April 9, 2019

The International Monetary Fund (IMF) has called on the federal government to end fuel subsidies in the country. It also urged them to create a timeline to recapitalise weak banks in the country. Concise News understands that the IMF said this at the conclusion of the IMF Executive Board 19 Article IV Consultation with Nigeria. Also, it expressed its support for the government’s plans to reform and raise value-added tax (VAT). “They welcomed the authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures,” IMF directors said in a statement. “They stressed the importance of strengthening domestic revenue mobilization, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives. “Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency. “They also recommended increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space.” The IMF directors “welcomed the decline in nonperforming loans and the improved prudential banking ratios but noted that restructured loans and undercapitalized banks continue to weigh on financial sector performance.” Also, they suggested, “strengthening capital buffers and risk-based supervision, conducting an asset quality review, avoiding regulatory forbearance, and revamping the banking resolution framework. “Directors also recommended establishing a credible time bound recapitalization plan for weak banks and a timeline for phasing out the state-backed asset management company AMCON.”   Source: Concise

The Federal Government plans to finance Nigeria’s N1.859tn budget deficit in 2019 by introducing new taxes and adopting a concessionary financing system under its privatisation programme. The government also stated that the projected deficit, at 1.33 per cent of the Gross Domestic Products, was still within the threshold stipulated in the Fiscal Responsibility Act 2007. This was contained in the presentation by the Minister of Finance, Zainab Ahmed, before the House of Representatives Joint Committee on the 2019-2021 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja on Tuesday. The panel is made up of the Committees on Finance; Appropriations; and Aid, Loans and Debt Management. Ahmed said the government had designed a new strategy for revenue growth to ensure a sustainable revenue flow system. She added that the ministry was in talks with the Federal Inland Revenue Service to identify new taxes, while the Treasury Single Account policy implementation would be extended to foreign accounts operated by government agencies. The minister said, “We have identified new revenue streams and we are working to tap into them, especially the identification of new taxes for which we are working with the FIRS to bring that to fruition, of course with an amendment to relevant tax laws. “We are working now to implement the TSA to cover foreign accounts operated by government agencies in order to broaden the net and minimise leakages.” According to the document presented by the minister to the committee, the budget deficit is to be financed mainly by privatisation proceeds of N210bn and N1.649tn borrowings, with “a shift away from commercial to concessionary financing.” Half of the borrowings, N824.82bn, would be sourced from domestic sources, with the other half from foreign sources. Also, the Director-General, Budget Office of the Federation, Mr Ben Akabueze, said Nigeria was expected to continue to experience growth from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 3.01 per cent in 2019, after emerging from recession in the second quarter of 2017. Akabueze said, “As of the end of 2018, Federal Government aggregate revenue was N3.96tn, which is 55 per cent of the budget and which is higher than the 2017 revenue.” He gave the breakdown as oil revenue of N2.32tn, which is 77 per cent of budget and 64 per cent higher than 2017; Company Income Tax of N637.25bn, which is 80 per cent of budget and 1.7 per cent higher than 2017; and Customs Collection of N303.91bn, which is 94 per cent of budget and 16 per cent higher than 2017. He said, “Notwithstanding the softening in the international oil prices in late 2018, the considered opinion or view of most reputable oil industry analysts is that the downward trend is not necessarily reflective of the outlook for 2019. Currently, the average Brent oil price projection for 2019, by 32 different institutions with relevant expertise, is still about $69 per barrel.” Akabueze assured Nigerians that the government would continue with its fiscal strategy of directing resources to most productive and growth-enhancing sectors, while efforts would be intensified to increase revenue. He added that the government would equally leverage private capital to supplement capital allocation from the budget. He stressed, “We will closely monitor the situation and will respond to any sustained changes in the international oil price outlook for 2019. Mr President has directed the Nigerian National Petroleum Corporation to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day. “The budget proposal seeks to continue the reflationary and consolidation policies of the 2017 and 2018 budgets, respectively, which helped put the economy back on the path of growth.” In his presentation, the Executive Chairman, FIRS, Mr Babatunde Fowler, stated that the tax office was optimistic about performing better than 2018 He said, “For the year 2018, the Federal Government gave the FIRS a collection target of N6.747tn. Analysis of actual collection figures for the year ended December 2018 shows that we collected a total of N5.320tn, which represents 78.86 per cent of the target. “The FIRS 2019 – 2021 Revenue Framework is based on the 2019 – 2021 MTEF and FSP. While the collection figure for 2018 was significantly higher than ever before, the FIRS is not resting on it oars and is continuing with the implementation of various measures to ensure that tax revenue collection significantly improves further in 2019.” Such measures, according to Fowler, include Strategic Revenue Growth Initiative, tax audit, use of technology such as VAT Auto Collect, State Offices of Accountant-General Platform, integration with GIFMIS for Federal Government MDAs, e-Service and mobile payment options. Others, he said, were sustained enforcement activities, Voluntary Assets and Income Declaration Scheme and amendment to tax laws to improve collection. On his part, the Comptroller-General, Nigeria Customs Service, Col. Hameed Ali (retd.), said there were strategies to actualise the 2019 budget target, stating that, “Every opportunity that will help in attaining the target shall be employed.” Ali said, “The proposed automation of all forms of manual payment in every Customs formation is geared towards enhanced revenue and budget performance. This approach will certainly culture the integrity and sanity of service operations.” “There shall be a holistic assessment and monitoring of all revenues collected on behalf of the service by the various designated commercial banks. This will create an avenue for genuine reconciliation of all accrued revenues against claimed remittances to the various designated government accounts.” The Customs boss also noted that the strategy would also guide against diversion of any collectable revenue.   Source: Punch

The International Monetary Fund says the Nigerian economy is recovering with increased Gross Domestic Product (GDP) in 2018 and falling inflation at the end of 2018. The Executive Board of the IMF stated this in its report at the conclusion of the Board’s consultation with Nigeria, according to a statement issued in Washington, DC by a spokesperson for the Fund, Lucie Fouda. IMF said: “Nigeria’s economy is recovering. “Real GDP increased by 1.9 per cent in 2018, up from 0.8 per cent in 2017, on the back of improvements in manufacturing and services, supported by spillovers from higher oil prices, ongoing convergence in exchange rates and strides to improve the business environment. “Headline inflation fell to 11.4 per cent at end-2018, reflecting declining food price inflation, weak consumer demand, a relatively stable exchange rate and tight monetary policy during most of 2018, but remains outside of the central bank’s target range of 6-9 per cent. “Record holdings of mostly short-term local debt and equity and a current account surplus lifted gross international reserves to a peak in April 2018, while the three-times oversubscribed November 2018 Eurobond helped cushion the impact of outflows later in the year”. IMF said, however, persisting structural and policy challenges continue to constrain growth to levels below those needed to reduce vulnerabilities, lessen poverty and improve weak human development outcomes, such as in health and education. The bank said a large infrastructure gap, low revenue mobilisation, governance and institutional weaknesses, continued foreign exchange restrictions, and banking sector vulnerabilities were dampening long-term foreign and domestic investment and keeping the economy reliant on volatile oil prices and production. “Under current policies, the outlook remains therefore muted. Over the medium term, absent strong reforms, growth would hover around 2½ per cent, implying no per capita growth as the economy faces limited increases in oil production and insufficient adjustment four years after the oil price shock. “Monetary policy focused on exchange rate stability would help contain inflation but worsen competitiveness if greater flexibility is not accommodated when needed. High financing costs, on the back of little fiscal adjustment, would continue to constrain private sector credit, and the interest-to-revenue ratio would remain high. “Risks are moderately tilted downwards. On the upside, oil prices could rise, prompted by global political disruptions or supply bottlenecks. Bold reform efforts, following the election cycle, could boost confidence and investments, especially given relatively conservative baseline projections. “On the downside, additional delays in reform implementation, a persistent fall in oil prices, reduced oil production, increased security tensions, or tighter global financial market conditions could undermine growth, provoke a market sell-off, and put additional pressure on reserves and/or the exchange rate,” the Fund said. The Executive Directors, in their assessment, welcomed Nigeria’s ongoing economic recovery, accompanied by reduced inflation and strengthened reserve buffers. They noted, however, that the medium-term outlook remains muted, with risks tilted to the downside. In addition, long standing structural and policy challenges need to be tackled more decisively to reduce vulnerabilities, raise per capita growth, and bring down poverty, they said. Directors, therefore, urged the authorities to redouble their reform efforts, and supported their intention to accelerate implementation of their Economic Recovery and Growth Plan. They welcomed the Nigerian authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures. They stressed the importance of strengthening domestic revenue mobilisation, including through additional excises, a comprehensive Value Added Tax reform, and elimination of tax incentives. Securing oil revenues through reforms of state owned enterprises and measures to improve the governance of the oil sector will also be crucial, they said. Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency, while also recommending increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space. With inflation still above the Central Bank target, Directors generally considered that a tight monetary policy stance is appropriate. They also urged ending direct Central Bank intervention in the economy to allow focus on the central bank’s price stability mandate. Directors commended the authorities’ commitment to unify the exchange rate and welcomed the increasing convergence of foreign exchange windows. They noted that a unified market based exchange rate and a more flexible exchange rate regime would support inflation targeting. Directors also stressed that elimination of exchange restrictions and multiple currency practices would remove distortions and facilitate economic diversification. They welcomed the decline in nonperforming loans and the improved prudential banking ratios but noted that restructured loans and undercapitalised banks continue to weigh on financial sector performance. Directors also recommended establishing a credible time bound recapitalisation plan for weak banks and a timeline for phasing out the state backed asset management company AMCON. Directors urged the authorities to reinvigorate implementation of structural reforms to diversify the economy and achieve the Sustainable Development Goals. They pointed to the importance of improving the business environment, implementing the power sector recovery programme, deepening financial inclusion, reforming the health and education sectors, and implementing policies to reduce gender inequities. Directors welcomed improvements in the quality and availability of economic statistics and encouraged continued efforts to address remaining gaps, including through regular funding.   Source: Punch

Individuals and corporate bodies found guilty of tax evasion are to henceforth lose their properties to the Federal Government, the Chairman, Federal Inland Revenue Services (FIRS), Babatunde Fowler, has said. This was as he equally disclosed that the tax agency surpassed its target for 2018 by generating a total of N5.32 trillion. Fowler disclosed this on Tuesday at a roundtable between the House of Representatives Joint Committee on Aides and Loans, Finance and Appropriations and relevant ministries and agencies on the 2019–2021 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Papers (FSP) in Abuja. While appraising his agency’s performance for the 2018 fiscal calendar, Fowler said the court had, for the first time, granted leave to the service to confiscate properties belonging to tax defaulters and liquidate same with a view to recovering government taxes. “We’ve gotten a court order to start the sale of property of tax defaulters for the first time, and we’re working at commencing that to recover what’s owed to government. “We have shown increased sales in the various tax nets, but we had to slow down, and we’re working on over 55,000 accounts and generating an estimate of about N746 billion.  “And, as we continue to use technology to improve the collection process, VAT (Value Added Tax) will continue to improve in remittances and increase revenue flow,” he said. The tax boss also disclosed new innovations being employed to improve tax collection with regards to the deployment of e-services which, he said, were improving ease of compliance by 25 points. “We’re working with the EFCC (Economic and Financial Crimes Commission) on the joint tax board to improve compliance and collection. “Property owners have also been netted and a total of N4.3 billion can be realised in Abuja and Lagos alone,” he said.   Source: Independent