• Claim private investors more efficient in project costing, delivery
• New VAT to affect the economic viability of vulnerable population
Experts in Nigeria’s financial services sector have said the provisions of the Financial Act 2020, recently signed into law by President Muhammadu Buhari, would significantly benefit the Fast-Moving Consumer Goods (FMCG) space, especially from the perspective of the Micro, Small and Medium Enterprises (MSMEs).
According to the experts, MSMEs with gross revenue of N25million and below are now exempted from paying Company Income Tax (CIT), which is a welcome development, as MSMEs are drivers of any economy especially an emerging market like Nigeria’s.
Specifically, Associate Director, Transaction Advisory Services, Ernst & Young (EY), Abimbola Ogudare, said as the largest producers of FMCG in Nigeria, MSMEs account for 70 to 80 per cent of the economic activities, noting that the new provisions would make them more efficient.
Speaking at the 10th Detail Business Series, organised by Detail Commercial Solicitors, in Lagos, she said: “From the GDP contribution stand point, MSMEs in Nigeria contributes 45 to 50 per cent of the nation’s GDP and that is significant, and in line with what you see anywhere in emerging markets where MSMEs contributes around that range. MSMEs also contribute about 10 per cent of the total export in Nigeria and about 40 per cent of that export is cashews, cocoa, and sesames.”
However, Ogudare said although the government exempted MSMEs’ whose gross revenue is N25million and below from paying taxes, they should be brought into the nation’s tax net by getting them registered.
She argued that “Nigeria is an informal market. About 60 per cent of the businesses in Nigeria are informal. We have a high mortality and you don’t know who the MSMEs are, but if the government is able to bring them in and know who they are, then they can be able to see how they grow,” she added.
In his remarks, Deputy Managing Director, Afrinvest, Victor Ndukauba, said although the financial reforms may have a positive effect on the Nigerian economy, the challenge of the investment climate and fiscal rules are just one element of consideration.
According to him, the biggest challenges facing the country at the moment is that of infrastructural deficit, as Nigeria still lacks the infrastructure that allows the efficient movement of goods, service, and people in good time, and in decent comfort.
He maintained that to solve these challenges, the government needs to essentially step back from undertaking projects by itself and act more from the regulatory perspective, and allow private investors to come in and take the equity risk, and leverage on that to drive efficiency.
“If you get a private capital investor to come in because he knows that he has limited time to recover his investment, he is more practical in project pricing and more efficient in costing projects and that saves us some leakages.
“This makes them more efficient in delivering the infrastructure in good time because the sooner they deliver, they get revenue and the sooner they can get their returns. Though there is a general forbidden sense that private capital is evil and that private investors are greedy but if we are able to harness the power of private capital and investments then we can solve this challenges.
“If you have paid attention to the last three quarters, the country has had a negative current account position. The last time we had that was in 2015. So from our view, there is a limit to what the federal government can afford to do on the infrastructure side.”
Also contributing, the Chief Financial Officer, MAX.NG, Guy-Bertrand Njoya, said some provisions of the Financial Act 2020 perpetuate the context of uncertainty and policy by fiat and on the whim.
According to him, it would be very difficult for the government to force out long-term investment in such a context, noting that the changes in the Value Added Tax (VAT), is going to affect the lives and the economic viability of the most vulnerable people in the population.
His words: “I know that there is an extensive list of items of goods that are exempted. For us as a mobility company, the question is: is transportation exempted and what kind of transportation is exempted?”
In a related development, tax experts believe the Finance Act 2020, will encourage more investors and grow Nigeria’s gross domestic product (GDP), while helping small businesses to achieve better mileage in improving the economy since the bulk of the nation’s enterprise lies within this bracket.
Speaking on the Impact of Finance Act 2020 on Nigerian businesses, organised by Ascension Consulting Services in collaboration with Explorers Legal Practitioners, and TESB Management Consultants, themed, “Practical Implications of the Finance Act 2020,” Director, Strategic Communication, Nigeria Investment Promotion Commission (NIPC), Emeka Offor, said the Act would promote more investment in the country.
Transition Lead, Domestic Taxes Group, Federal Inland Revenue Service (FIRS), Olufemi Faniyi, said technology has been deployed to ensure maximum compliance from taxpayers to ensure the objectives of the Act are achieved.
Similarly, Professor of Taxation, University of Lagos, Abiola Sanni, who envisaged a quantum leap on tax reform initiatives, which he said, should be naturally be built around the law.
Senior Partner, Ascension Consulting Services, Azeez Alatoye, while evaluating how the Act would help businesses, said it would impact positively because there is a number of incentives for small businesses.
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