Business
Telecoms sector to bridge budget deficit
Published
8 years agoon
By
Olu EmmanuelBy Adedeji Fakorede
The International Monetary Fund (IMF) has warned that Nigeria’s budget gap will probably be larger than Federal Government’s estimates this year because revenue from taxes and state companies will be lower than forecast.
In Article IV report that followed meetings with Federal Government officials, it said the budget deficit may reach 3.7 per cent of gross domestic product (GDP) this year, higher than President Muhmmadu Buhari’s projected gap of 2.8 per cent. The gap was 2.8 per cent last year, preliminary estimates show. It was 4.7 per cent on a consolidated basis.
“The larger deficit would likely have to be financed domestically, further raising yields and crowding out private-sector credit,” the IMF said.
Buhari’s N7.3 trillion ($23.1 billion) budget for this year to boost infrastructure investment and help the ailing economy recover from a contraction of 1.5 per cent last year, the first such slump since 1991. The economy was weighed down by a drop in the price and output of oil, its biggest export, which led to dollars crunch.
According to the Ministry of Budget and National Planning, the government has a revenue target of N2 trillion from oil and N1.37 trillion from non-crude sources including tax collections.
While the government is undertaking tax reforms under the new seasoned tax master, Chairman of the Federal Inland Revenue Service (FIRSC), Mr. Babatunde Fowler, to increase revenue collection, the impact of those measures will be gradual, the IMF’s Mission Chief in Nigeria, Gene Leon, said on a call with reporters.
Although the naira has fallen 36 per cent against the dollar since the Central Bank of Nigeria (CBN) removed a peg in June, investors say Governor Godwin Emefiele is preventing it from dropping further through trading and import restrictions and regular sales of foreign exchange.
The currency is as much as 20 per cent overvalued, Leon said. A depreciation of that size would take it to about 390 per dollar, almost matching the black-market rate of 398.
The average yield on the government’s naira-denominated debt has risen 424 basis points over the past year to 16 per cent, the highest level among 31 major emerging markets tracked by Bloomberg after Egypt.
Nigeria will probably raise debt from more Eurobond sales this year, the IMF said. These, together with concessional financing from the World Bank and the African Development Bank (AfDB), will make up 60 per cent of external debt. The government will also issue 10-year promissory notes equivalent to 2.2 per cent of GDP to settle domestic arrears, it said.
This debt is in addition to a $500 million Eurobond sold last month as part of the 2016 budget and $1 billion raised in February.
The Federal Executive Council (FEC) approved a 21-year $1.3 billion loan with the World Bank, AfDB and other institutions at two per cent, Finance Minister Mrs. Kemi Adeosun told reporters in the capital, Abuja. The money will be used for the new Development Bank of Nigeria that will lend small businesses long-term funding.
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The Federal Government said it expects budget-support loans of at least $1 billion from the World Bank, and a final, $400 million portion of a $1 billion credit facility from the AfDB.
While the National Bureau of Statistics (NBS) estimates that the telecoms sector contributes about 11 per cent to the GDP but desirous of improving the level of efficiency in tax management and revenue generation through deployment of technology, the NCC and FIRS has set up a Revenue Quality Assurance Committee (RQAC) for the telecommunications sector.
This was the highpoint of the discussions between Executive Vice Chairman (EVC) of the NCC, Prof. Umar Danbatta and Fowler after a courtesy visit of the tax czar to the NCC Headquarters.
Director, Public Affairs, NCC, Tony Ojobo, said the joint committee with four members each from the two organisations was to specifically examine and suggest ways through which the level of transparency could be attained via technology in tax management for FIRS and the returns from Annual Operating Levy (AOL) for the NCC.
The Joint Committee, which is scheduled to meet this week, he added, should also see how workers matters, including payments are addressed. It is also to audit the states and explore the benefits accruable to them in terms of taxes collected.
The Joint Committee is expected to work out a recommendation to facilitate the Type Approval of telecoms equipment that can be used for a transparent assessment of the operators’ revenues.
Danbatta expressed concerns over the shutting down of Base Transceiver Stations (BTS) in the states indiscriminately without recourse to the Commission.
“This is worrisome as it undermines the capacity to provide telecom services, thereby denying consumers good quality of services,” he told Fowler.
The EVC cited the resolution of the National Economic Council (NEC) on Multiple Taxation, Levies and Charges on ICT Infrastructure in Nigeria dated March 21, 2013, saying the document is very clear on the issues of multiple taxations, levies, Right of Ways (RoWs) among others.
Danbatta appealed to the FIRS chief “to help propagate the provisions of the policy to the Joint Tax Board (JTB)”, which he chairs.
Fowler had earlier expressed worries over the taxes being collected from mobile network operators (MNOs) in the states.
According to him, the concern stemmed from the fact that MNOs do not remit the Value Added Tax (VAT) already charged as at when due. “While some decide when they will remit it, the law stipulates that such taxes must be remitted to the FIRS between 20/21 of each month. Some too have not fulfilled the annual returns,” he lamented.
In an earlier working document sent to the Commission, the FIRS had requested the permission of NCC to connect its equipment to the MNOs networks for a direct interface to which Prof. Danbatta had responded that such equipment must go through the Type Approval process.
He said the NCC sees collaboration with the FIRS as a decision in the right direction.
This, he added, underscores what Buhari said about the collaboration of inter-governmental agencies, which saw to the timely completion of the Nnamdi Azikiwe International Airport, Abuja ahead of the time schedule.
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