The week ahead – On a knife’s edge

A bill seeking to empower the state government to collect value-added tax (VAT) has scaled the first and second reading at the Lagos State House of Assembly. The legislators directed the committee on finance which is handling the bill to report back on Thursday. During the session on Monday, house speaker Mudashiru Obasa said the VAT bill would lead to an increase in revenue and infrastructure development. On 19 August, Rivers governor Nyesom Wike signed into law a value-added tax (VAT) collection bill in the state. A Federal High Court in Port Harcourt had issued an order restraining the Federal Inland Revenue Service (FIRS) from collecting VAT and personal income tax and directing the Rivers state government to collect those taxes. Obasa urged the Lagos state government to do everything legally possible to ensure the judgement of the court in Port Harcourt is sustained up to the Supreme Court. He lamented that despite generating about ₦500 billion annually in VAT, Lagos received paltry amounts from the FG. “It is an opportunity for us to emphasise again on the need for the consideration of true federalism,” he added. According to Obasa, the VAT bill, when signed into law, will help the state tackle challenges in various sectors. The court judgment prompted the FIRS to file a stay of execution, appeal the judgement and advised the public to maintain the status quo on tax payment. On Monday, the Rivers state government announced that the court dismissed the FIRS’s stay of execution application. The state government said the court ruled that “granting the FIRS application for a stay of execution would negate the principle of equity.” Justice Stephen Dalyop Pam noted that in as much as the state government and the state legislature had enacted a law in respect of VAT, the courts were bound to obey laws. The judge said the law remained valid until it had been set aside by a court of competent jurisdiction, adding that the law enacted by the Rivers State legislature remained valid. Apart from Rivers, Lagos had directed the FIRS to stop issuing demand notices for payment of VAT and to render accounts, within seven days, of all sums collected as VAT in the current accounting cycle in the state. On its part, the FIRS has vowed to continue VAT collections until the appeal court decides on the legal dispute. Meanwhile, the Niger State Internal Revenue Service (NGSIRS) shut down eight commercial banks and the Abuja Electricity Distribution Company (AEDC) over ₦456 million in tax debts. NGSIRS executive chairman Mohammed Etsu said the clampdown followed the provisions of relevant state tax laws. “What we are doing is in line with the provisions of the relevant tax laws,” said Mr Etsu. He identified the affected banks and their liabilities as Stanbic IBTC (₦113.2 million), Polaris Bank (₦74.8 million), UBA (₦68.9 million), Union Bank (₦47.1 million), First Bank (₦45.7 million), Heritage Bank (₦31.5 million) Unity Bank (₦14 million) and GTB (₦8.2 million). Others listed by Niger included AEDC, with a debt of ₦45.8 million, Aloe Vera International Hotel (₦3.9 million), and Rashida Restaurant (₦3.2 million). Mr Etsu further explained that the NGSIRS’ efforts to make the defaulting organisations pay their tax debts yielded no positive results, leading to the sealing of their business premises.

Despite requesting for a higher baseline in August, Nigeria failed to meet the existing crude oil supply quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC) during the month, Thisday reports. The country lost 90,000 barrels per day in August, or roughly 2.8 million barrels in the month, making last month’s production of 1.43 million bpd one of the lowest in five years. While Saudi Arabia and Iraq were the main drivers of OPEC’s production for August, with additional production of 290,000 bpd and 200,000 bpd, respectively, Nigeria, which can produce 2 million bpd, other things being equal, slumped from its July figure of 1.520 million bpd, according to an OPEC document. Production growth in Africa’s highest oil producer is proving a major challenge due to infrastructure challenges and technical difficulties, leading to shut-ins. In addition to the above problems, there have also been instances of community or workers’ protests, which incessantly disrupted operations, leading to severe losses. Thisday quoted a Nigerian National Petroleum Corporation (NNPC) document showing that the company and its partners lost 6.035 million barrels of crude oil to emergency shutdowns in the previous month. In its August presentation to the Federation Account Allocation Committee (FAAC), which was held between the 18th and 19th of August, the corporation recorded 32 of such incidents throughout its facilities in the country. All this fed into a government revenue shortfall of ₦1.76 trillion in the first half of this year, according to official data. According to a revenue performance report, which was obtained from the Budget Office of the Federation, the FG’s projected revenue for the 2021 fiscal year was ₦7.9 trillion of which ₦3.9 trillion was earmarked as a pro-rata target for the first six months. As of June 2021, the government had only generated ₦2.3 trillion, or 44.1% of the pro-rata estimate, indicating a revenue gap of ₦1.8 trillion. During the period under review, the aggregate revenue of ₦2.23 trillion comprised oil revenue of ₦492.4 billion, non-oil revenue of ₦778.2 billion and ₦922.1 billion from other revenue sources including independent revenue of ₦558.1 billion. The report said, “FGN share of oil revenues was ₦492.44 billion (which represents 49% performance), while non-oil tax revenues totalled ₦778.18 billion (104.5% of pro-rata). Companies Income Tax and Value Added Tax collections were ahead of the budget targets with ₦397.02 billion and ₦129 billion, representing 116.5% and 108.2% respectively of the pro-rata targets for the period.

Katsina Governor Aminu Masari has said with the benefit of hindsight, his government should never have negotiated with gunmen, let alone grant them amnesty. Mr Masari said he did not regret his decision at the time, but admitted that information available to him confirmed that engaging the bandits was not the right thing to do. Consequently, based on current understanding of the situation, the governor said he had set in motion plans to proscribe open grazing of cattle in the state. He said once certain structures were put in place for ranching, nomadic herding would be outlawed in the state. Masari insisted that open grazing of animals should not be encouraged in any form, adding that the practice is even contrary to Islamic doctrines, which forbid allowing animals into other peoples’ land. The governor of the North-west state also identified informants as the greatest challenge to the fight against insecurity in that part of the country.

Anxiety has gripped residents of some communities in the Magboro area of Obafemi/Owode Local Government of Ogun State as no fewer than 25 persons were feared dead following an outbreak of cholera in the area. The affected communities include Arepo, Akeran, Akintonde, Sofolarin and Abule-Oko. State health commissioner Dr Tomi Coker, had on Sunday confirmed the incident, saying: “It is predominant among okada [motorcycle taxi] riders and scavengers in the area.” The Chairman of the Community Development Committee (CDC) in Magboro, Mr Oluwasegun Oladosu, Tuesday confirmed that 15 deaths have been recorded. Highlighting the identity of some of the casualties, Oladosu said that about 10 people of northern extraction, who relocated from the community to Kara (settlement), have died of cholera. Oladosu said commercial motorcyclists (Okada riders) who were of northern extraction were most hit by the outbreak. According to him, some of the okada riders had just returned from a trip and probably might have been infected with cholera. The chairman lamented, however, that relations of the victims did not release the corpses, saying: “They always rush to bury them. A number of them are already fleeing the community. But the information we have now is that 15 people are already dead. “Forget about tribes, we have been living here with the Hausas for a long time, peacefully. But, some of them had travelled recently and they just returned, especially the okada riders. They will always tell you the truth. Some of them came with the disease. Some of them who ran to Kara [a Hausa settlement], we learnt 10 of them are dead.” The CDC chairman said a government team had visited the community and provided drugs for cholera treatment and prevention. Oladosu called on the government to ensure they always enforce sanitation in the community, which he described as very dirty.

Commentary

• It is a welcome development that key VAT generation states like trailblazer Rivers and now Lagos have continued to carry on with setting up the required legislative framework for the VAT collection in spite of the FIRS’s vituperations. Until there is either an appeal court judgement or at the minimum, a stay of execution order from a competent court of law, the subsisting legality is on the side of the states. Fresh from their victory on this front, the states are increasingly turning their attention to another knotty revenue issue – who gets to collect stamp duties? This time, all 36 states have sued the federal government over the non-remittance of stamp duties funds generated from the states – a number which the states say amounted to ₦176 billion over the period from 2015 to 2020. In that suit, the states are asking the court to declare that Abuja “is not entitled to collect, administer, or keep the proceeds of any stamp duties on transactions involving individuals within the respective states of the plaintiffs,” a carbon copy of the declaration that Rivers asked for and got on VAT. Away from the contest over federal and state rights, what is important is to keep an eye on the laws the states pass to ensure that they are fair and do not create an extortionate VAT tax regime – a situation that is well within the realm of possibilities. We have written extensively on the court judgement but the issue continues to evolve. We expect a few more southern states to take similar steps to Lagos as they are likely to be the big beneficiaries. Even some northern ones may join the fray; Adamawa, a negligible contributor to the VAT pot but a solid PDP state is siding with the south on this. This could put the north in a prickly situation and some of the states are already using a hammer on corporate residents. The point to note about the Niger State Internal Revenue Service shutting down businesses is that because a tax authority says a business or individual owes tax debts does not make it so. What we have seen in Nigeria over the years is the arbitrary imposition of levies to force various entities to the negotiation table. It is hard to see how a bank, which has fewer than three branches in a state, will owe in excess of ₦100 million in taxes to a state that only has the right to charge PAYE on employees resident in the state, especially as Niger is one of the states unwilling to take over VAT collection from the FIRS. The states should also watch out as they are not the only prophets in the desert crying out for more fiscal responsibility. In Lagos, Nigeria’s VAT powerhouse, a conference of 57 local governments and local council development areas (LCDAs) have asked for equal sharing of VAT revenue with the state government. Lagos’s new VAT law only guarantees 25 percent of the revenue to the LGAs, setting the stage for a fevered tussle between Alausa and its constituents. The lesson of this tale is that one must not make the assumption that passing on responsibility from the centre to the states automatically equates to good. The era of fiscal realignment is well and truly underway.
• One of the aptest metaphors to describe Nigeria is its inability to meet oil production quotas, essentially leaving much-needed revenue on the table. In spite of how crucial oil revenues are to the country, there has been little concerted effort to make the necessary investments and build needed capacity over the years to improve Nigeria’s ability to extract the oil that is naturally given from under its soil. As the appetite of the major oil companies for Nigeria diminishes, and the world begins the steady but sure transition to cleaner sources of energy, the oil majors Nigeria has relied on will not do more heavy lifting for the country. Sadly, a political elite with a narrow field of vision is unable to recognise that this is not only a problem for the country but also a problem for them. In addition, it is concerning that the current and previous Nigerian governments have continued to pay lip service to the development of the country’s oil resources as well as the marketing of its products. A similar piece on the issue by Vanguard Newspaper referenced a statement by the Director of the Department of Petroleum Resources (DPR), Engr. Auwalu Sarki, saying that of the 7,000 oil reservoirs in the country only about 1,700 are in production, and in the same breadth that the FG is determined to boost Nigeria’s oil production to four million barrels per day. The truth is that the latter is highly improbable. It took Nigeria almost 15 years to pass its Petroleum Industry Bill, which would have aided investments into the sector if it was done a decade ago. Now, the oil majors led by Shell are queuing to exit the country. The future of energy is renewable, and it is unlikely that Nigeria will ever be able to attract the kind of money to develop those non-producing fees. The best we may get is the development of a few marginal fields, indicating that Nigeria’s days as a major oil producer are numbered.
• Negotiations between Governor Masari’s administration in Katsina and so-called bandits were doomed considering the existence of numerous bandit groups in not just the state but the country. While there are large groupings of armed criminals with some sort of organisational structure, the term ‘bandits’ has also been loosely applied to any armed non-state actor in the North-West. The state government’s strategy has been further hampered by insufficient mapping of criminal groups as well as poor (or nonexistent) intelligence – both elements of which should have informed the decision to negotiate an amnesty in the first place. In many ways, the amnesty was an admission by the state that it was unable to apply kinetic methods of force to quell the banditry. It also didn’t coordinate with neighbouring states facing similar security challenges and Abuja. While the move by the Katsina State Government to end open grazing might not in itself end the banditry, it goes a long way to tackling one of the root causes: cattle rustling, as the practice of open grazing, makes it easy for cattle herders to be attacked by rustlers. Already, the Katsina Emirate has symbolically banned open grazing within its borders, although traditional rulers are not constitutionally empowered to make laws. More importantly, Governor Masari’s admission, and the action of the Katsina Emirate, represents a sea change in attitudes by a growing, albeit small, number of northern states pertaining to open grazing. Whether this means that these governments will provide grazing reserves for herders, or require herders to acquire land and develop ranches, we wait to see. But if more states adopt a stance against open grazing, it will put paid to the Federal Government’s plans to reactivate grazing routes as a means to end constant clashes between nomadic herders and farming communities.
• Nigeria is in the midst of a cholera epidemic that has not attracted the media attention it should because a bigger game, the Covid-19 pandemic, is still the star of public health reporting. The numbers, however, tell a very grim tale. As of the close of business on 7 September, there had been 65,145 cases and 2,141 deaths recorded in 2021, according to the latest data from the Nigeria Centre for Disease Control (NCDC) – a case fatality rate of 3.28%. As context, 2,578 official Covid-19 fatalities have been recorded from 197,046 cases since its commencement in late February 2020: a fatality rate of 1.31%. Of the 23 states affected by the epidemic, 19 are in the North. In addition, all 16 states that reported cases in the past week were northern states. This ties to what Mr Oladosu said about victims being from the North who had just returned to the community. This means that there is a need for local authorities to intensify contact tracing and awareness among communities, especially on how to keep their food and water safe to avoid contamination and the spread of the disease. Cholera spreads mostly within low-income communities that often have poor sanitary facilities and open defecation is rife, thus making it easy for the disease to spread. Again, this is consistent with the areas that these cases have been recorded in Magboro, an unplanned, low-income community dealing with these problems. Public health and urban planning authorities need to, as a matter of urgency, look into how to improve the living conditions of such communities in a sustainable way that eliminates the risk of a deadly and infectious disease running amok.