The Federal High Court sitting in Port Harcourt has declared the Rivers State Government, not the Federal Inland Revenue Services (FIRS), should collect the Valued Added Tax (VAT) and Personal Income Tax (PIT) in the state. The Court presided over by Justice Stephen Dalyop Pam also issued an order of perpetual injunction restraining the Federal Inland Revenue Service and the Attorney-General of the Federation, both first and second defendants in the suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, personal income tax and VAT. Justice Pam made the declaration while delivering judgement in the suit filed by the Attorney-General for Rivers State (plaintiff) against the FIRS (first defendant) and the Attorney-General of the Federation (second defendant). The court, which granted all eleven reliefs sought by the Rivers State Government, said there was no constitutional basis for the FIRS to demand and collect VAT, withholding tax, education tax and a technology levy in Rivers State or any other state of the Federation. Pam said the constitutional powers and competence of the FG was limited to taxation of incomes, profits and capital gains, which did not include VAT or any other species of sales, or levy other than those specifically mentioned in items 58 and 59 of the Exclusive Legislative List of the 1999 Constitution. The judge dismissed the preliminary objections filed by the defendants that the court lacked the jurisdiction to hear the suit and that the case should be transferred to the Court of Appeal for interpretation. Justice Pam, who also dismissed objections raised by the defendants that the National Assembly ought to have been made a party in the suit, declared that the issues of taxes raised by the state government were the matters of law that the court was constitutionally empowered to entertain.

The United Nations has warned of an impending food crisis in Nigeria, calling for global support to avert the potential catastrophe. According to UN Secretary-General Antonio Guterres, Nigeria’s Humanitarian Response Plan, which seeks over one billion dollars, is only one-third funded. Farhan Haq, Deputy Spokesman for UN Secretary-General said this while briefing correspondents at UN headquarters in New York on Friday on the humanitarian situation in North-East Nigeria. He said sustained funding would be needed to avert food crises in the zone. “Our humanitarian colleagues warned that without sustained funding, millions of people in Borno, Adamawa and Yobe states, North-East Nigeria will struggle to feed themselves,” said Haq. He said millions of people in the three states would struggle to feed themselves during the lean season due to conflict, COVID-19, high food prices, and climate change effects. According to him, an estimated 4.4 million people, including internally displaced people, are expected to face critical food shortages, with 775,000 people being at extreme risk of catastrophic food insecurity. “This is the worst outlook in four years. “The humanitarian community is working with the Government and local authorities to scale up the distribution of food in high-risk areas, but a surge in violence targeting aid workers and assets has made this difficult. “Our colleagues tell us that 8.7 million people in Nigeria need urgent assistance, including 2.2 million displaced people,” he said.

Two persons were Monday allegedly killed in Nnewi, Anambra over the sit-at-home order issued by the Indigenous People of Biafra (IPOB). Police authorities confirmed that there was an incident in the industrial city on Monday morning, which led to fatalities but denied knowledge of who was responsible. Two persons died during a bloody confrontation that happened at the Izuchukwu junction area in Nnewi. An eyewitness said the victims were a member of Eastern Security Network (ESN) and a commercial motorcyclist. In Imo State, members of IPOB reportedly set ablaze two buses. The buses left Lagos Sunday and arrived at Mbaise by 6am. One person died as he failed to escape from the bus with the other passengers. Residents of southeastern centres including the trading hub Onitsha, and the cities of Enugu, Awka and Owerri said usually busy markets were quiet, roads were clear of traffic and even some students who were due to sit exams had not turned up. The sit-at-home exercise comes in the wake of an Amnesty International report that said at least 115 people were killed by security operatives in the southeast from March to June 2021. The human rights organisation said the country’s security forces deployed “excessive and unlawful force, and torture and other ill-treatment” to address the rising violence in the South-East region. Amnesty International, in a statement, said security operatives responded by killing “dozens of gunmen and civilians” in places where attacks occurred in the region. The international organisation said it had documented 52 incidents of unlawful killings and 62 cases of arbitrary arrest and torture carried out by security operatives from January 2021. “Human rights groups estimated that the death toll of violence between January and June 2021 in Anambra, Imo, Abia, and Ebonyi states might run into the hundreds. The police said ESN fighters killed 21 of its personnel in Imo state alone. Some victims told Amnesty International that they were arrested while walking in the street, at a public bar or simply for having birthmarks or tattoos on their body,” the human rights organisation added,” the group added.

At least 56 Boko Haram/ Islamic State West Africa (ISWAP) terrorists have laid down their arms and embraced peace, the Nigerian Army said on 5 August in a statement. According to army spokesperson, Onyema Nwachukwu, a brigadier general, the terrorists turned themselves in after suffering casualties as a result of bombardments of their camp by the troops. The statement comes about 24 hours after the army announced that some Boko Haram fighters and their families which consist of 19 male fighters, 19 adult females and 49 children surrendered due to unbearable conditions in their trenches. The army, in its statement, said it recovered arms and ammunition from the terrorists. “Sustained air and artillery bombardments on the enclaves of the terrorists in Sambisa forest and its environs have continued to yield positive results,” the army said. “The Chief of Army Staff (COAS) Lt Gen Faruk Yahaya has lauded the troops for their effort and charged them to remain dedicated and committed in the fight until the terrorists are completely decimated,” the statement concluded.

Commentary

  • While the VAT decision by the Federal High Court is momentous for a number of economic and political reasons, a few legal niceties need to be cleared up. Not all VAT will be collected by the states. Each state would certainly administer VAT within their territory. The FIRS will administer VAT within the Federal Capital Territory (the federal government is solely responsible for running the FCT) as well as non-import foreign VAT, while the Nigeria Customs Service will continue to collect import VAT on international trade. The Value Added Tax was introduced in Nigeria by military decree in 1993, replacing the sales tax which was one of the structural reforms driven through by the Ibrahim Babangida regime in 1986. In what was certain to create perpetual tension between the states and Abuja, the VAT is administered and collected by the federal tax authority and the revenue is shared among Nigeria’s three tiers of government – federal, state and local, unlike the old sales tax which was administered by the states. Under the military sceptre, appointed state military administrators (equivalent to elected governors) didn’t do more than cough. Since the return to civilian democratic governance in 1999, however, the states have been vocal about their unhappiness with this arrangement and have consistently sought a political solution. From their perspective, both VAT and sales tax are consumption taxes, essentially birds of a feather. If they could administer a sales tax, what is so special about VAT? Only Rivers has been bold enough to make that argument in the courts. We must commend the Rivers State Attorney General for engaging the judicial system when all political agitation had failed. If anything, a judicial pronouncement is on firmer legal footing than whatever political compromises might have been extracted. Economically, the biggest losers will ironically be the states except for Lagos. A few states like Delta, Kaduna, Kano, Katsina, Oyo and Rivers may experience minimal impact, while 30 states which account for less than a fifth of present VAT collection will take significant revenue hits. Aso Rock may in fact be better off given that the Federal Capital Territory (FCT) generates the second-highest VAT (after Lagos) in addition to import and non-import foreign VAT. The law currently requires that the VAT pool be shared by Abuja (15%), the states (50%) and local government councils (35%) with 4% allocated to the FIRS as the cost of collection. Thus, in 2020, total VAT collection was ₦1.53 trillion with import VAT comprising ₦348 billion, foreign non-import VAT was ₦420 billion and local VAT was ₦763 billion. With the new ruling, Abuja is likely to retain more than the 15% it currently receives while states and LGAs will have less to share, particularly if VAT on federal contracts which is currently included in local VAT is excised as that will now solely enure to the federal government. Furthermore, because a previous Supreme Court decision ruled that VAT covered the field of all consumption tax in Nigeria, a state cannot impose a consumption tax in addition to VAT. This means that any state intending to collect VAT will have to repeal its existing consumption tax(es). Politically, Rivers’ approach is a stark contrast with that of other states, especially Lagos, that chose to simply charge an extra consumption tax (technically illegal under Nigerian law) in addition to VAT. We expect the Federal Government to appeal the judgement, and that the matter to get an expedited hearing at the Supreme Court considering its outsize constitutional implication. In the meantime, the status quo is likely to continue with the unwelcome effect that complications may arise for businesses who may have to deal with multiple tax authorities for VAT purposes, further worsening this country’s ease of doing business efforts. The most important lesson from this judicial pronouncement is one which we have consistently submitted in the past – Nigeria is already restructuring in bits and the coming years will only see an acceleration of the inevitable. The options for policymakers are simple: will it be a negotiated and orderly decentralisation or will it be one in which the federating units bite away at the edges until the structure chaotically collapses?
  • The impending food crisis highlights the gravity of the confluence of the numerous factors such as conflict, COVID-19 and climate change on food production in the North-East, and also how the FG’s economic policies such as the border closure and currency controls have affected the importation of agricultural inputs, which have in turn created a negative impact with regards to food prices, and which has in its own turn, been the major driver of rising inflation in the country. Although the border closure has been rescinded, the impact is yet to be felt on food prices in the country, and it might be until the last quarter of the year before any differences will be noticeable. Additionally, while the diagnosis by the United Nations is correct, the geographic focus of the intervention to the North-East does not take into account the on-the-ground realities in Nigeria. In large swathes of the rural parts of the North-West and Middle Belt, a similar situation is playing out. Just like Boko Haram has done in the North-East, terrorists and armed herder militias have made agriculture impossible for a people whose livelihood depends on farming and fishing. Across all these areas, people who could ordinarily feed themselves and sell surplus have been reduced to aid-dependent IDPs due to insecurity. While the interventions are important to prevent these large numbers of people from starving, the ability to even reach these people is hampered by the very thing that has precipitated the crisis in the first place – insecurity. Without adequately tackling insecurity, especially in the aftermath of the consolidation of ISWAP and large parts of Boko Haram, having access to the IDPs to deliver aid in the short term and increasing food production in the region in the long term will be difficult to achieve. It is also important to keep in view that while the majority of those affected are in the North-East, there is a risk of a similar situation playing out in the North-West where armed gangs of bandits have overrun large swathes of the region, disproportionately in rural areas, and are keeping farmers away from their farms. The United Nations and well-meaning global institutions must apply pressure on the Nigerian government to address the country’s security challenges, and where necessary offer and facilitate much-needed help to deal with the issue. It is the only way that a sustainable reversal of the situation can begin.
  • The sit-at-home order which was ordered by IPOB to protest the detention of Nnamdi Kanu is an ill-thought-out strategy that increases the risk of the group losing a significant amount of the local support it has hitherto enjoyed. This is because the closures came with significant economic costs which will be primarily suffered by the region, while its violent enforcement methods risk alienating the population. As an example, natives of Anambra alone control 35% of Nigeria’s trade sector. Trade comprises 38% of the state’s economy; hence shutting down the state’s economy once a week every week will be a body blow. Already there is indicative evidence of support waning amongst trade unions as well as self-employed and salaried workers, leaving a lot of IPOB’s support among the (admittedly large) mass of the unemployed. Despite claims by IPOB members that the violence was carried out by state agents to tarnish their image, all indications show that it was indeed done by IPOB supporters enforcing the sit-at-home order. This creates the added risk that subsequent orders will also be violently enforced, putting the local population at greater variance with the secessionists. Somewhat ironically, such actions by IPOB will end up providing the justification for the increased militarization of the South-East in keeping with the tradition laid down by Operation Python Dance 1 & 2. These operations have been accompanied by brutality and human rights abuses by all sides against the civilian population of the region, as outlined in the Amnesty report. This puts residents between a rock and a hard place and might force them to pick the lesser evil, which, for the time being, will be IPOB. In the final assessment, Nigeria’s security agencies need to both understand and ensure that their operations are carried out with respect to human rights and eschewing force brutality in order to win hearts and minds not only in the South-East region of the country but in every place where the authority of the Nigerian state is being challenged. It is important to reiterate that a conflict between IPOB and the Nigerian state will be devastating for the region – geographically Nigeria’s smallest, most densely populated as well as its most urbanised. This means that unlike in the North-East and North-West, such a conflict will not be fought in vast sparsely populated spaces, but in its urban centres – an event which, 50 years after a devastating civil war, will set the region and the country back decades again.
  • The surrender by the terrorists is part of Operation Safe Corridor, Nigeria’s non-kinetic approach to ending the insurgency by disarming, demobilising and rehabilitating (DDR) insurgents, especially those forcefully conscripted into the ranks of the terrorists. However, the military’s messaging, intended to talk up the successes of the approach, risks muddying the intentions of the DDR programme. It implies that any member of the terrorist group, no matter how high-ranking and significant their role in the insurgency, can surrender without punitive repercussions. This ends up fuelling the negative reception of the DDR programme with the general public and further enflames passion on the matter. It is important to note that contrary to the perceptions being created by the military, the defections are driven more by the tussle for territory between Boko Haram and ISWAP and not by the military’s bombardment of the terrorist camps. This rift within the ranks of the insurgency has seen numerous erstwhile Boko Haram members surrender rather than fall into the retributive orbit of ISWAP. Nevertheless, the establishment of similar programmes by Cameroon, Chad and the Niger Republic has seen similar successes, suggesting that DDR programmes remain important and could be key to ending the insurgency. It should not, however, be interpreted as a defeat of ISWAP, which despite the lull in activity, remains a potent force and will likely resume activities after the rainy season and the integration of Boko Haram elements into its ranks. Despite this, we can only hope that the programme will yield actionable intelligence that can be used by the military in fine-tuning its tactics and strategies in its campaign against ISWAP. As with most emerging developments in the North-East, hope is the operative word.