Economy

Windfall tax: FG insists on sanctions for defaulting bank chiefs

Published

4 months ago

July 23, 2024

Admin

The Federal Government has reiterated that the principal officers of banks who refuse to comply with the law on the windfall tax on banks’ foreign exchange profits will be sanctioned.

The government’s position was reiterated on Monday at the National Assembly when the Minister of Finance, Wale Edun, and the Chairman of the Federal Inland Revenue Service, Zack Adediji, met with the finance committees of both chambers on the Amendment of the Finance Bill, 2024.

Last week Wednesday, the Senate gave expeditious passage to President Bola Tinubu’s request to amend the Finance Act to impose a one-time windfall tax on banks’ foreign exchange profits in 2023.

A windfall tax is a higher tax levied by the government on sectors or businesses that have disproportionately benefited from favourable market conditions.

The President said the money would be part of the revenue used to fund the additional N6.2tn added to the 2024 budget.

The bill which has passed the second reading states, “The Federal Inland Revenue shall assess the realised profits, collect, account, and enforce payment of levy payable under section 30 in accordance with the powers of the Service under the Federal Inland Revenue Service (Establishment) Act 2007; and in the exercise of its functions in 32(a) above, may enter into a deferred payment agreement with the assessed banks, provided that such deferred payment agreement is executed on or before December 31, 2024.

“Any bank that fails to pay the windfall profit levy to the service and has not executed a deferred payment agreement before December 31, 2024, commits an offence and shall, upon conviction, be liable to pay the windfall profit levy withheld or not remitted in addition to a penalty of 10 per cent of the levy withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria minimum rediscount rate and imprisonment of its principal officers for a period of not more than three years.

“Financial year means either the year commencing from January 1, 2023 to December 31, 2023, or any period within the financial year not aligned with the calendar year comprising twelve calendar months of the bank’s financial activity,” it added.

Speaking at the meeting, Edun said, the “bank windfall” profit levy, though small still constituted an important contribution to government finances at a time when revenues had substantially increased despite minimising taxes.

In his explanation, the FIRS chairman explained that the windfall tax was not a new tax imposed on banks.

Adedeji said, “These are the gains that you have without any contribution from you, without any value addition. They result from the effect of an adverse activity on others. And who are these others? If you look at the report of all manufacturing entities in the last one and a half years, you will discover that a lot of registered companies recorded huge losses from exchange transactions.

“Anywhere in the world, your duty as the government is to redistribute the wealth to sustain the progress and prosperity of the nation.

“So the loss suffered by manufacturing, as a result of these foreign gains, which is being recorded in the bank is what the government seeks to redistribute. And that is why we have this levy.

“So we seek your permission and your understanding in balancing this economic inequality that has occasioned due to the circumstances that we find ourselves.”

Speaking on the sharing formula, the FIRS chairman proposed that it be distributed 50/50 between banks and the government.

He said, “These gains that are realised, the levy proposal today is 50 (per cent) for the bank and 50 (per cent) for the government.”

Raising the issue of penalty as stated in the bill, Senator Isah Jibrin ( APC, Kogi East), asked that the bill be more explicit.

He said, “My area of worry is concerning the penalty, we need to be very explicit on it.

“On the issue of penalty, here it is stated, 10 per cent of the tax withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria MRR. So what are we going to do? 10 per cent is like coming from nowhere, so I would suggest that we align the MRR.”

“Then at what point does the issue of imprisonment of the officials come in? At what point do we now say, okay, enough is enough and the officials should be arrested after default, is it after a month, a year, two years, or three years.”

Responding to this, Edun said it was unlikely that banks would defy the government, but noted there were penalties for those who defaulted.

The finance minister said, “To be fair to the banks there is no reason to assume that’s what they trying to do. Let us give the benefit of the doubt to one another.

“Well there has to be, there has to be something that will serve as a deterrent. The penalties have to be there. And at the end of the day, tax evasion is a criminal offence.

“For underreporting of profits by the bank, we have enough technical ability to look at what the bank’s audited accounts say and track the level of foreign exchange and the profits therefrom.”

Adedeji also allayed fears regarding possible cases of underreporting.

He noted that the CBN in a memo in September 2023 and March this year had directed commercial banks in the country not to touch or spend the profits they made from foreign exchange transactions.

Economy

FG reaffirms support for NNPC Limited’s 100,000 barrels per day production

Published

21 hours ago

November 23, 2024

Kayode Sanni-Arewa

The Honourable Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, has reaffirmed the Federal Government of Nigeria’s commitment to supporting the NNPC Limited/FIRST Exploration; Petroleum Development Company Limited (FIRST E&P) Joint Venture (JV) in achieving its ambitious target of producing 100,000 barrels of oil per day (BOPD).

The Minister made this declaration during a comprehensive engagement with the JV, which included a tour of its offshore drilling and production facilities in the Niger-Delta.

The two-day visit was designed to provide the Honourable Minister firsthand insight into the JV’s operations and underscore its contributions to Nigeria’s energy security and transition goals.

Head, Joint Venture Investment Management, NNPC Upstream Investment Management Service(NUIMS), Mr. Olanrewaju Igandan; Minister of State, Petroleum Resources(Oil), Senator Heineken Lokpobiri; Managing Director, FIRST E&P Development Company Limited, Ademola Adeyemi-Bero and Managing Director, First Marine and Engineering Services Ltd, Joseph Penawou during the tour of Ogu Base logistics in Yenagoa Bayelsa State

The visit commenced with a tour of the Abigail-Joseph, the JV’s Floating Production Storage and Offloading (FPSO) vessel, followed by inspections of the Anyala OML 83 and Madu OML 85 Conductor Supported Platforms (CSPs) on Tuesday, November 19, 2024. The Minister’s itinerary also included a visit to the JV’s Ogu Logistics Base and a Host Community Stakeholders Engagement meeting in Yenagoa, Bayelsa State.

Describing his tour as quite strategic to Nigeria, the Minister disclosed that by meeting this ambitious 100,000 BOPD target, the JV would be helping the Federal Government achieve its production goal of 2.5 million BOPD by 2025. The Minister also praised FIRST E&P for its role in Nigeria’s recent achievement of 1.8 million BOPD and highlighted the strategic significance of the company’s operations to national growth.

During an engagement held with the Minister, FIRST E& P’s Managing Director, Ademola Adeyemi-Bero, reaffirmed the company’s commitment to supporting the Federal Government in achieving its target by maximising production, optimising efficiency, and contributing to Nigeria’s energy security through the NNPCL/FIRST E&P JV partnership. “For a nation like Nigeria, where oil and gas remain critical drivers of socio-economic growth, ensuring a sustainable energy supply is essential for industrialization, economic diversification, and improving the quality of life for millions. At FIRST E&P, our vision is strongly aligned with the national priorities for production. With a steady output of 56,000 BOPD, we are focused on achieving our medium-term target of surpassing 100,000 BOPD”, stated Adeyemi-Bero.

Bala Wunti, the Chief Upstream Investment Officer of NNPC Upstream Investment Management Services (NUIMS), represented by Olanrewaju Igandan, Head of Joint Venture Investment Management at NUIMS, applauded FIRST E&P and its partners for their remarkable achievements over the past decade. He highlighted that since achieving first oil in 2020, the partnership has produced over 50 million barrels of oil, significantly contributing to national revenue through royalties, taxes, and host community development initiatives.

While commending the JV, the Bayelsa State Governor, Douye Diri represented by Chief of Staff, Dr. Peter Akpe, called for greater collaboration between the Federal Government, oil companies, and state authorities to boost production.

Speaking during the Host Community Stakeholders Engagement meeting, Chairman, KEFFESO Host Communities Development Trust (KHCDT), Amadabo of Moko-ama, Sangana Kingdom, His Royal Highness Moses Theophilus, commended the management of the JV for their invaluable support to the host communities through various initiatives in the areas of education, health care, and human capital development.

Lokpobiri commended the JVs host communities for creating a peaceful and supportive environment that has enabled the company to operate smoothly without disruptions. He urged the communities to continue their collaboration with the company, emphasizing that their support is crucial for increasing production and achieving the ambitious targets set. Reassuring stakeholders, he reaffirmed the Federal Government’s commitment to enhancing Nigeria’s investment climate and ensuring the nation remains globally competitive in the oil and gas sector.

Economy

FG services foreign debt with $3.5bn

Published

2 weeks ago

November 13, 2024

Kayode Sanni-Arewa

The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.

This is according to data from the Central Bank of Nigeria on international payment statistics.

The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.

Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.

In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.

The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.

In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.

March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.

The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.

July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.

The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.

The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.

This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.

It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.

Regarding external debt, the agency said external financing obligation