There are indications that the Nigerian government is planning to tax foreign digital service providers offering services to Nigerians and earning revenue in naira. Some of these service providers which are video streaming sites, social media platforms, and companies that offer downloads of digital contents are expected to pay digital tax to the Federal Inland Revenue Service. The Minister of Finance, Zainab Ahmed, had issued the Companies Income Tax (Significant Economic Presence) Order, 2020 as an amendment of the Finance Act 2019, aimed to impose a tax on a foreign entity with respect to certain services or digital transactions if it had a Significant Economic Presence in Nigeria. Netflix, Facebook, Twitter, among others are some of these foreign companies that offer digital video and advertising services to Nigerians. Others like Alibaba and Amazon generate revenue from Nigeria by processing and transmitting data collected about users in Nigeria, provision of goods or services directly or through a digital platform or offer intermediate services that link suppliers and customers in Nigeria. The finance minister may by order, determine what constituted SEP in Nigeria as the new regulation would apply to companies with income of ₦25 million or equivalent in other currencies from Nigeria in a year and those with a Nigerian domain name (.ng) or a website address in the country. The SEP order mandated foreign companies with sustained interactions with persons in Nigeria and customising their digital platforms to target persons in Nigeria by stating the prices of its products or services in naira to pay taxes. The Act says a foreign entity providing technical services such as training, advertising, supply of personnel, professional, management or consultancy services has a SEP in Nigeria in any accounting year if it earns any income or receives any payment from a person resident in Nigeria or a fixed base or agent of a foreign entity in Nigeria. Payments made to employees of a foreign entity or for teaching in an educational institution are exempted.
The Petroleum Products Pricing Regulatory Agency has reversed its earlier position and now says it would not allow petroleum products, marketers, to fix the price of petrol. The PPPRA had a day earlier announced the removal of the price cap on petrol, a move which led many to call for the body to be scrapped. But speaking Saturday in Abuja, Abudulkadir Saidu, the PPPRA’s executive secretary, said that the body’s role in the determination of the monthly price for petrol would be advisory, while its price would serve as a guide to marketers in the sale of the commodity. While Saidu confirmed that the FG had deregulated the downstream segment of the market, he insisted that in a deregulated market, the role of a regulator in monitoring and regulating activities in the sector cannot be overemphasised. According to him, the ‘Market-Based Pricing Regime for Premium Motor Spirit (PMS) Regulations, 2020,’ published 4 June 2020, does not confer on marketers the power to fix prices for the product as they deem fit, but should rather, rely on guiding prices that would be advised by the PPPRA according to market realities.
The failure of 26 banks in Nigeria, including merchant banks, to meet Central Bank’s Cash Reserve Ratio obligations has cost them about ₦459.7 billion. The fresh debit has left many stakeholders in the banking sector very upset. Among the banks that were affected, UBA was debited ₦82.3 billion, First Bank ₦59.3 billion, Zenith Bank ₦50 billion, FCMB ₦45 billion, and GTB ₦40 billion. The latest CRR debits are coming barely one month after a lot of banks were collectively debited to the tune of ₦1.4 trillion for the same reason in April. During the CBN’s Monetary Policy Committee meeting that was held last month, committee members voted to retain the CRR rate at 27.5 percent. The rate was increased in January this year from 5 current to its current level after the apex bank cited inflationary pressure concerns. What this means, therefore, is that Nigerian banks are required to keep 27.5 percent of their deposits as CRR with the CBN. Sadly, the move, in addition to similar policies by the monetary regulator, has left many banks cash-strapped and unable to pursue various profitable ventures. While reacting to the latest development, a banker said “What we’ve seen in recent times is that the CBN just indiscriminately debits banks, usually towards the stale-end of every week. They will look at your bank account and if your liquidity is plenty, they will debit you.” The CBN has deployed several policies in the past two years that defy conventional solutions all in a bit to contain the devaluation of the naira and support fiscal measures that are yet to be complimentary, according to financial analysts who suggest that the CRE policy is another one of those policies. An analyst with knowledge of this matter told Nairametrics that it appears the CBN no longer relies on the 22.5 percent CRR charge but rather arbitrarily debit bank accounts.
Business Confidence fell into negative territory for the first time to -66.2 index points in May, 2020, indicating loss of confidence among business owners in Nigeria. This coming at the backdrop of the inactivity brought about by the lockdown measures to curb Coronavirus represents a decline of 72.6 index points when compared to the positive 6.6 index points recorded in the preceding month of March. Report from the Central Bank of Nigeria’s Business Expectations Survey, indicates that confidence would remain low until next month before picking up gradually into October. The Confidence Index has been on the downward trend since December, analysis from the Vanguard showed. After rising steadily for 11 months from 221.1 index points in February 2019, to 30.3 index points in December 2019, it fell consistently in the first quarter of this year to 6.6 index points in March, indicating the decline of 23.7 index points. The monetary regulator said that the decline worsened in May with respondent firms expressing negative outlook on the volume of total order, credit access, average capacity utilization and financial conditions (working capital). It added that the pessimism on the macroeconomy in the current month was driven by the opinion of respondents from construction (-2.4 points) wholesale/retail trade sectors (-5.6 point), manufacturing (-20.0 points) and Agric/services (-37.7 points). Similarly, the major drivers of the pessimism for next month were construction (-0.3 points), manufacturing (-1.3 points) and agric/services (-2.8 points) as further analysis showed that businesses that are export-oriented (-1.2 points), both import- and export-oriented (-9.6 points), import-oriented (-10.0 point) neither import- nor export-oriented (-45.5 points), drove the negative business outlook in May 2020. Insufficient power supply, financial problems, unfavourable economic climate, competition, high-interest rate, insufficient demand, unclear economic laws, access to credit, unfavourable political climate and insufficient demand were identified by firms as major factors constraining business activity. The firms expect the Naira to depreciate in the current month, next month, next 2 months and appreciate in the next 6 months as inflation level is expected to rise in the next six months and 12 months, while the borrowing rate is expected to rise in the current month, next month, next two months and next six months.