Residents of Magodo, a suburb of Lagos have entered a premium power deal with Ikeja Electric, giving them steady power supply. The estate, which has not experienced any power outage for nearly two weeks after the agreement came into effect, has applauded Ikeja Electric for the provision of uninterrupted supply. The Premium Power initiative is a power purchase agreement under the Willing Buyer, Willing Seller initiative issued by the Nigerian Electricity Regulatory Commission. The deal entails a commitment to specific service level standards while the customer agrees to pay a tariff that is above the current MYTO tariff. Since the implementation of the agreement on 15 August 2019, residents of the Estate have been on 24-hour supply and under the agreement; there will also be access to dedicated Customer Care and Technical teams for prompt resolution of queries or technical issues within the Estate. At the contract signing ceremony, two weeks ago, the COO of Ikeja Electric, Folake Soetan, expressed confidence in the success of the trend-setting agreement which she noted was in line with the FG’s “willing seller, willing buyer” policy.

The Federal Inland Revenue Service (FIRS) says it will begin to impose VAT on both domestic and international online transactions from January 2020. The chairman of FIRS, Tunde Fowler, said that many countries had identified Nigeria as a big market and that there was a need to tap the potential of online businesses to generate more revenue for the country. The commencement date of the VAT charges on online transactions, Fowler said, would be subject to the government’s approval. The agency said it would ask banks to charge VAT on online transactions as VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31 percent. This is higher than the Organisation for Economic Cooperation and Development’s average of 20 percent.

President Muhammadu Buhari has said that Nigeria’s border with the Benin Republic at Seme in Lagos, was partially closed to check smuggling activities. The border has been closed for nine days now amid reports that that the closure will last for 28 days. Speaking when he met Patrice Talon, his Beninois counterpart, on the sidelines of the seventh Tokyo International Conference for African Development in Yokohama, Japan on Wednesday, Buhari said smuggling is threatening his administration’s agricultural policies. According to the president, the closure was to allow Nigeria’s security forces to develop a strategy on how to stem the dangerous trend and its wider ramifications. He also assured that he would reconsider reopening in the “not too distant” future adding that a meeting will be held with the presidents of Benin and Niger Republic. President Buhari’s spokesman, Femi Adesina quoted Talon as saying that the closure has caused suffering for Beninoise people.

Andrienne Barnes, a Literacy and Pedagogy specialist from Florida State University, in the US has claimed that 72% of children at early grade primary school level in northern Nigeria public schools cannot read a single word while only 1.2% of them are able to read and answer comprehension questions. Barnes, a part of a USAID supported survey on early grade reading in some states in the Northern part of the country said this at NCRRD’s National conference on children’s books and the teaching of early grade reading in Nigeria. The challenge, according to Barnes, is as a result of the shortfall in reading proficiency among the early grade pupils in the country to paucity of high-quality teaching and learning materials with well trained and motivated teachers in public schools. However, Barnes noted the ongoing positive education reforms across Nigeria, but the change is too slow and “typically entails two steps forward and one, sometimes two steps backwards. The expert urged stakeholders to have a deliberate and objective evaluation of the system and transformation focused on long-term educational outcomes which would surely lead to the revival of the reading culture and improvement on early grade reading among its teeming population.

Commentary

  • The news about the Magodo/Ikeja Electric deal is in some ways, the best news of the year so far. The power sector reform designed and partially implemented by the Goodluck Jonathan administration led to the unbundling of the Power Holding Company of Nigeria (PHCN) into a series of 18 successor companies – six generation companies, 11 distribution companies and a national power transmission company (retained as a government-owned entity). There was substantial investment in the generation arm which led to an installed generation capacity estimated at over 12,000MW. However, the failure of the government to invest in transmission infrastructure means that today less than 5,000MW can be evacuated. Perhaps a bigger issue is that the insistence of the FG on fixing electricity tariffs has plunged the distribution companies into crippling debts which they are unable to service, hence the demand by theses distribution companies has sunk to below 4,000MW leading to huge wastage across the value chain. This led the former power minister, Babatunde Fashola, to develop the Premium Power Initiative under which the Magodo Residents’ Association and Ikeja Electric have signed on, something that we consider to be a very welcome development. The biggest issue in Nigeria’s power industry today is the fact that the tariff is not cost-reflective, hindering investment in the industry. On the net, this agreement is cheaper for the residents who will spend less on fueling their generators, and more profitable for the Ikeja Distribution Company, a win-win for both parties. It is prudent for Nigerians to view their cost of power as a whole, as opposed to electricity tariffs in a silo, in order to appreciate the gains this will bring. If this succeeds, the likelihood is that more gated communities will sign up to similar schemes, showing a path to profitability in the sector, and eventually attracting more investment.
  • Regarding the insistence on subjecting online transactions to VAT, we have some key questions: Has the government abandoned its stated goal of financial inclusion? Does this policy support this goal? Is it okay for policies to directly contradict each other in this manner? Overall, does the revenue gain from this double taxation surpass the revenue loss from the loss of volume of transactions as well as a loss of corporate tax from the companies involved in the online space due to such transaction losses? Following the failure of various initiatives of the FG to increase tax revenues by increasing the number of tax-paying Nigerians, the FIRS is trying new things, including increasing VAT rate and imposing VAT on online transactions. At 5%, VAT in Nigeria is one of the lowest in Africa, compared to Kenya and South Africa at 16% and 15% respectively. Whilst it is justifiable to increase VAT to 7.5% as proposed, imposing VAT on online transactions will be a hindrance to the CBN’s cashless policy and the FG’s own ease of doing business initiative. We advise the government to commence the hard work of bringing more Nigerians in the large informal sector into the tax paying bracket rather than deferring to initiatives focused on imposing multiple taxes on the same individuals and businesses already bearing the burden. Policymaking must take a holistic view of things, and this is what we advise.
  • In last week’s editorial, we had said that order to close the border could only have come from the Presidency, and the President’s admission confirms our position. It also enforces the point we made that arbitrariness in decision making costs the country dearly. Long queues have formed on either side of the border, and legitimate businesses are suffering while, according to various sources, rice smuggling goes on unimpeded, which is an ironic display of how porous Nigeria’s borders really are, especially in a week where six undocumented MRAPs came into the country. The mindset that causing suffering brings victory, as displayed in the President’s spokesman’s comment about the Beninouse leader’s statement, is an archaic one best left to the pre-industrial age, but unfortunately, the Nigerian government seems stuck in this belief, and ultimately it is the people of Nigeria who will bear the brunt of this ill-thought-through decision. What is more, Nigeria has signed agreements both at Ecowas and at the continental level with AfCTFA to facilitate the free flow of legitimate trade. Does this closure not violate these agreements? We have often said that policymaking in Nigeria almost always uses a sledgehammer to kill ants in a reactionary manner. This is a classic example.
  • Literacy in English continues to suffer huge paucity in Northern Nigeria. This survey is only one in a series of studies reiterating this fact. Some may argue that literacy should factor in literacy in Arabic or the ajami script. However, considering that the language of commerce and official communications in Nigeria is English and that English remains the dominant language internationally, we must assess literacy within parameters relevant to Nigeria’ progress. Barnes’ analysis reiterates previous analyses on the state of education in Northern Nigeria, which contributes the majority of the out-of-school children across the country. Basic education falls within the purview of the local and state governments. Despite the establishment of the Universal Basic Education scheme in 1999 intended to provide matching funds from 2% of the FG’s Consolidated Revenue Fund to states for investment in basic education, the availability and quality of primary and secondary education in the North, in particular, has remained very poor, and this gap is squarely on leaders at this level in the North. This is largely due to a lack of political will on the part of the governments to properly fund basic education and to spend on the right priorities. The poor statistics on education are a direct factor in the economic fortunes and level of security in the region and country.