Governors of the 36 states of the federation have introduced tax relief programmes to mitigate the negative impact of the COVID-19 pandemic on businesses and individual taxpayers as well as ensure the speedy recovery of State economies.
The relief programmes which were initiated in states across board focus on five main tax activities, including extension of filing and payment dates, tax moratoriums, waivers or reduction of penalties and interests over the extension period.
While some states are also offering rebates or discounts on taxes paid within a specific period, others are allowing the payment of taxes, fees and levies among others in installments.
In the same vein, states’ tax offices are now enabling filing and the issuance of tax clearance certificates electronically.
These were the outcomes of a virtual meeting under the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for Results jointly organised by the World Bank and the Nigeria Governors’ Forum (NGF) at the weekend.
According to a statement by the media office of the NGF, the programme is midwifed by the Federal Ministry of Finance, Budget and National Planning (FMFBNP).
The SFTAS experts at the webinar concluded that such waivers for businesses are no longer optional, but have become an essential element of governments’ stimulus-targeted packages to facilitate recovery for businesses that face a liquidity crisis, and individuals whose livelihoods have been adversely impacted by the COVID-19 crisis.
The statement noted that while state governments are themselves currently experiencing a liquidity crisis of their own, with limited capacity to borrow, it has become imperative that they find a balance between granting tax reliefs and maintaining revenues at a sustainable level.
The extent to which government revenues will be impacted by these reliefs will depend on the type of relief that they grant and their ability to raise their tax efforts simultaneously, including offering incentives for greater tax compliance.
These efforts are being incentivised by a new Disbursement Linked Indicator (DLI) under the Finance ministry’s World Bank $750million States Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for Results.
Eligible states will be rewarded with USD2.5 million each in performance-based grants if they announce by July 31, 2020 and implement by September 30, 2020 a tax compliance relief programme for individual taxpayers and businesses to mitigate the COVID-19 impact.
According to the programme, there are however criteria to be met if a state is to receive the $2.5million, including that state announcements should be signed by the commissioner for Finance or the executive chairman of the State Internal Revenue Service and published on state websites and in national dailies to ensure widespread awareness amongst taxpayers.
Furthermore, the state government should issue guidelines to their tax officials and collecting agents for the implementation of the reliefs to ensure consistent execution by all and sundry.
The virtual meeting was attended by 125 participants from the 36 states of the federation, including state commissioners for Finance and executive chairpersons of state Internal Revenue Services.
Addressing the participants, the programme manager of the Nigeria Governors’ Forum (NGF) SFTAS Technical Assistance Project, Mr Olanrewaju Ajogbasile, said the secretariat, through the support of the FMFBNP and the World Bank, was available to provide technical advisory on the domestication of necessary reforms to meet the DLIs and more broadly, fiscal sustainability.
Ajogbasile also disclosed that while some states have strictly followed the requirements of granting extension for filing 2019 annual returns and waiver for penalties and interests for businesses and individual taxpayers, others have gone further to waive other taxes, fees and levies for a specified period of time.
2.4m Households To Benefit From FG’s Stimulus Package
To ensure food security for citizens, at least 2.4 million households have been penciled to benefit from the federal government’s post COVID-19 stimulus package, the presidency disclosed yesterday.
Senior special assistant to the president on Agriculture, Dr Andrew Kwasari, gave the hint in an interview with the News Agency of Nigeria.
Kwasari was speaking against the backdrop of the number of projects anchored by the Nigerian Economic Sustainability Committee to secure the economy against the effects of COVID-19.
The stimulus package would be provided through the Agriculture for Food and Jobs Plan, under the agricultural sector of the Nigerian Economic Sustainability Plan.
The NESP, set up by President Muhammadu Buhari in March 2020, is being chaired by Vice President Yemi Osinbajo, with members from key sectors of the economy, to forestall the effects of the COVID 19 pandemic on the economy.
Kwasari said, “The Economic Sustainability Committee needed to be very strategic in utilising the minimal resources, overall, not only for the agriculture sector.
“So for the agricultural sector, we decided that we will use this strategy to utilise available cash to work with financial institutions, led by the Central Bank of Nigeria.
“To see how we can get stimulus packages to about a minimum of 2.4 million households or to fund 2.4 million hectares of land that will be cultivated during this 2020 wet and dry season farming”.
The presidential aide added that it was in a bid to answer the question: “What must Nigeria do to ensure food sufficiency in the wake of COVID-19?” that the agricultural sub-sector of NESC decided to clearly define and understand the global scenario of the pandemic.
He continued: “The Nigerian economy was already disrupted; we had lost a large share of our GDP income which comes from oil.
“So with this reduced GDP, even if there is stable food systems supply, Nigeria may not be able to afford importation of food in order to feed over 200 million people.
“Imagine then where we have both global food system disruption in productivity and output and the loss of national income from oil revenue losses. Then we are in a more dangerous situation”.
He further stated that Nigeria opted for large scale food production to cushion the effects of COVID-19 due to dwindling resources.
“Nigeria has a plus in terms of a large population that can be channeled into food production, so we capitalised on it to grow food during this 2020 wet season and dry season farming,” he said.
Kwasari noted that in tackling the problem of the impending economic depression, the committee also had to increase its limited resources to reach the larger population of indigent Nigerians.
Domestic, Foreign Investors Trade N1trn In 6 Months
Meanwhile, domestic and foreign investors on the Nigerian Stock Exchange (NSE) pulled a total transaction of N1.004 trillion in the first six months of the year 2020.
This was contained in the Nigerian Stock Exchange’s Domestic & Foreign Portfolio Investments (FPIs) Report for August, 2019.
The FPIs report included transactions from nearly all custodians and capital market operators and is widely regarded as a credible measure of foreign portfolio investment (FPI) trend.
The report uses two key indicators, inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.
Foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market, while inflow includes purchase transactions on the NSE.
Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities among others.
Total transactions at the nation’s bourse from January to June 2020 stood at N1.003 trillion, a slight down from N1.088 trillion transacted by both domestic and foreign investors in the first six months of 2019.
Reviewing trading activities for the period under review showed that domestic transactions constituted about 60.48 per cent, outperforming the foreign investment of 39.52 per cent.
Total domestic investors accounted for N606.93billion in the first half of 2020, comprising domestic institutional investors which pooled N320.52 billion in the first half of 2020, while domestic retail investors accounted for N286.41 billion.
Also, FPIs for the six-month period ended June 30, 2020 stood at N396.63, with outflows and inflows at N129.95 billion and N266.68 billion respectively.
The first half (H1) of the year performance further underlined the downtrend that had characterized FPI trend in recent period, as capital market analysts stated that local investors are taking advantage of the incredibly low prices of stocks in the NSE to increase their investments following the downward movement in equity valuation since the advent of the coronavirus (COVID-19), pandemic on the Nigeria’s economy.
They explained that local investors are increasing their stake in equities market due to the attractive dividend yield in the market coupled with a low yield environment in the fixed income market.
They observed that the development is good for the local bourse, saying that it would restore credibility and stability to the market, which was hitherto marred by volatility occasioned by the activities of foreign investors.
Analysts at Cardinalstone Securities Limited said, “It is a good thing that domestic interest is building in the market; it is really positive. This is what we have been clamouring for, where the local investors will be the drivers of the market.
“What we, typically, see is that domestic investors follow the investment pattern of the foreign investors whereby if we see that they are buying, we will buy and if we find out they are selling, we will sell.
“Domestic investors are not driving the market and that is why sometimes, you see that some stocks are trading at crazy multiples where they should not be. Now, that we are seeing a lot of domestic participation, that will bring some sort of credibility and relative stability in the market.”
On their part, analysts at United Capital Plc said, “In our view, the decline in portfolio investment was due to investors’ risk-off sentiment which was sparked by the outbreak of COVID-19, plunge in crude oil prices and fears as well as the eventual devaluation of the naira in March-2020. We note that the underwhelming nature of FDI inflows continues to reflect the inability of the country to attract the much-needed capital amid long-term uncertainties.
“Looking ahead, we believe that the current issues around FX illiquidity, fears of a further naira devaluation, low interest rate environment in the OMO market, are likely to discourage large-sized FPI and FDI inflows for the rest of the year. Accordingly, we expect the overall capital imported in 2020 to underperform that of 2019.”
Speaking on the market performance, the CEO, Sofunix Investment and Communications, Mr Sola Oni said, the market had been fragile since the beginning of first quarter due to massive exit of many foreign portfolio investors and their Nigerian counterparts due to uncertainties in the system for fear of naira devaluation.
He added that Coronavirus further compounded the problem at a higher scale as it has dire implications on economic activities across the board.
“We expect the first quarter to be flat in this regard while the second quarter will most likely be negative growth”, he stated.
According to Oni, the problem at hand is multifaceted and as such because there is total slow-down of all economic activities.
He urged the government to develop a comprehensive schedule of addressing multifaceted issues, including fixing of infrastructure, provision of power, review of taxation in view of the current situation and implementation of measures already announced to combat coronavirus challenges and put the economy on the right track.
Meanwhile, the equities market kicked off the year amid stronger optimism propelled in part by the unattractive fixed income yield environment and the hunt for high dividend yielding stocks by investors.
However, the outbreak of the COVID-19 pandemic and the economic fallout swiftly put an end to the early optimism, with the resulting fear and uncertainty dictating market sentiment for the rest of the first half.
For the H1, the All Share Index (ASI), which mirrors the performance of the market in terms of equity price movement closed lower at 24,479.22 points on June 30, 2020, compared to 26,867.79 points at the beginning of the year, thus representing 8.89 percent loss.