All Change!!! Nigeria Is Not An Oil Economy

By Kemi Adeosun

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 characterized 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 four 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 mobilization, in the form of taxes. Tax to Gross Domestic Product (GDP) ratios of less than 10 per cent against the OECD average of 34.6 per cent 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 clamor 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 per cent of GDP, Nigeria simply does not fit into the mold of the traditional oil economies.

Interestingly, even nations who did legitimately fit into this narrow mold 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 has diversified economies and tax to GDP ratios of 20 per cent and 16 per cent, respectively, compared to Nigeria’s 6 per cent. Consequently, the change mantra had to be urgently applied to revenue mobilization.

Analysis of the data suggests that revenue mobilization 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 taxpayers from an economically active base of 70 million. Over 95 per cent of these are salary earners in the formal sector, just 241 persons paid personal income taxes of N20 million (US$65,573.77) in 2016.

Taxing the high net worth 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 mobilization 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 nine-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 per cent 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 mobilization 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 Inaugurates NCMDF Board Members

The Minister of Finance, Kemi Adeosun has confirmed the appointment of members of the Board of Nigerian Capital Market Development Fund, NCMDF.

Mrs Kemi ADEOSUN at the Securities and Exchange Commission yesterday disclosed this, saying,

“The Commission’s mandate is to deepen the market and enhance the socio-economic development of our beloved country.”

Member of the Board are : Mounir Gwarzo – Chairman, Non-executive Commissioner of SEC – Vice Chairman, Executive Commissioner of the Securities and Exchange Commission, Mrs Olubunmi Siyanbola – Director, Home Finance, Ministry of Finance, and Dr. Faruk Umar – Chairman, Association for the Advancement of the Rights of Nigerian Shareholders Others are Mr. Sunny Nwosu – Independent Shareholders Association of Nigeria, Mr. Bayo Olugbemi – President/Chairman – Institute of Capital Market Registrars – Represented by Walter Oghogho and Ify Ejeizie – Association of Stock Broking Houses of Nigeria.

FG To Be Prudent With Foreign Borrowing – Kemi Adeosun

The Minister for Finance, Mrs. Kemi Adeosun, revealed on Sunday that the Federal Government would not be reckless with foreign borrowings as it maintains an expansionary fiscal policy.

Adeosun also revealed that the International Monetary Fund (IMF) and the World Bank Group have projected a positive outlook for higher growth for the Sub-Saharan Africa and the global economy in 2018.

Adeosun made this known in Washington D.C. at a Joint Media Briefing with the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, at the end of the 2017 Annual Meetings of the International Monetary Fund and the World Bank Group.

She stated that the Federal Government adopted an expansionary fiscal policy with an enlarged budget in order to deliver a fundamental structural change to the economy, thereby reducing the country’s exposure to crude oil.

“Why are we borrowing? Mobilising revenue aggressively was not advisable, nor indeed possible, in a recessed economy. But as Nigeria now reverts to growth, our revenue strategy will be accelerated.

“This is being complemented by a medium-term debt strategy that is focusing more on external borrowings to avoid crowding out the private sector.

“This would also reduce the cost of debt servicing and shift the balance of our debt portfolio from short-term to longer-term instruments. This Government will be very prudent around debt. We won’t borrow irresponsibly,” said Adeosun, who led the Nigerian delegation to the 2017 Annual Meetings of the IMF and the World Bank.

The Minister participated in both the International Monetary and Financial Committee (IMFC) and Development Committee (DC) meetings, the two highest decision-making organs of the Bretton-woods Institutions.

She revealed that developments in the global economy since the Spring meetings were reviewed, noting that growth had picked up in 2017 even though not even.

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele; Honourable Minister of Finance and Leader of the Nigerian delegation to the 2017 Annual Meetings of the IMF and World Bank, Mrs. Kemi Adeosun, and the Permanent Secretary in the Ministry of Finance, Alhaji Mahmoud Isa-Dutse, at a Joint Media Briefing at the end of the IMF and World Bank Meetings in Washington D.C. on Sunday, October 15, 2017

“Global growth is estimated to be 3.6 percent for Fiscal Year 2017, while Sub-Saharan Africa (SSA) is projected to grow at 2.6 percent and the outlook is for higher growth in Fiscal Year 2018.

“However, downside risks remain in the medium-term with high policy uncertainty, geopolitical tensions. Inflation remains subdued,” she added.

Providing further details on the IMF and World Bank meeting, Minister Adeosun said the overarching policy priorities for the entire membership was to boost potential output and improve income distribution while improving financial sector resilience.

The two Bretton-wood institutions, according to her, urged commodity exporters like Nigeria, to pursue structural policy reforms to unlock the country’s potentials and stimulate aggregate supply as well as enhance the diversification process.

On the Development Committee (DC) meeting, she said members discussed the need to enhance the capacity of the International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC) to meet their obligations of supporting the financing needs of client countries and to prevent a slowdown in lending.

“At the DC where I spoke on behalf of Angola, Nigeria, and South Africa, I urged the international community particularly the Bretton-wood Institutions to change the narrative on Africa which always portray the continent as Low-Income Countries (LIC).

“Indeed, there are some Middle-Income Countries represented by this constituency and so there is the need for the Bank to deploy instruments, policies, and programs that will address the peculiar needs of these countries,” she said.

Responding on the issue of investing in women, Adeosun remarked that the women remained the best investment any nation could make.

“The multiplier effect of such investment is significant. We need to make more opportunities available to our women. They are the economic drivers of our nation. We have enormous talents in Nigeria, and the Federal Government will invest in human capital,” she added.

The CBN Governor, Mr. Godwin Emefiele, who also participated in the IMF and World Bank meetings, confirmed improvement in the Nigerian economy.

“The fundamentals we are seeing show that there is a lot of stability in the foreign exchange market, and having come down from high level to the level we are now, and the currency is just fluctuating between N359/N365 to the dollar.

“We think it is good level compared to where we are coming from. We think it is important to note that as reserves get stronger, as economic fundamentals get stronger, there is no doubt that the naira will get stronger and we will see more appreciation in the currency,” Emefiele said.

He assured that the CBN would continue to focus on the banking system to ensure there were no significant threats that would affect the strategic health of the banking system.

He further said that the CBN would continue to support the Federal Government’s efforts to reduce unemployment and create jobs.

Senate Summons Adeosun, Udoma Over Economy

The Minister of Finance, Mrs Kemi Adeosun and her Budget and National Planning counterpart, Sen. Udo Udoma have been summoned by the Senate to brief Nigerians on developments in the economy. Chairman, Senate Committee on Media and Public Affairs, Sen. Sabi Abdullahi, made this known when he briefed newsmen on Tuesday in Abuja.

Abdullahi said that the invitation of the ministers was to get assurance on measures being put in place to prop-up and continuously support the economy to forestall relapse to recession.

He recalled that it was on the floor of the Senate that Nigeria was declared to be technically in recession.

According to him, we had cause to discuss the issue of recession that came up last year.

“We are glad that we have at least exited recession by virtue of the 0.55 per cent marginal growth we have recorded.”

Abdullahi, however, said that there was need for managers of the economy to explain its state to citizens, especially with the issues of recession.

He urged the economy managers to step-up their jobs in order to consolidate current gains and avert any relapse to recession.

Sukuk: What Nigeria Stands To Gain And Why UK, S’Africa, Others Embrace It

The Federal Government N100billion Sukuk offer was concluded on Friday though the brickbat it generated between the Christian Association of Nigeria (CAN) and the Nigerian Supreme Council on Islamic Affairs (NSCIA) still reverberates. SULAIMON OLANREWAJU looks at what sukuk is, its operation, upsides as well as downsides.

While Nigerians and the rest of the world await the outcome of the nation’s first N100billion offer which ended on Friday after a two-day extension, its issuance has divided the country along religious lines. In a reaction to the sukuk offer, the Christian Association of Nigeria (CAN) described the issuance as a subtle attempt by the Federal Government to Islamise Nigeria. The body, therefore, called on the government to abrogate the laws and framework behind the sukuk issuance, failing which it would seek legal redress.

In a statement signed by its General Secretary, Rev. Musa Asake, CAN noted that it “has been protesting against this aberration since the Osun State Government, under Governor Rauf Aregbesola, embarked on this violation of the constitution.

“Rather than stand in the defence of the constitution, it is disappointing to note that the Federal Government is pursuing what is an outright confirmation of an Islamisation agenda.

“The recent floating of sukuk bond by the government is not only sectional but illegal and a violation of the constitution. Every law that has been promulgated to back the sukuk issuance and promote an Islamic banking system in Nigeria is ultra vires, illegal, null and void.”

But in its reaction, the Nigerian Supreme Council for Islamic Affairs (NSCIA), accused CAN of “Islamophobia.”

In a statement signed by its Deputy Secretary General, Salisu Shehu, the body said, “CAN cannot claim ignorance about the fact that even the World Bank has been involved in issuing sukuk and the floating of sukuk bonds. Interestingly also, several non-Muslim countries across Africa, Europe and Asia have also instituted Islamic Financial System generally and Sukuk in particular. Worthy of mention here are Kenya, Tanzania, South Africa, United Kingdom, Luxembourg, Russia, China, Singapore and a number of firms in the United States.

“Less than two years ago, Britain hosted a World Conference on Islamic Banking and Finance and David Cameron, the then British prime minister, openly declared that their intention was to make UK the hub of Islamic Finance in the World.”

It added that, “It would certainly be embarrassing for CAN to be told that the first and foremost state in Nigeria to submit application for loan to the Islamic Development Bank is a Christian-dominated state in the South-East.”

NSCIA then appealed to CAN to “in the spirit of Biblical injunctions, uphold the truth for its sake and tread the path of honour and refrain from statements capable of causing disaffection and promoting disharmony that may lead to conflict in the country.”

What is Sukuk?

The essence of sukuk is to raise funds without having to bother about interest, which in Islamic parlance is known as riba. Islamic laws forbid interests on loans, hence sukuk, which encourages profit sharing rather than interest earning, is embraced by financial operators in Arab world. However, the appeal of sukuk currently transcends the Islamic world as many non-Islamic countries have now embraced it.

According to the Rules and Regulations of the Securities and Exchange Commission (SEC Rules 2013), sukuk refers to investment certificates or notes of equal value which evidences undivided interest/ownership of tangible assets, usufructs and services or investment in the assets of particular projects or special investment activity using Shariah principles and concepts and approved by the SEC.

Writing along this line, Majeed Oladunjoye, in an article published in Journal of Islamic Banking and Finance, says sukuk can be defined as “certificates of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investments,” adding that sukuk is more than a mere bond.

Sukuk is contrasted with conventional bond in the sense that while in the case of conventional bonds the issuer has a contractual obligation to pay to bond holders, on certain specified dates, interest and principal, under a sukuk structure the sukuk holders each hold an undivided beneficial ownership in the underlying assets.

Under a sukuk structure, returns to sukuk holders (investors) represent rights to receive payments from a trade transaction or ownership of a particular asset or business venture. However, the returns to conventional bondholders represent the right to receive interest for borrowed monies.

In other words, a sukuk holder is not just a mere investor but a part owner of the project. A sukuk investor has a common share in the ownership of the assets linked to the investment although this does not represent a debt owed to the issuer of the bond. So, sukuk is a trust certificate.

Why opt for Sukuk?

Mr Mounir Gwarzo, Director General of the Securities and Exchange Commission, while explaining the rationale behind his organization and the Debt Management Office (DMO) working together to ensure a buy-in into sukuk by the Federal Government, said, “Within the context of continued decline in the prices of crude oil in the international markets, attendant drop in both foreign exchange and government revenues as well as fragility of growth from major emerging markets like China, the need for alternative sources of capital to finance infrastructure becomes increasingly more compelling. Both government agencies (SEC and DMO) therefore agreed on the urgent need to begin mobilising capital in order to address the nation’s investment needs. Particularly, issuing a sovereign sukuk will attract significant amounts of affordable capital from the Gulf countries and other established Islamic markets around the world into Nigeria.”

Former Director General of the DMO, Dr Abraham Nwakwo, said that sukuk is part of the DMO’s 2013-2017 Strategic Plan which mentions the goal of using “non-interest debt financing instruments (such as sukuk) for investment in critical national development priorities and sectors.”

He added that the issue was “part of the plan to fast track the development of infrastructure and engage in … project-tied capital raising,” adding that Nigeria has challenges with road, railway and power infrastructure.

Gwarzo predicted that Nigeria’s maiden sovereign sukuk would be oversubscribed with enhanced participation of domestic and foreign investors.

Apart from the huge funding made available through the instrumentality of sukuk, for a country that spends a fortune on debt servicing, sukuk provides a refreshingly different alternative. According to Vitor Gaspar, International Monetary Fund’s Director of Fiscal Affairs Department, in April this year, Nigeria spends 66 per cent of its tax revenue on debt servicing. Similarly, the Emir of Kano, Muhammadu Sanusi, said the Federal Government expends 66 per cent of the country’s revenue on servicing debt interest, while 34 per cent of the revenue was used for capital and recurrent expenditures.

In his own view Dr Benedict Nwafor of the University of Lagos, said the attraction for Nigeria is its present challenge. “For Nigeria, anything that will reduce the debt burden will be welcome. If a country expends 66 per cent of her earnings on debt repayment, that country cannot experience development. The government has to develop critical infrastructure to engender development. The sukuk is an opportunity for raising funds without raising the nation’s debt profile,” he said.

According to him, although sukuk is founded in Islamic belief, it is nothing other than a financial instrument for mobilizing funds. He added that each country has its own reason for embracing sukuk.

He explained that while South Africa welcomed sukuk because of its desire to broaden its investor base and to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development, Hong Kong adopted sukuk because “As China’s global financial centre, it is an important conduit for Mainland companies to access the international markets and the preferred offshore capital raising centre for Mainland issuers.”

Benefits of sukuk

Sukuk provides access to a vast and growing Islamic liquidity pool in addition to the conventional debt. According to Naveed Mohammed, an Islamic finance scholar, sukuk provides an ideal way of financing large projects for the public good that would otherwise not be possible.

He says, “There are many economic activities or projects that are out of reach of various developing Islamic economies and governments. In these cases, sukuk is perfect for financing these projects without falling into interest-based debt. This makes sukuk an important avenue for redistribution of wealth and achievement of social justice. The use of sukuk to fund large projects means that investors in sukuk are incentivized to help economies develop by creating and producing rather than by consuming or manipulating others. Islamic finance is based on principles of fairness and justice which are achieved by avoiding riba.”

Mohammed adds that investors on the secondary market who are looking for investments that can be liquidated easily will find thatsukuk is ideal. “Thanks to the secondary market for Islamic securities, investors can sell their securities and obtain the cost of their certificates. If the projects that back their sukukcertificates have generated profits, this results in a quick return in investment.  This means that Islamic financial instruments are well suited for fund management. Banks or institutes can use part of their funds to purchase Islamic securities and then sell them on the secondary market when liquid assets are needed.”

Sukuk’s major appeal is the removal of interest burden as well as the vast resources available to its promoters. This explains why a country like the United Kingdom has fully embraced it. The immediate past British Prime Minister, David Cameron, once said he would want London to stand alongside Dubai and Kuala Lumpur as one of the greatest capitals of Islamic Finance in the world. With that, in June 2014, the United Kingdom became the first country outside of the Islamic world to issue a sovereignsukuk. The UK government raised £200 million to fund the construction of residential buildings. Other non-Islamic countries have since keyed into sukuk as a means of raising funds. These include Hong Kong, Senegal, South Africa and Luxemburg.

Drawbacks

Sukuk is not without its drawback. The major drawback is what happens to a sukuk holder should asukuk fail. What is the status of a sukuk holder when a sukuk fails? A sukuk holder is said to be a part-owner of a project. What happens in the eventuality of the failure of the project? Can he and other owners move in and take possession of the project or does he bear the consequences of that failure by forfeiting his investment?

According to Ibrahim Warde, Professor of International Finance at The Fletcher School of Law and Diplomacy, Tufts University, it is not clear what will happen when a sukuk fails. He says, “This is an issue that has not been tested in court. In Malaysia, somesukuk issues have junk status, and two other sukuk are already in default: the Easter Cameron Gas company in the United States and Investment Dar of Kuwait. One of the unresolved questions is whethersukuk holders should stand in the line of creditors or in the line of the owners of underlying assets.”

Also expressing confusion over the status of a sukuk holder, Muddassir Siddiqui, who is both a licensed Shariah jurist and a-U.S. trained attorney, said, “Through reading many cases that have so far been litigated in courts around the world, I have found that in almost all cases, the courts have struggled to reconcile the substance and form of the contract. Was it a sale, lease, construction or partnership contract or a financing arrangement between the parties?”

Lending his voice to the complexity involving sukuk, Rodney Wilson, Emeritus Professor of Economics at Durham University in the UK, who is also Visiting Professor, Qatar Faculty of Islamic Studies and Adjunct Professor, International Centre of Education in Islamic Finance (INCEIF), Kuala Lumpur, opined that “when sukukpayments are delayed or fail, the means of redress are potentially more complex than for conventional notes and bonds because under Shari’ah, leniency towards debtors is favoured.” This will unfailingly raise moral hazard problems.

But beyond these concerns, Nwafor is of view that sukuk certificates can transfer state-owned projects to sukuk holders in case of default. According to him, “A sukuk holder is a part owner of a project until he is fully repaid. So, if a project funded by sukuk fails or is so badly managed that the investors cannot recoup their investment, the project will owned by the investors until the investors are able to get back their capital. This is one of the complications withsukuk. This grey area has to be sorted out to avoid the country and the people being short-changed. The government must come out clean on what happens to a project and the investor in case of project failure. We cannot pretend that it cannot happen. Projects fail regularly here in this country. Should that happen, what becomes of the project and those who invested in it?”

He added that the Federal Government has a lot to do in educating the public on the benefits of sukuk to ensure a buy-in. “The government must also do all it can to assure Nigerians that this scheme is not intended to favour a section of the society. I am of the view that if other non-Muslim countries can accept it, so can Nigeria but the government has to work extra hard to convince Nigerians that it means well for all Nigerians with the sukuk.”

Source: Nigerian Tribune

Revenue Drops As FG, States, LGs Share N467.8Bn In August

The federal government, states and local governments shared N467.8 billion in August, the Minister of Finance, Kemi Adeosun, said on Tuesday.

This indicates a shortfall in revenue by N184.2 billion from N652 billion shared in July.

Mrs. Adeosun, who was represented by the Permanent Secretary in the ministry, Mahmoud Dutse, said this at the end of the monthly Federation Account Allocation Committee, FAAC, meeting on Tuesday in Abuja.

She said the shared amount was inclusive of Value Added Tax, VAT.

The Gross statutory revenue was put at N387.31 billion, while the VAT was N80.53 billion.

She said the decline in revenue was caused by a drastic fall in revenue from Companies Income Tax, CIT, due to the expiration of the deadline for filing tax returns.

She, however, said oil revenues recorded an increase due to rise in export sales by $62 million.

“The increase in the average price of crude oil from $50.27 per barrel to $51.05 per barrel and a significant increase in export volume by 1.20 million barrels resulted in increased revenue from export sales for the federation by $62 million.

“Despite the increases, there were issues of leaking flow lines, shut-ins and shutdowns at terminals for maintenance.”

Giving a breakdown of the allocation, Mrs. Adeosun said the federal government received N193.04 billion, states N130.69 billion and local governments N98.01 billion.

She also said N31.59 billion was given to the nine oil producing states as their 13 per cent derivation.

She put the balance in the Excess Crude Account, ECA, at $2.3 billion.

Mahmud Yunusa, Chairman, Forum of Finance Commissioners, said it was time for the states to begin to look inwards to shore up their revenue.

“States will explore other options of revenue to depend less on revenue from the centre.

“We need to block leakages in revenue and come up with reforms to shore up revenue.

“We are also working on cost of running governance and any cost that is not necessary in running government needed to be reduced.”

He said reforms were currently on in the states to optimise the collection processes for revenue, adding that he was optimistic it would reduce dependence in revenue from the centre to about 50 to 60 per cent.

(NAN)

 

Paris Refund: See What Each State Gets

The Federal Government on Tuesday released details of payments to the 36 states as refund of “over-deductions on Paris Club, London Club Loans and Multilateral debts on the accounts of States and Local Governments between 1995 to 2002

The latest payment is the second tranche of the refunds to the states.

A total of N243.8 billion was released to the 36 states and Abuja in the second tranche.

The Minister of Finance, Kemi Adeosun, said approval for the release of the fund was given by Acting President Yemi Osinbajo on May 4.

The details, released by the Ministry of Finance on Tuesday evening, showed that Akwa Ibom, Bayelsa, Delta, Kano and Rivers received the largest sum of N10 billion each.

The states had earlier promised to use a large chunk of the money to settle debts owed workers and pensioners in their respective domains.

“The releases were conditional upon a minimum of 75 per cent being applied to the payment of workers’ salaries and pensions for States that owe salaries and pension,” Salisu Dambatta, a finance ministry spokesperson said in the statement.

The finance ministry said it was reviewing the impact of these releases on the level of arrears owed by the various state governments.

See details below:

S/N STATE AMOUNT PAYABLE (NGN)
1 ABIA 5715765871.48
2 ADAMAWA 6114300352.68
3 AKWA-IBOM 10000000000
4 ANAMBRA 6121656702.34
5 BAUCHI 6877776561.25
6 BAYELSA 10000000000
7 BENUE 6854671749.25
8 BORNO 7340934865.32
9 CROSS RIVER 6075343946.93
10 DELTA 10000000000
11 EBONYI 4508083379.98
12 EDO 6091126592.49
13 EKITI 4772836647.08
14 ENUGU 5361789409.66
15 GOMBE 4472877698.19
16 IMO 7000805182.97
17 JIGAWA 7107666706.76
18 KADUNA 7721729227.55
19 KANO 10000000000
20 KATSINA 8202130909.85
21 KEBBI 5977499491.45
22 KOGI 6027727595.8
23 KWARA 5120644326.57
24 LAGOS 8371938133.11
25 NASARAWA 4551049171.12
26 NIGER 7210793154.95
27 OGUN 5739374694.46
28 ONDO 7003648314.28
29 OSUN 6314106340.62
30 OYO 7901609864.25
31 PLATEAU 5644079055.41
32 RIVERS 10000000000
33 SOKOTO 6441128546.76
34 TARABA 5612014491.52
35 YOBE 5413103116.59
36 ZAMFARA 5442385594.49
37 FCT 684867500.04
243795465195.2

FG to to Give Huge Tax Debtors 3-Year Payment Plan

To encourage more voluntary or accidental tax defaulters to pay up, the Federal Government is to offer tax defaulters with huge (tax) liabilities up to a period of three years to spread their tax payment under the Voluntary Assets and Income Declaration Scheme.

According to a report by The Punch, “Top government officials involved in the implementation of VAIDS confided in our correspondent that those who failed to take advantage of the scheme and later found to have under-declared their income or assets would be treated as wilful tax evaders and made to face the full force of the law.

“The official said apart from prosecution, the government had agreed to allow taxpayers with huge tax debts to enter into arrangements to pay outstanding tax liabilities in instalments.

“However, he said while these categories of tax defaulters might be allowed to settle their tax obligations in instalments, they would be required to pay interest on the outstanding balance.”

“The official said, “Even though ignorance of the law is not an excuse, the government has decided to take the pragmatic approach of offering an amnesty window to allow Nigerians, who may have evaded tax, whether ignorantly or deliberately, the opportunity to do their civic duty and pay the correct taxes whilst providing the much needed revenue for Nigeria’s infrastructure.

“The Federal Government appreciates that many defaulters have assets but may not have cash. Therefore, taxpayers will be allowed to enter into arrangements to pay outstanding tax liabilities in instalments.

“Taxpayers may, at the discretion of the relevant authority, be granted up to three years to pay their liability, but will be obliged to pay interest on the outstanding balance.”

FG Spends N7.1trn On Debt Service In 8 Years

The federal government has spent a whopping N7.1 trillion on debt servicing alone in the last eight years, LEADERSHIP checks have revealed.

The figure is cumulative of the amount spent on retirement of domestic and foreign loans incurred by the federal government between 2010 and 2017, but excludes statutory transfers.

It was also gathered that the N7.127 trillion is 70 per cent of (or about N5 trillion lower than) the 12.08 trillion budgeted for capital expenditure in the same period.

Debt service is the amount of money paid on the principal and interest on outstanding loans, the interest on bonds, or the principal of maturing bonds, which are usually incurred to fund capital projects or shore-up budget deficits.

Whereas debt service are on the first line charge from the federation account, the situation is different with capital and recurrent expenditures.

Government’s ability to finance its budgetary provisions for recurrent and capital expenditures is dependent on financial inflow to state treasury.

In 2015 and 2016, federal government’s spending on debt service were higher than the amounts spent on capital expenditures.

In 2015 for instance, N577.99 billion was budgeted for capital expenditure, but as at September of the same year, only N194.77 was actual expenses on capital projects against the N953 billion spent on debt servicing.

This was also the situation in 2016 when, out of the N1.59 trillion budgeted for capital expenditure, only N1.2 trillion was actually released for the purpose, compared to the N1.48 trillion paid to settle outstanding debts in the same year.

Minister of finance, Mrs. Kemi Adeosun said N1.2 trillion was spent on capital projects in 2016, leaving a balance of N39 billion deficit.

In the ministry’s 2017 budget, the federal government plans to spend N1.660 trillion on debt service, with N2.24 trillion budgeted for capital expenditure.

A breakdown of the figures shows that N1.552 trillion was earmarked for capital expenditure in 2014, while at the same time N712 billion was paid for debt service.

The N591.76 billion voted for loan repayment/service in 2013 when N1.54 trillion was budgeted for capital projects is higher than the N559.6 billion expenses on debt service in 2012. The sum of N1.52 trillion was budgeted for capital expenditure in 2012.

N1.56 trillion and N445.1 billion were voted for capital projects and debt service respectively in 2011, while N725 billion was used to service debt in 2010 against the N1.5 trillion budgeted for capital expenditure.

A chartered accountant and financial analyst, Mr. Peter Adebayo, said it is economically disastrous for the nation adding that “it portends a great danger for our economy”.

The senior partner at Adebayo & Co, an accounting firm said, “Spending 70 per cent of the amount expended on capital projects subject to accountability on debt servicing sincerely calls for forensic examination and this must be done without further delay, otherwise the nation will be plunged finally into the lagoon,”.

He blamed the lack of stewardship and accountability in the management of the country’s debt system for the high cost of public debt.

According to official records, the nation’s total debt profile (including foreign and domestic debts) now stands at N19.16 trillion as at March 2017.

Debt Management Office last week said N82.6 billion was spent in the first quarter of 2017 alone on servicing of domestic and foreign debts. $127.92 million or N39.19 billion, when calculated at the official exchange rate of N306.35 to $1, was used to service foreign debts, while another N434.87 was used to service local debts.

Nigeria had debt to Gross Domestic Product (GDP) ratio of 18 . 6 per cent as at December 2016, from the 12 . 1 per cent it was at the end of 2015, just as National Bureau of Statistics puts the nation’s GDP at N67. 98 trillion.

In a scary forecast, the International Monetary Fund (IMF) said Nigeria’s indebtedness will climb to 24.1 per cent of its GDP by 2018.

It made the pronouncement in its World Economic and Financial Surveys unveiled in May where it also projected that by the end of 2017, the country’ s current indebtedness would have reached 23.3 per cent of the GDP, which suggests that the cost of servicing the surging debt profile will further increase.

On the contrary, Minister of Budget and National Planning, Udoma Udo Udoma, expressed optimism that a coherent and clear approach has been set out in the recently launched Economic Recovery and Growth Plan (ERGP) to increase non-oil revenue and reduce the cost of debt service.

He argues that with improved revenue generation to the federation account, the debt ratio will consequently reduce.

Private investors or lenders measure a country’s ability to repay its debt by the level of its debt burden.

Borrowing from that, experts who spoke with LEADERSHIP urged the debt management office and the Central Bank of Nigeria to ensure prudent management of the nation’s debt profile.

Source: Leadership

20 Whistleblowers Get N375.8million Pay

The Ministry of Finance confirmed that The federal government on Wednesday said it had released about N375.8 million for payment of 20 whistleblowers who provided information that led to the recovery over N11.6 billion.

The Ministry also confirmed that the payments were the first ever under the whistleblower policy.

The government did not disclose the identities of the beneficiaries, apparently for security reasons.

“This payment is the first under the Whistleblower Policy,” the Minister for Finance, Kemi Adeosun, said in the statement.

“The payment underscores the commitment of the President Muhmmadu Buhari-led administration to meet its obligations to information providers under the Whistleblower Policy, which is an essential tool in the fight against corruption.”

The minister said recent amendments to the Whistleblower Policy of the government include the introduction of a formal legal agreement between information providers and the Federal Government. The agreement is executed by the Minister of Justice and Attorney-General of the Federation.

In line with the policy, each whistleblower would be entitled to a minimum of five percent of the money involved in the corruption case reported.

The payment of the money would, however, be made after the successful recovery of the affected sum to government coffers, while informants whose info provide a false hint, risk prosecution, and jail.

 

Africa Can’t Remain Dumping Ground: Adeosun

The Minister for Finance, Mrs Kemi Adeosun, has made a declaration that the African continent cannot remain a dumping ground for vendors of all kinds of goods under the guise of Free Trade Agreement. She made the declaration in Abuja at an extraordinary meeting of Directors-General of Customs of the African Union (AU) where customs administrators around the African Union (,AU) converged with the aim of forging a new position of relevance in the world Customs Organisation.

Her words: “You must be patriotic. You must be Africa-focused. We cannot continue to be the world’s largest market for anybody who wants to sell anything.
“Selling and buying, that is trade and we must correct some of the historical imbalances that have made our economies very vulnerable.”.

Adeosun tasked the customs administrators to strive to strike a balance between revenue mobilisation, border production, security control, regulatory functions.
The African region, she stated remains number one in terms of illicit financial flows and charged governments in the region to do more to ensure strong customs organisation’s capable of checking illicit trade and trans-border crimes.

“We are number one in illicit financial flow. Money and goods flow out of our (African) countries without being taxed or assessed we are also heavily import-dependent for many of our basic goods. So we do need very strong focus on customs.

“I am to draw your attention to the fact that customs activities at the borders can make or break the economy. It is therefore a challenge to you to always employ interventions that would expedite the movement of trade goods across national borders in a simplified and predictable manner to enhance trade facilitation and promote economic growth in Africa,” the minister said.