Business

….…focus on boosting economy

The Central Bank of Nigeria (CBN) has hosted a dialogue between the Organised Private Sector (OPS) and the Bank’s leadership to explore strategies for enhancing Nigeria’s financial sector.

The meeting held at the Bank’s Lagos office on Wednesday, June 19, 2024, focused on exploring how broad-based monetary policy communication and guidance can positively influence the global investment community’s perception of Nigeria and on determining the right bundle of monetary policies and interventions to increase the productive sector’s growth.

In addressing the need for improving monetary policy communication and guidance to positively influence the global CFO and investing community’s perception of Nigeria, the CBN Governor, Mr. Olayemi Cardoso emphasised the importance of private sector input in shaping economic policy. “The private sector is a critical engine of our economy,” he said. “This meeting underscores our commitment to working collaboratively with stakeholders to create a more robust and investor-friendly financial environment.”

Stakeholders at the meeting also pledged to establish a framework for collaboration and consistent interactions with the top leadership of the OPS to harmonise economic policy and guarantee the CBN’s effective support of the private sector in partnership with the Nigerian Economic Summit Group (NESG).

The CBN Governor also presented a detailed explanation of the economy’s trajectory, highlighting the deceleration of month-on-month inflation and expectations of moderation. He also said the Bank would continue improving monetary policy communication through forward guidance to domestic and global investors.

The CBN Governor also assured the private sector leaders of their commitment to building trust, ensuring price stability, and implementing monetary policies to support economic growth, improve stability in foreign exchange rates, and effectively moderate inflation.

He assured them that despite current drawbacks, the Bank had consistently improved FX supply while protecting the interests of all parties. In addition, he stressed the importance of restoring confidence and trust in the Nigerian economy for all investors, local and foreign.

Mr. Cardoso also noted that the policy measures deployed by the CBN aim to build a transparent economy that will boost investors’ confidence and improve the country’s business environment.

The CBN presented a detailed explanation of the economy’s trajectory, the reasons behind the recent aggressive Monetary Policy Rate hikes, and the expected transmission timeline into the economy. It also highlighted the deceleration of month-on-month inflation and expectations of moderation in headline inflation going into the third and fourth quarters of 2024.

In his remarks, the President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, appreciated the CBN’s open dialogue and interest in ensuring the manufacturing industry and other organised private sectors are abreast of CBN policies.

He said the OPS was concerned about how the price verification system is currently operated and, in agreement with the CBN, will provide the CBN with specific details about the concerns and suggestions for implementable improvements to the system.

During the discussions, other private sector leaders expressed concerns about the elevated impact of macroeconomic risks on business costs across various industries. They noted that while structured development finance support may not directly increase cash supply, it enhances the capacity of the productive sector to manage risks such as exchange rate volatility. They also emphasised the importance of the role of the Central Bank of Nigeria in catalysing trade finance and development finance support through traditional institutions.

The presidency, through its Committee on Fiscal Policy and Tax Reforms, has announced that there is a need to increase the value-added tax (VAT) rate.

Chairman of the committee, Taiwo Oyedele, disclosed this while informing Nigerians the VAT revenue-sharing formula would be reviewed.

He spoke at a policy exposure and impact assessment session organised by the committee earlier this week.

Nigeria’s VAT rate currently stands at 7.5 percent.

Oyedele, a tax expert, also said the committee has proposed reviewing state and local governments’ share of VAT revenue to 90 percent.

According to section 40 of the VAT Act, the federal government gets 15 percent of the tax revenue, states share 50 percent, and local governments share the balance of 35 percent.

However, Oyedele said the committee is recommending reducing the federal government’s share from 15 percent to 10 percent.

“We are proposing that the federal government’s portion should be reduced from 15 percent to 10 percent. States’ portion will be increased but they would share 90 percent with local governments,” he said.

Oyedele said the committee proposed adjusting the sharing formula for VAT because it is a tax of the states.

“In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today came about. But we think it is too much,” he said.

The tax expert added that the burden of VAT should be on the ultimate consumer.

“So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing,” Oyedele said.

“Nigeria’s economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won’t even fly.

“So we therefore need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero percent VAT. So for the poor and small businesses, no VAT.”

Oyedele said other consumers will pay a bit more.

“We have spoken to businesses about it and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector,” he said.

Oyedele also said each state should not be granted exclusive custodianship of their collections– because it would likely result in chaos.

The Central Bank of Nigeria (CBN) has announced the exemption of 16 specific banking transactions from the recently introduced cybersecurity levy. The move aims to streamline and facilitate essential financial activities without additional costs for customers and institutions.

The exempted transactions include:

1. Loan disbursements and repayments
2. Salary payments
3. Intra-account transfers within the same bank or between different banks for the same customer
4. Intra-bank transfers between customers of the same bank
5. Other Financial Institutions instructions to their correspondent banks
6. Interbank placements
7. Banks’ transfers to CBN and vice-versa
8. Inter-branch transfers within a bank
9. Cheque clearing and settlements
10. Letters of Credits
11. Banks’ recapitalisation-related funding – only bulk funds movement from collection accounts
12. Savings and deposits, including transactions involving long-term investments such as Treasury Bills, Bonds, and Commercial Papers
13. Government Social Welfare Programmes transactions e.g. Pension payments
14. Non-profit and charitable transactions, including donations to registered non-profit organisations or charities
15. Educational institutions’ transactions, including tuition payments and other transactions involving schools, universities, or other educational institutions
16. Transactions involving bank’s internal accounts such as suspense accounts, clearing accounts, profit and loss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts.

This decision by the CBN is expected to ease the burden on customers and financial institutions engaging in these essential transactions, ensuring smooth operations and financial stability in the banking sector.

All commercial, merchant, non-interest, payment service banks and other financial institutions, among others got a directive from the Central Bank of Nigeria (CBN) to activate the payment of 0.5 per cent on some electronic transactions.

Others who got the CBN circular yesterday, are mobile money operators and payment service providers.

The circular outlines the implementation guidance on the collection and remittance of the National Cyber-security Levy, following the enactment of the Cybercrime (Prohibition, Prevention, etc) (Amendment) Act 2024.

Referring to previous directives and public engagements by the Office of the National Security Adviser (ONSA), the circular stressed the necessity of compliance with the amended Cybercrimes Act.

Pursuant to Section 44 (2)(a) of the Act, a levy of 0.5% (0.005) equivalent to a half percent of all electronic transactions value by specified businesses is mandatory. This levy is to be remitted to the National Cyber-security Fund (NCF) for administration by the ONSA.

The circular reads: “Following the enactment of the Cybercrime (Prohibition, Prevention, etc) (amendment) Act 2024 and pursuant to the provision of Section 44 (2)(a) of the Act, ‘a levy of 0.5% (0.005) equivalent to a half per cent of all electronic transactions value by the business specified in the Second Schedule of the Act’, is to be remitted to the National Cyber-security Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA)”.

The key directives outlined in the circular include: the levy is to be applied at the point of electronic transfer origination, with financial institutions responsible for deduction and remittance. Deducted amounts shall be reflected in the customer’s account with the narration: “Cyber-security Levy.”

In addition, deductions are to commence within two weeks of the circular issuance, with monthly remittances to the NCF account by the fifth business day of every subsequent month.

The financial institutions are directed to complete system reconfigurations for timely submission of remittance files to the Nigeria Interbank Settlement System (NIBSS) Plc. within specified timelines. Failure to remit the levy is deemed an offence, with penalties including fines of not less than 2 percent of the annual turnover of defaulting businesses.

Certain transactions were exempted from the levy to avoid multiple applications. The Schedule of Exemptions from Cyber-security Levy, outlined transactions exempted from the levy, including loan disbursements and repayments, salary payments, intra-account transfers, and transactions involving educational institutions particularly, educational Institutions transactions, including tuition payments and other transaction involving schools, universities, or other educational institutions.

Others include, Intra-bank transfers between customers of the same bank; Other Financial Institutions (OFIs) instructions to their correspondent banks; Inter-bank placements; banks’ transfers to CBN and vice-versa; inter-branch transfers within a bank; Cheques clearing and settlements; Letters of Credits (LCs).

Banks’ recapitalisation related funding – only bulk funds movement from collection accounts; savings and deposits including transactions involving long-term investments such as Treasury Bills, Bonds and Commercial Papers; government Social Welfare Programmes transactions e.g. Pension payments; non-profit and charitable transactions, including donations to registered non-profit organisations or charities and transactions involving bank’s internal accounts.

The apex bank listed the affected accounts as: suspense accounts, clearing accounts, profit and Ioss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts and escrow accounts.

The circular directed all institutions under CBN’s regulatory control to comply with the provisions of the Act and the circular.