS).
Ezenwo Nyesom Wike, Rivers State governor, a staunch opposition Peoples Democratic Party (PDP) leader, pushed through a law authorising local collection of VAT, warning FIRS against any “sabotage.”
Southern Lagos State, the nation’s economic powerhouse including the commercial capital Lagos, quickly followed with its own law to collect VAT.
After a federal government appeal, the dispute is caught up in competing demands, with Abuja considering a Supreme Court challenge.
Abubakar Malami, attorney general, last week told reporters that only the national assembly could legislate on how VAT is levied.
“The federal government is looking at all options at its disposal, including the possibility of involving the jurisdiction of the Supreme Court,” he said.
Under Nigeria’s system, FIRS collects VAT centrally and the resources are distributed across federal, state and local governments.
VAT receipts in 2020 were N1.5 trillion or $3.6 billion. Under the current system the federal government gets 15 percent, with the rest split between states and local governments.
But richer southern states like Lagos and Rivers — Lagos alone produces around half of Nigeria’s VAT — have long complained they end up paying for poorer states mostly in the agricultural north but also some southern ones.
They want more “fiscal federalism,” meaning getting a bigger share of the VAT they collect and more responsiblity to manage their own affairs.
“What we are after is to ensure that this money is used for the people of Lagos State, and that is exactly what we have achieved,” Setonji David, a Lagos assembly lawmaker, told Channels TV.
– ‘Restructuring’ Nigeria –
The “restructuring” debate often resurfaces during election times in Nigeria, which became a single entity under British colonial rule in 1914 when the mainly Muslim north was joined with the mostly Christian south.
Regional identities for Nigeria’s major ethnic groups are often fiercely guarded — sometimes with separatist rhetoric — even as the federal government promotes national unity.
“We will see more of these scenarios, where different constituent entities will try to assert more control economically using political means over what is extracted or generated from their territories,” SBM Intelligence analyst Tunde Ajileye said of the VAT fallout.
The tax debate is especially sensitive after the coronavirus pandemic that battered Nigeria’s oil revenues and pushed Africa’s largest economy into its second recession in five years.
During the pandemic, the federal government increased VAT from five percent to 7.5 percent, providing much-needed revenue.
Eurasia Group’s Amaka Anku said decentralisation of tax management is unlikely, as most states lack expertise or willingness.
“Outside Lagos and the federal capital territory (Abuja), states are likely to be negatively affected by a decentralization of VAT collection, making the proposition politically unfeasible.”
But the VAT fight also plays into the heated tones before the 2023 election to replace President Muhammadu Buhari, a northern Muslim in power since 2015.
– Election tensions –
Critics of Buhari say since he came to power he has favoured northeners in a way that has intensified calls for more autonomy for states and even calls for separatism by some southern agitators.
Officials of the All Progressives Congress’ ruling party dismiss such claims and point to government investments across north or south.
But mass kidnappings, attacks and insecurity have also prompted calls from some southern leaders to have control over their own security forces.
VAT has joined a list of disputes where southern and northern leaders appear to be digging in on rival sides.
One of those is “zoning” — an unofficial power-sharing deal that rotates the presidency between candidates from the north and the south.
After two terms with northern Buhari, many southern leaders want a president from their region. Many leaders from the north disagree.
But despite the squabbling, analysts say a compromise on VAT is the likely outcome.
“The good thing about this is there has not been a use of violence or rhetoric, it is more the use of the court process,” said SBM’s Ajileye.
“I expect there will be some political settlement ultimately.”
Nigerian Education Loan Fund (NELFUND) has said that Nigerian students will need to present their Unified Tertiary Matriculation Examination registration number (UTME); National Identification Number (NIN); and Bank Verification Number (BVN) to access student loans.
Mr Akintunde Sawyerr, managing director of NELFUND, assured that the body would ensure that those he called ‘ghost students’ would not have access to the soon-to-be-launched scheme.
The MD noted that NELFUND has put processes in place to ensure that all applicants and beneficiaries are traceable to prevent the loan from turning into a sort of national cake.
“We are using technology to run the system. The process of application is online and we are limiting human contact as much as possible. Once you have a Bank Verification Number, BVN and National Identification Number, NIN, which are parts of the requirements, we will have access to your data and all your accounts. This will also help us to know if you are qualified or not,” he explained.
He explained further that those who are already in school can apply for the loan at any level of their study, but must be at the beginning of each session. They would also have to provide their admission and matriculation details in addition to BVN and NIN.
According to the NELFUND boss, about 1.2 million Nigerian students in tertiary institutions and government-recognized skill acquisition centres would be among the first batch of beneficiaries. The number may increase as time goes on.
The programme, he noted, will be funded with one per cent of the total annual collectable revenue by the Federal Inland Revenue Service (FIRS), which will amount to N194 billion if the agency meets its projection.
He explained that the loan would be paid in two segments. The first, he said, is the chargeable school fees which would be paid directly to the institutions while stipend would be paid into individual student’s account for day-to-day upkeep.
Mr. Sawyerr stated that the amount individual applicants will access will vary because of the course of study, school fees payable and geographical location of the institutions among others.
On the method of payback, he said, “You don’t start paying back the loan until two years after your National Youth Service Corps, NYSC Scheme and that is, if you have secured a job or business. A beneficiary can defer repayment if he has not secured a job, but if after due diligence, he defaulted, then he becomes a criminal and we will work with every agency that can help us get the money back, for example, EFCC, ICPC etc.”
Sun International Limited, run by Anthony Leeming, South African entrepreneur, has agreed to sell its Nigerian interests to Rutam Finance Company Limited (RFC) for roughly $14.4 million.
The move is part of Sun International’s strategy to consolidate operations and focus on key markets. Sun International joined the Nigerian market in 2009, but has struggled in recent years due to a challenging operating climate.
This divestiture is consistent with the company’s strategic objectives and represents a shift in portfolio management.
Sun International, will sell a 43.3 percent ownership investment in Tourist Company of Nigeria PLC (TCN), which manages Lagos’ Federal Palace Hotel, to RFC for $1.875 million.
In addition, the group would pay off its whole $12.675 million credit to RFC, effectively exiting the Nigerian market. The corporation also intends to sell its remaining 6% ownership in TCN in due course.
The transaction, subject to customary closing conditions including as regulatory approvals, is estimated to create a cash inflow of about $14.41 million for Sun International.
These funds will be utilized to reduce debt.
Following the completion of the acquisition, TCN will no longer be included in Sun International’s financial statements.
This will reduce group debt by about $41.82 million, excluding IFRS 16 lease liabilities.
The closing is scheduled for no later than May 28, 2024, provided that all usual closing conditions are met. The Nigerian Competition Authority, the Securities and Exchange Commission, and the Nigerian Stock Exchange have all provided key clearances.
Sun International, founded in 1968 by the late Sol Kerzner, has grown into a renowned gaming and resort company under Leeming’s leadership.
In fiscal 2023, the company’s revenue increased by 7% to $646.14 million, while headline earnings increased by 86 percent to $55.35 million.
This demonstrates Sun International’s resiliency and strategic direction. Sun International’s pullout from Nigeria demonstrates the company’s dedication to streamlining its portfolio and pursuing growth possibilities in key areas.
With a rich history and a focus on the future, this transaction demonstrates the company’s commitment to create wealth for shareholders and stakeholders while also strengthening its position in the gaming and hospitality industries.
Sam Darwish, a US-Nigerian telecom entrepreneur, has experienced a huge financial setback in his holding in IHS Holdings following a recent drop in the shares of the top telecom infrastructure company on the New York Stock Exchange (NYSE).
Sam Darwish
According to data, Sam Darwish’s investment in IHS Holdings has lost $6 million in market value during the last 13 days. This drop reflects increasing selling pressure among NYSE investors.
From March 12 to 30, Darwish’s investment in IHS Holdings increased from $35.17 million to $49.27 million, resulting in a $14 million gain.
Darwish founded IHS Holdings in 2001, and it has since grown to become the largest telecom infrastructure business in Africa, Europe, Latin America, and the Middle East.
It is renowned for its huge tower count and is the world’s third-largest independent international tower firm.
In the last 13 days, IHS Holdings shares on the NYSE have dropped by 11.72 percent, from $3.67 on April 3 to $3.24 at the time of writing.
As a result, the company’s market capitalization has dropped below $1.1 billion, causing significant losses for stockholders.
As chairman and CEO of IHS Holdings, Sam Darwish holds a critical position in African telecom.
With a strong 4.17 percent ownership holding, equivalent to 13,958,158 ordinary shares, he is a key participant in the global telecom infrastructure business.
The recent double-digit loss in IHS Holdings shares has resulted in a $6 million decrease in the market value of Darwish’s shareholding in the top telecom infrastructure company. His shareholding has decreased from $51.23 million on April 3 to $45.22 million.
Despite this defeat, Darwish remains an important figure in the worldwide telecom business.
IHS Holdings’ extensive tower network and smart acquisitions have secured its position as a major participant in the global telecom infrastructure sector.
NELFUND Says UTME, NIN, BVN Mandatory for Student Loans
Sun International Finalizes $14.4M Exit from Nigeria, Sells Interests to RFC
Sam Darwish, US-Nigerian Businessman Suffers $6m Loss as IHS Shares Plunge
NITDA, NIMC Partner for Seamless Data Exchange Capabilities
FG Plans EO to Criminalise Fiber Cable Damage Costing Telcos Billions
See Full List of Fake Loan Apps Blacklisted By CBN
FIRS Files Tax Evasion Charges against Binance
IFC Invests in New 4DX Ventures Fund to Support Tech Startups in Africa
AXA Mansard Empowers Female SMEs with Financial, Digital Skills
Moniepoint Study Reveals How Strong Cultural Bonds, High Levels of Trust Drives Nigerian Family Businesses
News3 days agoQNET Raises Alarm over Fraudulent Use of Foundation’s Name in Nigeria
News3 days agoSoftTalk Messenger Introduces Chat and Make Calls without Sharing your Phone Number
Telecom3 days agoStarlink Users in SA to be Cut Off April 30
Telecom3 days agoNCC Advises Subscribers to Opt for Strong Passwords to Beat Hackers
Broadcasting3 days agoCanal+ Offer for MultiChoice Gains Shareholders’ Support
Telecom2 days agoImperative of Upholding Nigeria’s Telecoms Lifeline
E-Financial3 days agoFidelity Bank Reports N124.3Bn Pre-Tax Profit for 2023
Telecom3 days ago9mobile Clinches 2 Trophies at the Prestigious SABRE Awards 2024