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NNPC SPENT $10 BILLION ON FUEL SUBSIDY IN 2022

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The Nigerian National Petroleum Corporation (NNPC) spent 4.39 trillion naira ($9.7 billion) on a petrol subsidy in 2022, the latest data from the state-owned corporation showed on Friday.

Data from NNPC showed that it did not make any transfers to federation accounts in 2022, creating a void in public finances when the government was warning that low revenues and high deficits left it unable to stimulate the economy.

The subsidy is a political hotspot in Nigeria, a country of over 200 million people, and numerous governments have tried and failed to eliminate or reduce it.

Due to years of neglect, Nigeria now imports nearly all its refined fuels.

Nigeria is spending more on fuel imports than it makes from crude oil output, even though oil production has started to recover. This is due to crude theft and pipeline destruction.

Minister of Finance Zainab Ahmed has announced that the country will continue its expensive but popular petrol subsidy until mid-2023, allocating 3.36 trillion naira ($7.5 bln) for the programme.

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AS FIRS UNDER NAMI JUMPSTARTS THE ECONOMY

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The Federal Inland Revenue Service as we know it is the federal government agency charged with mobilizing revenues through tax collections across the length and breadth of Nigeria for the development of the country. At a time when the country is witnessing a significant reduction in oil revenues (Nigeria’s major revenue earner) as a result of several factors, such as low levels of oil production, oil theft and the global oil glut, the Buhari administration has had to devise creative ways of generating revenues for the execution of numerous government projects.
With this policy direction and initiative, the Federal Inland Revenue Service took the challenge to bridge the yawning revenue gap. In doing this they expanded the tax net to include several profit-making companies and organisations which had prior to the emergence of the Buhari administration played artful dodgers in tax payments and remittances. Of course the FIRS also introduced other innovative measures which have today raised the tax revenue profile to N10.1trillion in 2022 from a low of N5trillion when he assumed office in 2019.


Suffice it to say that the increase in tax collections has remained stable and consistent since Alhaji Muhammed Nami assumed the leadership of the FIRS as the Executive Chairman. As an expert in tax administration he realized the federal government’s predicament in sourcing for funds that will help rejuvenate an economy buffeted by the vagaries of the sharp drop in global oil prices. Therefore, as the price of oil kept plummeting at the international market, Muhammed Nami along with his management team took the gauntlet by quickly adorning their thinking caps and worked round the clock to help the Buhar administration deliver on its mandate and campaign promises to the Nigerian people.
Since then the FIRS started witnessing a steady increase in tax collections, and the result is that Nigeria was able to survive the shocks associated with the unpredictable oil market. Simply put, the FIRS became the first federal government agency to achieve tangible results in the federal government’s revenue diversification policies.


To put the monumental feat achieved by the FIRS with the realization of N10.1 trillion in tax collection within a period of one year in a proper perspective, it is pertinent to take a cursory look at the following four years figures of tax collection in the country and they clearly show how the Nami-led FIRS has fared under an inclement economic weather.
In 2019, the agency realized N5.32 trillion; in 2020 the agency netted N4.9 trillion, this was the year that the COVID pandemic dealt a hard blow to the global economy; in 2021, the Service collected N6.45trillion, which was as at then the highest ever collected and over 100% of its collection target; while in 2022, it achieved the jaw-breaking highest tax collection ever of N10.1trillion.


Perhaps, one interesting aspect of this report is the increase in non-oil collection achieved by the Service. Non-oil collection stood at N5.96 trillion, while oil collection was N4.09trillion. Before now Nigeria was helplessly dependent on oil revenues, and the reality is that the country was in no advantageous position to control or influence the impact of changes of oil prices on our national economy.


The implication of these increases is that the FIRS has innovatively widened the scope of collectible taxes in Nigeria as well as applied an aggressive tax drive, and the result is that while oil prices were staggering across the globe, and to the detriment of oil-producing countries including Nigeria, the FIRS provided the financial succor that has helped Nigeria’s economy to withstand the debilitating impact and the federal government placed in a position to carry out its mandate of rendering service to the people.


By Chukwudi Enekwechi, JP
Kwechis19@yahoo.com

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FIRS BREAKS ITS 2021 RECORD, COLLECTS N10.1 TRILLION IN 2022

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The Federal Inland Revenue Service (FIRS) has announced that it collected over N10 trillion in tax revenue in the year 2022, the highest tax collection ever recorded in its history.

The Service made this known in its “FIRS 2022 Performance Update,” report signed by its Executive Chairman, Mr. Muhammad Nami, and released to the public on Monday, after his briefing with President Muhammadu Buhari.

“The FIRS, in the year 2022 collected a total of N10.1 trillion in both oil (N4.09 trillion) and non-oil (N5.96 trillion) revenues as against a target of N10.44 trillion.

“Companies Income Tax contributed N2.83 trillion; Value Added Tax N2.51 trillion; Electronic Money Transfer Levy N125.67 billion and Earmarked Taxes N353.69 billion.

“Non-oil taxes contributed 59% of the total collection in the year, while oil tax collection stood at 41% of total collection,” the report noted.

It is the first time that the FIRS will cross the 10-trillion Naira mark in tax revenue collection.

The Performance Update Report further clarified that included in the total revenue sum is the sum of N146.27 billion which is the total value of certificates issued by the Service to private investors and NNPC for road infrastructure under the Road Infrastructure Development Refurbishment Investment Tax Credit Scheme created by Executive Order No. 007 of 2019.

The report also stated that the N10.1 trillion is exclusive of tax waived on account of various tax incentives granted under the respective laws, which amounted to N1,805,040,163,008.

Providing perspective to this unprecedented tax collection, the FIRS noted in the Performance Update that the Muhammad Nami-led management upon assumption of office came up with a four-point focus, namely: administrative and operational restructuring; making the service customer-focused; creating a data-centric institution; and automation of administrative and operational processes.

It further noted that over the period of 2020 to 2022, the management had introduced reforms bordering around these four-point focus which were producing results.

“The reforms introduced at different times from 2020 are gradually yielding fruits. By the close of 2022, the Service had fully restructured the administration of the Service for maximum efficiency and achieved internal cohesion such that all functional units are working in unison towards the achievement of set goals.

“As a result of conducive environment created for staff, officers of the Service are pulling their weight on the global stage with international recognitions and awards;

“The Service had also automated most of the administrative and operational processes. A major leap was the full deployment of the TaxPro Max for end-to-end administration of taxes in June 2021. The module for the automated TCC went live 1st January 2023 while taxpayers had already downloaded over 1,000 TCCs this year without having to visit FIRS office,” the report read.

It also noted that the Service had operationalised its data mining and analysis system thereby allowing for data-backed taxpayer profiling.

Other reforms the Service introduced in this period focused on the detoxification of the tax environment by ridding it of mutual mistrust, negative tax morale, and tax evasion, through effective taxpayer education, open engagement with stakeholders and improved services.

It noted that it is courtesy these reforms, framed around the four-focus points that the Service was able to achieve this collection.

Mr. Muhammad Nami, Executive Chairman of the FIRS, commenting on the N10.1 trillion record tax collection achieved under his leadership stated that this was made possible through “dogged implementation of strategic reforms over the past two years; a renewed commitment by officers of the Service, accompanied with a boosted morale; as well as the innovative deployment of technology for automation of both tax administration and operational processes.

“This collection was possible through collaboration with our stakeholders, from our colleagues at the Executive branch of government, to the members of the judiciary, to our brothers and sisters at the National Assembly, as well as the tax advisory committee, professional bodies, unions, and most crucially our taxpayers.” 



Speaking on the outlook for 2023, Mr. Nami stated that the Service would build on the current reforms, achieve full automation and continue to establish a resilient Service that would continue to provide sustainable tax revenue to fund the government.

“We intend to maintain, and even improve on the momentum in 2023,” he stated.

“We have peaked, but this is not certainly our peak. In fact, my hope is that this would be the least sum the Service would ever collect going forward.

“Our goal is to identify more areas where we can improve on in the delivery and efficiency of our collection; and plug loopholes, while deploying innovative reforms in data and artificial intelligence.

“Ultimately, we believe that the FIRS can shoulder the responsibility of providing revenue needed for the governments across the Federation to cater for the needs of the Nigerian people through taxes.

“This is feasible once we get the much-desired support from the three tiers and arms of government, as well as all stakeholders.”

The FIRS appreciated President Muhammadu Buhari for his support, as well as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed and the Minister of State, Mr. Clem Agba.

“FIRS Management uses this medium to commend all patriotic taxpayers who paid their taxes correctly, stakeholders for their support, and officers of the Service for their dedication to duty.

“The Service equally owes its achievements in 2022 to effective leadership of the Honourable Minister of Finance, Budget and National Planning – Mrs Zainab Ahmed, her brother, the Minister of State – Mr Clem Agba, members of the National Assembly and the fatherly support of the President and Commander-in-chief of the Armed Forces of Nigeria – Muhammadu Buhari.”

This is the second consecutive year that the Service will be recording unprecedented tax collection.

In 2021, the Service achieved a record tax collection of N6.405 trillion, being over hundred percent of its collection target for the year, as well as the first time that the Service will cross the six trillion mark.

In 2022, building on the success of the preceding year, the Service achieved a record collection of N10.1 trillion, being over 96% of its collection target for the year, and the first time the Service will cross the ten trillion mark.

This collection represents an over one hundred percent leap from the tax collected by the Service in 2020—the first year of the current management of the Service.

Johannes Oluwatobi Wojuola
Special Assistant to the Executive Chairman, FIRS
(Media&Communication)
January 23, 2023

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BAKERS EXPLAIN WHY BREAD PRICES WILL KEEP RISING

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Nigeria is expereicning galloping inflation and data suggest bread prices are a major factor.

Available data from the December 2022 consumer price index (CPI) report from the National Bureau of Statistics (NBS) shows that increased bread costs are a contributing factor to food inflation in Nigeria.

According to the CPI and inflation report, the food inflation rate in December 2022 was 23.75% on a year-on-year basis; which was 6.38% higher compared to the rate recorded in December 2021 (17.37%).

Also, on a month-on-month basis, the food inflation rate in December was 1.89%, this was 0.49% higher compared to the rate recorded in November 2022 (1.40%).

The NBS identified inflation as being caused by the rise in prices of bread and other food items like potatoes, yams, fish, oil, and cereals.

  • “The rise in the food inflation was caused by increases in prices of Bread and cereals, Oil and fat, Potatoes, Yam and other tubers, Fish, Food Product etc.”

Rising costs of major ingredients

Mrs. Okafor, a caterer told Nairametrics that the cost of flour, sugar, and milk for the production of bread has been increasing since 2022.

  • The increase is mainly due to the increase in wheat importation costs as a result of the Russia-Ukraine war as well as Nigeria’s foreign exchange challenges.
  • With Nigeria being the second largest wheat importer in the world, it makes it hard for bakers and even big bakeries to effectively run their businesses without increasing the cost of bread, which is a staple food for Nigerian families.
  • According to her, customers have been complaining about the rise in the cost of bread, especially the family loaf which costs N1000 or N900 per loaf.

Mrs. Okafor, who is based in Lagos, gave Nairametrics a breakdown of the average costs of large quantities of flour, sugar, and milk, which are major ingredients needed for bread production.

  • 50kg bag of flour – N30,000 to N32,000
  • 50kg bag of milk – N32,000 to N34,000
  • 50kg bag of sugar – N34,000 to N36,000

Production costs at FQ Loaf typify the burden on bakeries

Ada Abel, General Manager at Abuja-based FQ Loaf Bakery, told Nairametrics that aside from the rising cost of ingredients, the business carries a lot of other costs.

According to her, the bakery has multiple products but the Jumbo loaf and the Family loaf are more popular among customers.

The average unit cost of a Jumbo loaf is N700 and there are over 40 in a batch which has to be produced mostly using a diesel generator. Meanwhile, the average unit cost of a Family loaf is N650 and there are over 70 per batch.

  • To cover risks, the bakery adds the cost of only a loaf of bread to each batch, which most times is less than the risks later encountered.
  • That and other risks like loaves that may go bad in passing through the value chain are borne entirely by the business.
  • The bakery buys diesel at N880 per liter and sometimes the full production process which could take over an hour has to be run using the diesel generator.

According to Ms. Abel, the loaves of bread pass through three layers of sales – bakery to distributors, distributors to table toppers (retailers), and table toppers to end consumers.

As the loaves travel to each party, money is added before the bread gets to the final consumer, so they can all make a profit.

  • She told Nairametrics of other costs that do not factor into the price of bread. She mentioned over 15 levies by the local government council, public health cadet charges, and food handling tests which cost the bakery N5000 per staff and have to be done every two years.
  • The Public Health Act inspection has to be done every three months and costs N3,500 per staff as well as an N30,000 certificate.
  • She also highlighted the inspection of business premises by officials of the Abuja Municipal Area Council (AMAC), as well as levy increases by the National Agency for Food and Drug Administration and Control (NAFDAC).

For the record: The NBS inflation report earlier cited says that in December 2022, food inflation on a year-on-year basis was highest in Kwara (27.90%), Imo (26.94%), and Ebonyi (26.28%), while Sokoto (20.90%), Taraba (21.59%) and Cross River (21.71%) recorded the slowest rise in year-on-year food inflation.

  • However, on a month-on-month basis, December 2022 food inflation was highest in Sokoto (3.38%), Oyo (3.10%), and Kaduna (2.97%), while Nasarawa (0.06%), Osun (0.70%) and Kogi (0.76%) recorded the slowest rise on month-on-month inflation.

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