The Niger State government has approved the reduction of tax payment as part of measures to cushion the economic impact of coronavirus pandemic in Niger State. A highly commendable move!
Clearly, COVID-19 has impacted negatively on the economies of nations.
Not even the economic powerhouses of the world like the United States and China were able to escape the devastating impact of the global economic meltdown occasioned by the coronavirus pandemic.
In our country Nigeria, the federal government reviewed the 2020 budget downward in the light of the COVID-19 pandemic. The pandemic has drastically reduced world’s demand for crude oil, a commodity our country largely depends on.
Being a mono-economy, Nigeria’s budget and economic outlook are always hinged on the price of crude oil.
The crude oil companies and nations that depend on it have taken a beaten by the coronavirus as many of such countries including Nigeria are having hard times meeting their budgetary obligations.
Similarly, the state governments in the country are battling to survive the impact of the pandemic as their budgets or projected revenues for 2020 are no longer realistic.
Like the federal government the state governments are reviewing their budgets downwards, even as they struggle to pay the huge wage bills of the civil servants, with little left to invest in infrastructure, education, agriculture. As a result of the COVID-19 pandemic , monies that should have been used for other development projects have been diverted to the health sector in a bid to combat the coronavirus spread, through the building of isolation centres and medical supplies as well as increasing the allowances of the medical officials on the frontline of the war against COVID-19.
With the revenues drying up from the federal allocations, the temptation is for the states to raise taxes and increase other sources of revenue to meet its obligations to the people. All this expected to be borne by the business sector. However, the business sector has been hard hit by the pandemic. In fact the lockdown impacted negatively on all businesses.
In many parts of the world businesses are being provided with stimulus packages to resuscitate businesses that have folded up or barely surviving as a result of the COVID-19 pandemic.
In Nigeria, already there are some stimulus packages being coordinated by the Central Bank of Nigeria (CBN) to help businesses to be back on their feet.
On 16 March, the Central Bank of Nigeria announced new measures to stimulate businesses; A one year extension of moratorium on principal repayments for CBN intervention facilities; The reduction of the interest rate on intervention loans from 9 percent to 5 percent; Strengthening of the Loan to Deposit ratio policy (i.e. stepped up enforcement of directive to extend more credit to the private sector); Creation of N50 billion target credit facility for affected households and small and medium enterprises; Granting regulatory forbearance to banks to restructure terms of facilities in affected sectors; Improving FX supply to the CBN by directing oil companies and oil servicing companies to sell FX to the CBN rather than the Nigerian National Petroleum Corporation; Additional N100 billion intervention fund in healthcare loans to pharmaceutical companies and healthcare practitioners intending to expand/build capacity; Identification of few key local pharmaceutical companies that will be granted funding facilities to support the procurement of raw materials and equipment required to boost local drug production; N1 trillion in loans to boost local manufacturing and production across critical sectors; The CBN has adopted a unified exchange rate system for Inter-Bank and parallel market rates to ease pressure on FOREX earnings as oil prices
continues to plummet; CBN adopted the official rate of N360 to a dollar for International Money Transfer Operators rate to banks; For on-lending facilities financial institutions have been directed to engage International development partners and negotiate concessions to ease the pains of the borrowers; Provision of credit assistance for the health industry to meet the potential increase in demand for health services and products “by facilitating borrowing conditions for pharmaceutical companies, hospitals and practitioners.”
The Central Bank also pledged to pump NGN 1.1 trillion (USD 3 billion) into critical sectors of the economy; Commencement of a three month repayment moratorium for all TraderMoni, MarketMoni and FarmerMoni loans; Similar moratorium to be given to all federal government funded loans issued by the Bank of Industry, Bank of Agriculture and the Nigeria Export-Import Bank.
Most of these incentives were the result of the intervention of the federal government, with many state governments doing nothing to help businesses in their domain survive COVID-19 beyond thinking how to tax them more to raise revenue. That is why it is always commendable when one observes a state government that thinks outside the box.
In an address during a statewide broadcast, Governor Abubakar Sani Bello, said the tax reduction in Niger State would take effect from 24th June, 2020 to 31st March, 2021. The governor said the filling date of annual tax returns by all businesses and individuals had been extended to 30th September, 2020. Bello also noted that the filling of monthly PAYE returns by businesses ‘’has been granted 10 days extension beginning from the 10th to 20th of every month.’’ He said:
‘’Penalties and interests on late fillings, payments, and remittances as well as default on tax liabilities have been reviewed downward to 5 per cent for penalties and 10 per cent for interest charges.’’ The governor said that the state government has granted 50 per cent reduction on all the rates as contained in the Harmonized Agricultural
Produce and Livestock Fees Collection Regulation Act 2019. “Payments in four installments have been granted to all taxpayers in the Small Medium Enterprises (SMEs) and the Informal sector,’’ he said. He also assured that all the agencies responsible for the collection of tax have been notified on the development, hence anyone that is shortchanged can forward their complaints to the office of the Secretary to the State Government.
Tax cuts is one of the ways that businesses can be helped to navigate through this difficult economic climate, and Niger State has done well to recognize this. It is also important that other state governments should emulate the Niger State government in order to support businesses in their states to survive and contribute to their economies.
Small and medium scale businesses are the largest employers of labour in the country. Any policy that encourages these businesses to grow will ensure retention of jobs by most Nigerians and have multiplier effect on the economic growth of our states and the country in general.
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