27 states fail to attract foreign investors as Nigeria's foreign investment drops by 20.47% in 2022
Zainab Ahmed


Despite praying to God for good tidings and better times in the new year during the cross over night services held across the country on December 31, 2021, tough times stare many Nigerians in the face in 2022, as the Federal Government, plagued by dwindling revenue, seeks to implement tough economic measures in the new year, Business Hallmark findings can reveal.

It would be recalled that in 2021, the disposable and purchasing incomes of many Nigerians were eroded by galloping inflation, with prices of goods and services skyrocketing to high heavens.

According to the National Bureau of Statistics (NBS), inflation rate at the end of November 2021, stood at 15.40 per cent, 0.51 per cent points higher than the 14.89 per cent recorded in November 2020. Figures for December 2021 are yet to be released by the bureau.

While Nigerians prayed for improved fortunes in the new year, economic and financial experts argued that the reverse will be the case. They insisted that rather than lifting the masses from poverty, government policies will further impoverished them.

“Apart from the several underlying economic issues the nation is currently grappling with, the effects of government policies, particularly the imposition of more taxes on goods and services, withdrawal of energy and fuel subsidies and continuous borrowings, which leaves government with practically nothing to execute projects, will have devastating effects on millions of Nigerians”, declared Dr. Dare Johnson, an economist based in Ibadan, Oyo State.

Top government officials had on numerous occassions last year announced that new tariffs, taxes, increase in fuel prices and electricity tariffs, as well as other tough measures are coming in 2022.

For instance, in November 2021, the Group Managing Director (GMD) of Nigerian National Petroleum Company (NNPC), Malam Mele Kyari, revealed that fuel subsidy would definitely be removed in 2022 as it was now fully backed by law. He further added that the price of a litre of petrol will range between N320 and N340.

“There will be no provision for it legally in our system, but I am also sure you will appreciate that government has a bigger social responsibility to cater for the ordinary Nigerians and therefore engage in a process that will ensure that we exit in the most subtle and easy manner.”

Speaking a day later, Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, maintained that the Federal Goqvernment could not sustain the current N250 billion monthly petroleum subsidy.

According to the minister, the costly monthly subsidy was making the NNPC’s remittance to the federation account almost zero.

“If we look at a cost of about N250 billion per month, and it has been increasing consistently. So we’re expecting something around N120 billion per month from NNPC. And now we’re getting to a point where NNPC is remitting near zero. And if we don’t stop we will get to a point where they will tell you pay me this for managing the fuel provision in the country.

“So if you take N250 billion times 12 months, that is about N3 trillion. If we don’t remove that, that is, what it is costing us. This is money that we can use to apply to health and to education”, Ahmed noted.

However, many Nigerians, including labour unions, religious organisations and professional bodies are kicking against the move, warning that its implementation would increase the hardship currently being experienced by citizens.

The National President of the Christian Association of Nigeria (CAN), Dr. Samson Ayokunle, while advising the government to thread with caution, tasked it to engage stakeholders before the subsidy is removed.

“The government need to engage labour and other stakeholders. We all know the prices of food items in the market, and know that there is no increment in salary, a lot of people might find it difficult to survive,” Ayokunle argued.

The Nigerian Labour Council (NLC) also kicked against the planned removal of subsidy on fuel by the government. The union argued that the removal, apart from worsening hyperinflation in the country, would also expose Nigerians, particularly the masses and underpaid workers to acute deprivation, hardship and suffering.

“The NLC NEC, therefore, resolved to reject and resist the planned increase in the pump price of petrol by the Federal Government as it described it as extremely insensitive to the acute hardship being experienced by Nigerian workers and people;

“Pursuant to its rejection and resistance of further increase in the price of petrol, to organize protest rallies in all the 36 states of the federation on January 27, 2022 which would culminate in the submission of protest letters to all the 36 state governors.

“Subsequently, a national protest will take place on February 1, 2022 in Abuja; and in case government decides to announce new petrol prices before the proposed protests, the protest will kick off instantly and without any other further notice in every state of the federation and the Federal Capital Territory”, the NLC President, Ayuba Wabba and General Secretary, Emmanuel Ugboaja, said in the signed communique.

Economists and financial experts who spoke on the planned removal of subsidy on fuel, while agreeing that the subsidy regime is fraudulent and unsustainable, said its removal now will further drive up inflation which will increase the hardship being experienced by many Nigerians.

Another policy plan of the government that will impact negatively on the masses is the Finance Act 2021 signed into law by President Muhammadu Buhari in December 2021.

Key highlights of the new Act include the collection of Capital Gains Tax (CGT) of 5% on shares in a Nigerian company disposed through the stock exchange; lottery and gaming operations including betting, gambling, poker, roulette, bingo, craps, wagering and related affairs are now taxable under CITA; Companies Income Tax which formerly stood at 0.5% minimum, is now 0.25% of annual turnover.

Others include the the exclusion of companies operating in both midstream and downstream sectors from tax exemptions. Before now, companies with downstream operations were eligible for exemption of profits where the qualifying goods are exported from Nigeria; capital allowance to be claimed on an asset is now limited to the portion of that set used to generate taxable profit; capital allowance brought forward by an SME is now treated as having been claimed and consumed in each such year of assessment, while capital allowance to be claimed on an asset is limited to the portion of that set used to generate taxable profit.

Also, companies in the upstream sector are now mandated to pay VAT regardless of their turnover; Non-Resident Entities (NREs) supplying VATable goods/services to Nigeria must charge, collect and remit VAT. This obligation will shift to the Nigerian counterpart where the NRE fails to pay; offshore companies providing digital services to local customers in Nigeria to pay 6% tax on turnover. The tax on digital services includes apps, high-frequency trading, electronic data storage and online advertising, as well as payment of excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country, among others.

Kicking against the N10 tax on beverages, manufactures who complained of an already difficult operating environment, warned government of huge revenue loss and massive layoff of workers.

The Director-General, Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, said the excise duty tax would affect the sub-sector.

“I would like to say that the introduction of excise duty of N10/litre on non-alcoholic, carbonated and sweetened beverages, despite its potential overwhelming negative impact is rather unfortunate.

“The revenue aspirations of the government in introducing this excise may not be justified in the long run. Let us look at it this way. The government is estimated to generate an excise tax of N81billion between 2022-2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the group.”

The MAN DG warned that the move might put the products out of the reach of the poor segments, resulting in employee salary reduction, retrenchment, and general increase in prices of goods.

The Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers (PwC), Mr. Taiwo Oyedele, expressed concerns over the effects of the tax, warning that it may have unintended consequences.

“I will be more concerned about sectors like manufacturing because their cost is rising and they are not able to increase their selling prices because the purchasing power is low.

“If you impose a tax, because they want to survive, they have to cut down on employment and find a way to survive. In terms of inflation, when you impose maybe an excise tax, if the sector is able to pass it on to customers, it would be higher selling prices, leading to inflation.

“But if the products are very elastic, and you are afraid of losing the market, then you bear the costs and your margins will be low. If your margin is low, it means what you pay in company income tax will be less, and your shareholders will get less in dividends, affecting their own purchasing power as well. So, taxes, sometimes, have unintended consequences, which policymakers must always consider,” he advised.

Apart from galloping inflation, removal of subsidies and introducing of more taxes, another issue that will affect the wellbeing of Nigerians is the mounting domestic and foreign debts being incurred by government at all levels.

According to the Debt Management Office (DMO), as of June 30, 2015, the nation’s external debt stood at $10.31billion and total public debt of $63.806billion or N12.1trillion.

However, the figure has tripled to $37.95billion for foreign debt and $92.626billion or N38.0trillion for total public debt as of September 30, 2021, a 268 per cent increase.

Owing to the strict debt repayment requirements, the Federal Government has continued to earmark N3.2 trillion to cover the repayment of interest and principal on a debts, living almost nothing to provide for the basic needs of Nigerians as provided for in the constitution.

On December 31, 2021, President Buhari had signed the 2022 budget estimate of N17.1 trillion into law. Breakdown of the figure shows that N6.9 trillion is budgeted for recurrent expenditure, N5.4 trillion for capital expenditure while N3.8 trillion will be spent on debt servicing.

While domestic debts servicing will gulp N2.5 trillion, foreign debts will take N1.1 trillion and N2.70 billion will be spent on sinking funds for loans.

However, Nigeria’s projected revenue for 2022 is N10.7 Trillion, meaning that the country would need to borrow N6.4 trillion to finance the 2022 budget.

This literally means that the Federal Government will be spending an equivalent of 74% of the nation’s capital expenditure on debt servicing.

According to financial experts, the continued spending of huge amounts on debt servicing by the country will harm its infrastructural development drive.

“What this means is that vital sectors like the health, education, security and infrastructure sectors will suffer. More Nigerians are expected to die from curable ailments and insecurity due to government’s inability to provide security and medicare”, said Rev. Olamide Ajayi of the Catholic Archdiocese of Lagos.

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