For businesses in Nigeria looking for loans from banks to grow, 2020 looks a bit brighter for them. Nigeria’s Central Bank CBN) has insisted that every bank must give out 65% of all deposits customers make in it as loans. Out of the 65% of all deposits given out as loans, banks are further directed to give out 150% of it to startups and SMEs. This however would only be applicable to commercial and merchant banks in the country. The central bank said it made the decision because figures from 2019 and previous years showed that banks are now approving more loans to businesses in the private sector.
CBN governor, Godwin Emefiele
“The CBN has noticed remarkable increase in the size of gross credit by deposit money banks (DMBs) to customers,’’ a letter addressed to all banks in Nigeria reads in part. ‘‘Accordingly, the CBN has decided to retain the minimum 65 per cent LDR in the interim. All DMBs are required to maintain this level and are further advised that average daily figures are to be applied to assess compliance going forward.
Here Is All You Need To Know
According to the central bank the deadline for banks to achieve the 65 per cent LDR passed on December 31, 2019, with sanctions applied on those that defaulted.
“The incentive which assigns a weight of 150 per cent in respect of lending to SMEs, retail, mortgage and consumer lending shall continue to apply, while failure to achieve the target shall continue to attract a levy of additional cash reserve requirement of 50 per cent of the lending shortfall of the target LDR on or before March 31, 2020.
“DMBs (Deposit Money Banks) are further encouraged to maintain strong risk management practices regarding their lending operations. The CBN shall continue to monitor compliance, review market developments and make further alterations in the LDR as it deems appropriate,” the letter further reads.
The CBN had in July, directed commercial banks to maintain a minimum LDR of 60 per cent effective from September 30, 2019. However, at the end of September, the stipulated minimum level was raised to 65 per cent, with a fresh deadline of December 31, 2019.
What Startups And SMEs In Nigeria Should Watch Out For
This is a huge opportunity for startups and SMEs in Nigeria to get loans from banks in the country as more banks may be scrambling after them or set up programmes that may benefit them. According to this CBN’s policy, a review would be carried out every three months in a year, starting from 2020 in order to determine whether the banks have complied with the lending policy or not. Any banks which fail to comply with the policy would be punished.
“To encourage SMEs, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose,’’ the letter further reads.
“The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories. “Failure to meet the above minimum LDR by the specified date shall result in a levy of additional cash reserve requirement (CRR) equal to 50 per cent of the lending shortfall of the target LDR.
“The CBN shall continue to review development in the market with a view to facilitating greater investment in the real sector of the
However, startups and SMEs in Nigeria will not take any loans without some heavy burdens.
Recall that the Nigerian central bank has recently instructed that once you are taking out any loans from any Nigerian bank, you are at same time permitting the bank to withdraw your deposits from other banks you may have accounts with, in order to repay your loan in the former bank in the event of your failure to pay back the loan on time.
“If you don’t pay the loans you collected from a bank, we will use your deposits in other banks to service your loans,” MD of Nigeria’s largest bank by market cap Guaranty Trust Bank, Segun Agbaje said.
Consquently, next time signing loan agreements with any banks or financial institutions in Nigeria, startups or individuals should watch out for a clause in the loan agreement that permits the lender to use their deposits in other banks to service their loans. This is because currently, no law permits banks in Nigeria to breach the duty of confidence and good faith they owe their customers. However, expect argument as to whether this new move by the CBN is an extension of the powers of the Central Bank of Nigeria under Nigeria ’s Central Bank Act. In the meantime, the bankers Committee has decided that bank borrowers would be made to sign an agreement that if there was a default, the bank would have a right to access the borrowers other accounts. Hence, banks would be looking to rely on this clause in defence of any of their action.Therefore, it is advisable to consider the terms of loan instruments before appending signatures.
This is The First Time The Central Bank of Nigeria Is Asking Banks In The Country To Do This
Previously, Nigeria had no rule on minimum loan-to-deposit ratios. However, many Nigerian lenders have pegged ratios of about 40%.
However, Nigerian banks are so reluctant with lending to businesses and have resisted lending to businesses and consumers and instead piled their cash into naira bonds, which yield 14.3% on average, one of the highest rates globally.
Lenders worry that with inflation at more than 11%, extending more credit could endanger the financial system through an increase in non-performing loans, or NPLs.
That makes some analysts skeptical of whether the new measures will work.
“Forcing banks to lend under the current macro-economic situation will only result in a buildup in Non-performing loans,” analysts at Lagos-based CSL Research, including Gloria Fadipe, said in a note to clients.
“This could pose a risk to financial stability.”
Bad Loans
Non-performing loans as a percentage of total credit in the Nigerian banking industry declined to 11% in the first quarter from 14% a year ago, according to the National Bureau of Statistics. Past experience with such measures isn’t encouraging. The central bank last year allowed banks to use their statutory cash reserves to fund manufacturers on the condition that such loans were at a maximum interest rate of 9% and a minimum maturity of seven years. The lenders didn’t take advantage of the policy due to credit risk and high returns on government bonds, according to Michael Famoroti, an economist and partner at Stears Business.
The Implication of This To Businesses
With this move, it is expected that Nigeria ‘s money deposit banks are going to loosen up money (by way of loans and other credit facilities) to Nigerians. For businesses desiring to raise funds, from January 1, 2020 may be the best time to laugh as more banks would be rushing after them. However, it remains whether Nigeria’s commercial banks would not fight back, by either setting up SPVs or lending to more stable corporations, big or small, in which case the vision of the CBN may have been defeated.
In any case, businesses should, once again, dust up their loan procurement files and get set for January 1, 2020.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award winning writer.
He could be contacted at udohrapulu@gmail.com
It is easiest for citizens of Seychelles, Mauritius or South Africa to travel around the world with their international passports than any other countries in Africa. The Henley Passport Index, released on 7 January 2020, indicates that Seychelles’ passport is the 29th most powerful in the world, having the ability to give the citizens of the East African country free visas to 151 countries (including China, Russia, Brazil, Hong Kong, Singapore, South Korea, Schengen Area, the United Kingdom etc.). Closely following Seychelles is another East African country Mauritius which is ranked 32th most powerful in the world, granting the citizens of the country free visas to 146 countries in the world (including China, Russia, Schengen Area, the United Kingdom, Japan, South Korea, Singapore, South Africa, etc.) South Africa is 3rd in Africa and 56th in the world, with free visas to 100 countries in the world. South Africa slipped three places down from the previous ranking and the worst performance since the Henley Passport Index was introduced in 2006.
Danny Faure, President Seychelles
Here Is All You Need To Know
Henley’s rankings are based on the number of destinations that a passport holder can access without a prior visa‚ based on data from the International Air Transport Association (IATA) and research by Henley & Associates.
Japan ranks first in the latest index, with its citizens able to gain visa-free access to 191 destinations. Singapore is second with 190 destinations. Germany and South Korea are joint third (189 destinations each).
Botswana (84th place) is the number 4 in Africa. The lowest-ranked African nations are Somalia (104th), Libya (102nd) and Sudan (100th).
Nigeria is the country whose ranking fell the most over the past decade. Its passport was ranked 76th in 2010 and now stands at 95th in 2020. The decade’s other big African losers are Sierra Leone, Libya and Gambia.
Importance of high integrity rating
The report’s authors point out those countries with high integrity ratings, strong institutions and a stable political environment are more likely to rate highly on the index as they are able to sign more visa-waiver agreements with other nations.
“It is not surprising that countries which have lower passport power also have lower government integrity scores. For instance‚ the South African passport is ranked 56th on the Henley Index and has a government integrity score of 39.7 out of 100,” the author’s noted.
“These results imply that governments associated with relatively high corruption have difficulties increasing their visa-free destinations‚ while high-functioning states are likely to have stronger passports
The continual decline in the power of the South African passport will likely increase the already high number of citizens seeking a second passport for business and personal reasons.
Passports of convenience
Facilitating additional passports through various types of investment has become a thriving industry.
Many countries now offer relatively easy residency, leading to citizenship for South Africans willing to invest in property or business development programmes. Among those offering so-called “golden visa” schemes are Portugal, Cyprus, Malta, Mauritius, Granada, St. Kitts & Nevis, Dominica and Antigua.
Best passports to hold:
1. Japan (191 destinations)
2. Singapore (190)
3. South Korea, Germany (189)
4. Italy, Finland (188)
5. Spain, Luxembourg, Denmark (187)
Worst passports to hold:
103. Yemen (33)
104. Somalia, Pakistan (32)
105. Syria (29)
106. Iraq (28)
107. Afghanistan (26)
Below Is The Breakdown of African Countries’ Performance On The Henley Passport Index
S/N
African Countries
Global Ranking
Ranking In Africa
Number of Countries Citizens Can Visit On Free Visa
1
Seychelles
29th
1st
151
2
Mauritius
32nd
2nd
146
3
South Africa
56th
3rd
100
4
Botswana
62nd
4th
84
5
Namibia
67th
5th
76
6
Lesotho
69th
6th
74
7
Eswatini (Swaziland)
70th
7th
73
8
Malawi
71st
8th
72
9
Kenya
72nd
9th
71
10
Zambia
73rd
10th
70
11
Tanzania
73rd
10th
70
12
Tunisia
74th
11th
69
13
Gambia
75th
12th
68
14
Uganda
77th
13th
66
15
Cape Verde Islands
77th
13th
66
16
Ghana
78th
14th
65
17
Zimbabwe
79th
15th
64
18
Sierra Leone
80th
16th
63
19
Morocco
80th
16th
63
20
Benin
81st
17th
62
21
Sao Tome And Principe
82nd
18th
61
22
Mozambique
82nd
18th
61
23
Rwanda
83rd
19th
59
24
Burkina Faso
83rd
19th
59
25
Mauritania
84th
20th
58
26
Cote d’Ivoire (Ivory Coast)
85th
21st
57
27
Senegal
86th
22nd
56
28
Gabon
86th
22nd
56
29
Togo
87th
23rd
55
30
Guinea
87th
23rd
55
31
Niger
88th
24th
54
32
Mali
88th
24th
54
33
Madagascar
88th
24th
54
34
Guinea-Bissau
89th
25th
53
35
Equatorial Guinea
89th
25th
53
36
Comoros Islands
89th
25th
53
37
Chad
89th
25th
53
38
Central African Republic
91st
26th
51
39
Algeria
92nd
27th
50
40
Liberia
93rd
28th
49
41
Egypt
93rd
28th
49
42
Cameroon
93rd
28th
49
43
Burundi
93rd
28th
49
44
Angola
93rd
28th
49
45
Congo (Rep)
94th
29th
47
46
Nigeria
95th
30th
46
47
Djibouti
95th
30th
46
48
South Sudan
96th
31st
43
49
Ethiopia
96th
31st
43
50
Eritrea
98th
32nd
41
51
Congo (DRC)
98th
32nd
41
52
Sudan
100th
33rd
39
53
Libya
102nd
34th
37
54
Somalia
104th
35th
32
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award winning writer.
He could be contacted at udohrapulu@gmail.com
Traders operating small and mid-sized businesses will from January 1st, 2020 start paying a three percent tax on their sales to the Kenya Revenue Authority (KRA) following the re-introduction of the levy, which looks set to hurt enterprises struggling with low revenues.
President Uhuru Kenyatta
The Finance Act 2019, which President Uhuru Kenyatta signed into law on November 7, reintroduced the turnover tax for businesses whose annual sales are below Sh5 million to boost tax collections.
The new tax takes effect today and is expected to saddle small traders, who have raised concerns about deteriorating business conditions, with additional operating costs.
It is also expected to provide the KRA, under pressure to collect additional revenue, with a fresh avenue for raising taxes from small traders, the majority of whom have not been paying State levies.
The Treasury had in 2018 dropped the turnover tax due to its poor performance as most traders failed to make revenue disclosures.
It replaced the sales levy with a presumptive tax at the rate of 15 percent of the single business permit fee issued by county governments when renewing their permits.
The tax allowed KRA to gather additional data on small traders, setting the stage for the return of the turnover tax.
The informal sector, popularly known as Jua Kali, is deemed to have limited contact with the taxation system save for indirect consumption levies and Mr Kenyatta’s administration is banking on the turnover and presumptive taxes to plug the revenue loopholes.
KRA says the presumptive tax will remain an advance tax that will be deducted against the turnover tax.
Maurice Oray, the deputy commissioner for corporate policy at KRA, defended the decision to retain the presumptive tax alongside the turnover tax.
He argued that the presumptive tax would be key in collecting data on small traders who largely operate informally for the purposes of enforcing the three percent-monthly turnover tax.
“The key thing is to recruit as many taxpayers as possible within that bracket, which has remained largely untaxed,” Mr Oray had said earlier.
KRA’s analysis ahead of introduction of presumptive tax in 2018 indicated that some 1.56 million taxpayers with single business permits had not registered under the turnover tax regime.
The micro- and small-sized businesses remain the backbone of the Kenyan economy and the largest contributor of new jobs despite largely operating in informal settings
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Ethiopian government has taken the next step in deepening the peace agreement signed with neighbouring Eritrea last year when Prime Minister Abiy Ahmed signed a peace pact with Eritrean President Isaias Afwerki to end hostilities that began with a two-year border war in 1998, deteriorating into 18 years of stalemated relations.
Eritrean President Isaias Afwerki
This took place during the foundation laying ceremony for the new Eritrean Embassy to be built at Sidst Kilo in the Ethiopian capital Addis Ababa which was jointly performed by the Ethiopian Prime Minister and the President of Eritrea last week. Speaking on the development, the Prime Minister said that “this is a Christmas gift of the people and government of Ethiopia to the people and government of Eritrea.”
Ethiopia and Eritrea reopened their embassies July last year, after the peace deal that ended two decades of hostilities over a border dispute. President Afwerki, who is on an official state visit to Ethiopia was grateful for the hospitality and benevolence of Ethiopia, saying his country remains resolute to work with requisite “vigor to recoup lost opportunities by three generations to bolster new chapter of cooperation between the two countries.”
The Ethiopian Prime Minister was named the 2019 Nobel Peace Prize winner for ending the longstanding border dispute between his country and Eritrea. Announcing Abiy as the winner of the 2019 Nobel Peace Prize, the chairman of the Norwegian Nobel Committee, Berit Reiss-Andersen, said the award was to recognize his “efforts to achieve peace and international cooperation and in particular his decisive initiative to resolve the border conflict with neighboring Eritrea”.
Receiving his Nobel Peace Prize medal, Abiy said: “I accept this award on behalf of Ethiopians and Eritreans, especially those who made the ultimate sacrifice in the cause of peace. Likewise, I accept this award on behalf of my partner, and comrade-in-peace, President Isaias Afwerki, whose goodwill, trust and commitment were vital in ending the two-decade deadlock between our countries,” the 43-year-old added.
Potential winners for this year’s Nobel Peace Prize included the 16-year-old Swedish climate activist Greta Thunberg, Angela Merkel, the German chancellor, Jacinda Arden for her swift response to the Christchurch shooting. Also, Alexis Tsipras and Zoran Zaev, the prime ministers of Greece and North Macedonia respectively, who ended 30 years of acrimony between their countries were considered. Ninety-nine individuals and 24 organizations have been awarded the Nobel Peace Prizes since 1901. Three hundred and one candidates were put forward for this year’s award. The Committee will make public their names after 50 years.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Naming 2020 the year of gas for Nigeria has a really nice ring to it, but marketing alone will not cut it.
The Honorable Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva has declared 2020 as the year of Gas for the Nation, the news piece started. What amazing news! And certainly long overdue. As it seems, Nigerian officials have finally taken the cue. As I have said ever so often, more than an oil nation, Nigeria is a gas nation. It just doesn’t act like it.
Honorable Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva
Undoubtedly, natural gas has the enormous potential to diversify and grow the Nigerian economy, power its industries and homes, produce ever-so-lacking wealth, create jobs, develop associated industries in the petrochemical sector, raise people out of poverty, the list goes on.
Mr. Sylva’s demonstrated intent could perhaps become the most relevant political action anyone has taken in Nigeria in years and could change the country forever; and yet, the work ahead is so vast, we can only hope he has the strength to pull it off.
To be sure, naming 2020 the year of gas for Nigeria has a really nice ring to it, but marketing alone will not cut it. Concerted governmental action is essential if we are to see true growth in the liquefied petroleum gas (LPG) sector, and first of all, we need to see a conclusion to the long delayed Nigerian Gas Flare Commercialisation Programme. Sylva stated that this was his main priority, so let’s hope it happens soon.
Once the programme is cleared, oil producers will have a more conclusive alternative to flaring. They will be able to monetize a resource that has so far been wasted, but still that will not suffice.
The flaring issue in Nigeria is tremendous. Every year, 2 million tonnes of LPG are flared, instead of being used as a source of power or feedstock. That means millions of dollars literally going up in smoke. Nigeria’s zero-flaring programme has been on-going for years, and yet, the Nigerian National Petroleum Corporation (NNPC) has just released results that indicate that gas flaring has been consistently increasing over time. More specifically, “a total of 276.04 billion cubic feet (bcf) of natural gas was flared from Nigeria’s oil fields between September 2018 and September 2019”. Further, NNPC stated that “the volume of gas flared within this period was more than what was supplied to power generation companies for electricity production which was 275.31bcf”. This is taking place in a country where 45% of the population does not have access to electricity, besides the extremely detrimental effect that has on businesses ability to compete and the extraordinary environmental damage that represents.
Already, the federal government announced in August that it would not be able to fulfill its Zero Routine Flaring target by 2020 and is yet to provide a new deadline for this goal to be achieved.
The problem remains the same as ever. It is much, much cheaper for producers to flare up and pay the fines than do anything about it. This can not continue to be. Stronger action is needed and it falls on Mr. Sylva’s leadership to see it done.
I don’t mean by this to point the finger at oil producers. Most would probably want to monetize that resource, and would if they could. But we lack legislation, infrastructure, pricing regulations, and actors ready to receive the feedstock. They can’t just pipe the gas somewhere and hope for the best. We need to focus on deepening domestic gas penetration and promote adoption amongst the population, foster the development of gas associated industries like ammonia and urea plants, use this resource for power generation, etc. Demand doesn’t grow out of nowhere.
For this to workout, everybody needs to work together. That means the ministry and the NNPC need to partner with the international oil companies, the indigenous oil companies as well as with the country’s financial institutions to create the solutions that can make this industry flourish. That is a tall job, but an essential one.
Of course, the news that the output of liquefied natural gas (LNG) coming from the Bonny LNG-plant is going to expand by 35% once the 7th LNG train is operational is fantastic. Nigeria will strengthen its position as one of the world’s biggest LNG exporters and that will bring considerable wealth for the country, but its people continue to be in the dark.
And LNG expansion projects are something IOCs are well prepared to do, but there are other important roles in boosting the gas industry that have to be taken by others.
I speak of course of marginal field development, a topic that is of fundamental importance to me and that I have extensively covered in my most recent book Billions at Play: The Future of African Oil and Doing Deals. Both for oil and gas, Nigeria’s marginal field development programme showed incredible promise when it was first launched in 2013. It gave opportunities to local companies to explore smaller discoveries that were uninteresting for the majors, which in turn allowed them to gain experience in leading exploration and production projects on their own. Further, it opened opportunities for domestic use of natural gas for power generation. That programme is now being copied by Angola, and yet, it has stalled in Nigeria.
Further, as I have extensively debated over the years, and most extensively in Billions at Play, we need to dramatically invest in Nigeria’s ability to negotiate and manage contracts. This applies both to the need to respect the sanctity of contracts, a fundamental part of giving international investors the confidence to trust that what they sign for will be respected, but also learning to choose who to sign contracts with. The current debacle with P&ID, an unknown little company that has managed to sue the Nigerian government for breach of contract in the English courts and is seeking USD$9.6 billion in compensation, is an incomprehensible situation that should never have taken place. We need to know who our partners are and who we should be signing contracts with, and then stick by them.
Only by combining the role of the majors, the indigenous companies, the necessary infrastructure development for gas transportation, bridging with the nation’s banks to help finance projects and by giving a clear legal framework to the sector, can we hope to succeed. I do not doubt that this is possible to accomplish in 2020 and the years to come, but coming from the experience of recent years, it does not seem probable, and no one pays the price for that more than everyday Nigerians, that continue to fail to benefit from its country’s resources.
Action is necessary as a matter of urgency.
This week it was disclosed that international oil and gas companies were holding back an estimated USD$58.4 billion in investments in oil and gas projects in Nigeria because of regulatory uncertainty. Foreign Direct Investment in Nigeria was USD$1.9 billion in 2018. It’s not like we don’t need the money.
But how can we expect international oil companies to feel comfortable signing off on billions in investment if after 20-plus years of negotiations we still haven’t managed to settle on the Petroleum Industry Bill that will oversee the sector? Who can blame them for waiting to see what happens? They are waiting for us to figure out how we want to regulate the industry, and after 20 years, we still don’t seem to know. That has to change, and soon.
Nigeria has an estimated 200 trillion cubic feet of gas reserves. It is high-time to put them to use. With the right policies we could change the face of the country completely. We could give light to our people, we could power our industries, releasing them from the handicapping dependency on diesel generators that make it all but impossible for them to be competitive, we could relinquish ourselves from our dependency on imported fuel for power and heat, we could create new opportunities for job creation and industrial development, we could take millions of people out of poverty… Further, strong domestic gas and gas-based industries could help boost intra-African trade, create new synergies with our neighbours, boost integration of power generation networks, establish new partnerships, even contribute to peace.
What I am saying, I say as an African, and it applies to many countries across the continent. However, Nigeria is in a prime position to truly enact change and be a beacon to others by showing leadership and resolve. It is the continent’s biggest economy and has the continent’s biggest reserves of hydrocarbons, both oil and gas. NNPC already works with some of the best major IOCs and the country has Africa’s best and most developed indigenous exploration and production capabilities. Let’s give ourselves the opportunity to be better and to live better, by taking advantage of the resources we already possess.
Mr. Sylva is showing leadership and drive. So far, he has proven himself to be the leader that Nigeria needs to develop new LPG and LNG industries that will take the country to the next level of development, not only economically speaking, but socially, environmentally, humanly. So let’s hope he can pull through the great transformations that need to occur for 2020 to truly be Nigeria’s year of gas.
NJ Ayuk is the Executive Chairman of the African Energy Chamber.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Cameroonians are getting a new gift in the new year, courtesy of the 2020 Finance bill which has been adopted by Cameroon ’s Parliament early December 2019. Quite remarkable about the Bill are new provisions which have been added to old General Tax Code meant to force taxpayers to register and fulfil their tax obligations before carrying out any transactions.
Here Is All You Need To Know
According to the new paragraph 3 of Article L1 of the finance law, from now on (from January 2020) any natural or legal person (companies) subject to the payment of a tax will no longer be able to carry out certain transactions if that person does not have a unique tax identification number.
The transactions include account opening with microfinance and credit institutions, subscription to any type of insurance contract, the signature of contracts for connection or subscription to water or electricity networks, land registration and authorization for a regulated profession (notary, lawyer, bailiff…).
To date, and according to Article L1 of the tax code, all legal persons and individuals carrying out an income-generating activity are required “to apply for registration with territorially competent tax authorities within fifteen (15) working days of starting their activities.”
Following this request, a unique identification number and a taxpayer card is issued to the taxpayer consecrating entry into the tax registry.
In simple terms, before you can operate any business related to microfinance and credit institutions, subscription to any type of insurance contract, the signature of contracts for connection or subscription to water or electricity networks, land registration and authorization for a regulated profession (notary, lawyer, bailiff…), in Cameroon from January, 2020 you will be required to procure a tax identification number.
Although there are already provisions of law in Cameroon that require all persons to procure tax ids before starting any business, it is reported that many Cameroonians and foreigners living in the country do not fulfil this obligation. Sources have it that between 20 and 30% of national wealth evades tax every year. Consequently, the import of the new paragraph 3 of Article L1 bis is to more specifically catch certain Cameroonians into the tax net.
Indeed, the new law comes with a penalty for violation which is to the effect that a bank or microfinance that opens an account for an organization or individual not registered in the tax registry will incur a fine of XAF5 million ($8,530) (See paragraph 5 of Article 100 of the Finance Bill)
Bankers are however worried that this reform would slow down financial inclusion rate in the country, which is, at the moment, estimated at 19%.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
As 2019 gradually draws to a close, 2020 is looking more eventful for businesses existing in Nigeria. Apart from the fact that Nigeria just climbed places on the world’s Ease of Doing Business Index, the country has refused to open its land borders with neighboring countries, such as Benin Republic or Niger. Below, we look at the totality of policy changes and likely changes that may be coming into effect in the new year.
Minister of State for Industry, Trade and Investment, Mariam Katagum
Payment of A New Value Added Tax(VAT)
2020 is already looking like a tax year for Africa’s largest economy. From all indications, it appears government has cleared the way for an aggressive pursuit of taxation in the coming year to shore up the country’s dwindling revenue. Recall that Nigeria’s total public debt, which stood at N21.73tn as of December 31, 2017, rose to N25.7tn as of June 30, 2019, according to data from the Debt Management Office, and that the Nigerian Senate, the upper arm of the country parliament appears bent on putting a final approval seal on a $29.96 billion loan request put before it by President Muhammadu Buhari. Taxation may the new oil money come 2020. Currently, Nigeria’s tax-to-GDP ratio has remained at below 10% which is relatively lower when compared to the Sub-Saharan Africa (SSA) average of about 19 per cent.
Nigeria’s government appears also to have put enough strategies on ground towards increasing the tax revenue base of the country, including recently appointing a new head of Nigeria’s federal tax agency.
Prominent among the list of taxes to businesses should expect in 2020 is the Value Added Tax (VAT) which has been increased from its previous 5% to a new 7.5%. Although the Finance Bill which contains the 7.5% VAT increase has scaled parliamentary approval, assenting to the Bill by Nigeria’s President may be part of his new year gift to the country. The Finance Bill when signed into law would introduce the following changes to the Nigerian tax system:
Stamp duty on bank transfer made in Nigeria will now apply only on amount starting from N10,000, and above. However, transfers between the same owner’s accounts in the same bank are to be exempted from stamp duty.
Dividend distributed from petroleum profits now to attract 10% withholding tax.
Compensation for loss of employment below N10m to be exempted from Capital Gains Tax.
VAT registration threshold of N25 million turnover in a calendar year to be introduced
Any expense incurred to earn exempt income now specifically disallowed as a deduction against other taxable income.
Under the new Finance Bill also:
Small Businesses will not be taxed while early corporate tax payers receive tax deduction bonuses
Small businesses with annual turnover of less than N25m will now be exempted from Companies Income Tax. However, to benefit from such incentive, such small businesses must first register for taxation in Nigeria and must continue to file tax returns during the period their profits are below the tax N25mn threshold
A lower Corporate Income Tax rate of 20% ( as against 30%) will however apply to medium-sized companies with turnover between N25m and N100m, to benefit from such incentive, they must first register for taxation in Nigeria and must continue to file tax returns during the period their profits are between the N25m and N100m threshold.
For companies or businesses that pay their tax dues early, a 2% deduction bonus on tax payable is given in the case of medium-sized companies between N25m and N100m and 1% deduction on payable tax is given for large companies from N100m and above.
Introduction of New Taxable Businesses In Nigeria
The finance law also extends the scope of taxable businesses in Nigeria to include any digital media agency that transmits, emits or receives signals, sounds, images or data of any kind in Nigeria, including ecommerce companies, app store, online adverts, cloud computing services online payment platforms and so on, as long as the company has significant economic presence in Nigeria and profit can be attributable to such platforms.
Also taxable in Nigeria under the new finance law would be outsourcing of foreign technical, management, consultancy or professional services to a person or company resident in Nigeria where the company has significant economic presence in Nigeria and profit can be attributable to such platforms.
Introduction of Tax Identification Number (TIN) For Personal Account Holders
Under the finance law, Nigerian banks are to request for Tax Identification Number (TIN) before opening bank accounts for individuals, while existing account holders (accounts opened before September 30, 2019) must provide their TIN to continue operating their accounts.
This is a major worry in a country where poverty rate is so high and financial inclusion rate so low.
Clampdown On Tax Defaulters In The Country
This would be the major highlight on taxation in Nigeria in 2020 as Nigerians would be watching to see how the federal tax authority executes this threat.
“The FIRS hereby informs all taxpayers (individuals, partnerships, enterprises, corporate organisations, ministries, departments and agencies) who are in default of payment of taxes arising from self-assessment, tax audit, tax investigation, transfer pricing audit, demand notices and any other liabilities, that the service will commence a nationwide tax enforcement exercise from December 18, 2019 with a view to prosecuting defaulters and recovering all outstanding tax liabilities.
“The taxes referred to are as follows: 1. Petroleum Profits Tax; 2. Companies Income Tax; 3. Value Added Tax; 4. Withholding Tax; 5. Tertiary Education Tax; 6. NITDA Levy; 7. Stamp Duty; 8. Capital Gains Tax,” a notice issued by the FIRS read.
Given that the Public Notice provides a seven-day time frame for compliance, it is safe to say that Nigerian tax defaulters may wake up in 2020 having the taxman axing its way to their doorsteps.
Interestingly, Nigeria’s Federal Inland Revenue Service, the national tax man may most likely push forward with its agenda to tax digital services, especially as the new Finance Bill has widened the base of taxable businesses in Nigeria to include, among many other qualifications, any digital media agency that transmits, emits or receives signals, sounds, images or data of any kind in Nigeria, including ecommerce companies, app store, online adverts, cloud computing services online payment platforms and so on, as long as the company has significant economic presence in Nigeria and profit can be attributable to such platforms.
If the Finance Bill goes ahead to win the President’s assent, this will be a deal breaker for online stores in Nigeria. So all startups and businesses in Nigeria that derive their revenue from the internet should get ready to pay 7.5% Value Added Tax on goods and services they sell online. Hard day also for online purchasers in the country. Expect an extra deduction each time you purchase goods or services online, local or international, if the FIRS pull the trigger.
“I am sure that when you order things online, you don’t often pay any VAT and this has two negative effects,’’ Nigeria’s outgone FIRS head stated on the sidelines of the third annual meeting of the Nigerian Tax Research Network held in Abuja recently.
“The number one is that the shop owner who pays rents, who has a staff, is at a disadvantage and if care is not taken, everybody will start ordering online and it will be delivered at their houses without any tax payment.
“We are going to try and address that by January of 2020.”
9% Communication Service Tax
The ‘Communication Tax Bill, 2019, which has scaled through the first reading in Parliament looks like the likely ambush that would shore up Nigeria’s revenue base in the coming year. The Communication Service Tax Bill provides that the rate of the tax is 9% of the charge for the use of the communication service. The Bill provides among other things that:
There shall be imposed, charged payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services.
The tax shall be levied on Electronic Communication Services supplied by Service Providers.
The tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the consumer of the service.
The tax is due and payable on any supply of Electronic Communication Service within the time period specified under sub-clause (5) of whether or not the person making the supply is permitted or authorized provide Electronic Communication Services.
The Federal Inland Revenue Service (FIRS) established under section 1 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall be responsible for collection and remittance of tax, any interest and penalty paid under this Bill.
The return and the tax due to the accounting period to which the tax return relates shall be submitted and paid to the FIRS not later than the last working day of the month immediately after the month to which the tax return and payment relates.
Under the Bill, any service provider who without justification fails to submit to the FIRS the tax return by the date is liable to a pecuniary penalty of N50, 000.00 and a further penalty of N10, 000.00 for each day the return is not submitted.
More Savings From Bank charges and Fees
If your business relies on ATM to make withdrawals from Nigerian banks, it is most likely to save some NGN1590 over the course of the 53 weeks that make up 2020, thanks to the sweeping reforms introduced on 2019’s Christmas eve by the Central Bank of Nigeria. Below are some of the changes made to the current charges being incurred by bank customers in Nigeria.
Bank customers would now pay N10 for electronic transfers below N5,000, and N25 for electronic transfer between N5,000 and N50,000. Only electronic transfer above N50,000 will attract N50 charge. Previously, bank customers pay N50 charge for electronic transfers below N500,000.
The guide also slashed charges for cash withdrawal via Other bank’s ATM to maximum of N35 after the third withdrawal within the same month from “N65 after the third withdrawal within the same month.
The new guidelines include the removal of Card Maintenance Fee (CAMF) on all cards linked to current accounts.
There would be also be a maximum of one Naira per mille for customer induced debit transactions to third parties and transfers or lodgements to the customers’ account in other banks on current accounts only.
Other reductions include Advance Payment Guarantee (APG), now pegged at maximum of one per cent of the APG value in the first year and 0.5 per cent for subsequent years on contingent liabilities..
The new guide also stipulates a one-off charge of N1,000 applied to the issuance of cards, irrespective of card type regular or premium.
The same one-off charge of N1,000 applies for the replacement of debit cards at the customer’s instance for lost or damaged cards.
Upon expiry of existing cards, customers are to pay the same one-off charge of N1,000 irrespective of card type and no charge should be required for pre-paid card loading or unloading.
For cards linked to savings account, the maintenance fee has been reduced to a maximum of N50 per quarter from N50 per month amounting to only N200 per annum instead of N600.
Under the new guidelines, there would be no more charges for reactivation or closure of accounts such as savings, current and domiciliary accounts while status enquiry at the request of the customer like confirmation letter, letter of non-indebtedness and reference letter would now attract a fee of N500 per request.
On Card Maintenance Fee (CAMF), the guide expressly states that this would be applicable only to current accounts in respect of customer-induced debit transactions to third parties and debit transfers and lodgments to the customer’s account in another bank. It emphasises that CAMF is not applicable to Savings Accounts.
The guide also emphasises that failure by any bank to comply with CBN’s directive in respect of any infraction shall attract a further penalty of N2,000,000 daily until the directive is complied with or as may be determined by the CBN from time to time.
To this effect, CBN, has directed banks to log every complaint received from their customers into the Consumer Complaints Management System (CCMS) in addition to generating a unique reference code for each complaint lodged, which must be given to the customer. Failure to log and provide the code to the customer will amount to a breach and is sanctionable with a penalty of N1,000,000 per breach.
Mr Isaac Okorafor, the CBN Director, Corporate Communications Department, said the guidelines would take effect from Jan. 1, 2020.
Nigeria May Open Its Closed Land Borders With Its Neighbours
There are already indications that Nigeria’s closed land borders may be opened in early 2020. Nigeria’s Federal Government has, however, said the decision to reopen the nations’ land boarders will be in strict compliance with the Economic Community of West Africa States (ECOWAS) regional trade protocol agreements.
‘‘We had a strategic meeting with the three countries, and what we agreed with our neighbours is to activate a joint border patrol, and the border patrol comprises the Customs, all the security agencies and ensure to try to follow the actual protocol laid by ECOWAS.
“The committee met on November 25, and it is only when that committee is certain that all the countries are respecting the ECOWAS protocol that they will recommend a day for the opening of the border.
“Government has opened talks with Jaiz Bank Plc, and Small and Medium Development Enterprises, to initiate schemes that will engage women who do little businesses along the border sides,’’ Minister of State for Industry, Trade and Investment, Mariam Katagum, said at a news conference in Abuja recently.
Nigerians May Get Visa On Arrival In More African Countries
As Nigeria prepares to welcome more nationals from other African countries from January, 2020, the country would also be expecting reciprocity from other African countries. Although Nigeria’s President, Mohammed Buhari gave a hint about the plan while attending a peace and development summit in Egypt, the Nigeria Immigration Service (NIS) has notified the general public that it has gotten a go-ahead order to issue visa on arrival all Africans coming to Nigeria without Visa from January 2020.
An interesting dimension to all this is a provision in the Nigerian Immigration Act that authorizes the minister to order the abolition or suspension of the requirement in Nigeria of a visa or other entry permit by nationals of that other country, where the Minister is satisfied that the Government of any other country or a Minister thereof permits the entry of citizens of Nigeria into that country without requiring a visa or other entry permit.
So, Nigerians would most likely get the opportunity to travel freely across Africa. Facts indicate that the more a country is visa open, the more other countries would more likely be willing to be visa open towards them too.
Trading Begins Under The AfCFTA Agreement 1 July 2020, A Huge Opportunity For Nigerian Businesses and Startups To Fly Freely All Over Africa
2020 also promises to be a historic year for the whole of Africa as the continent gets ready to record its first ever trading under the AfCFTA agreement. The operational phase of the AfCFTA was launched during the 12th Extraordinary Session of the Assembly of the African Union in Niamey, Niger on 7 July 2019. The AfCFTA will be governed by five operational instruments, i.e. the Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory.
AfCFTA is an opportunity for countries and companies to help each other grow, as they have done in other regions. But trade liberalization has the potential to damage the poorest within those countries, which is why it is so important to have supportive policies. The speakers laid out several challenges and solutions.
President Muhammadu Buhari has inaugurated the National Action Committee (NAC) for implementation of the African Continental Free Trade Area (AfCFTA) Agreement.
In July 2019, President Buhari approved the establishment of the committee with the mandate to undertake a process of engagement with stakeholders to sensitize them on the opportunities and challenges of the AfCFTA.
The committee is made up of representatives of Ministries and Agencies with competent and relevant jurisdiction, and selected stakeholder groups from the private sector and the civil society
Comments
From the facts and figures above, 2020 would be relatively tough for Nigerian businesses as they try to fit into the new tax regime. This also would be the first year in a long time Nigerians would be required to present their TAX Ids before opening their bank accounts. This writer foresees an aggressive pursuit of taxes by government and increased prosecution of tax offenders.
On the other hand, those who are ambitious enough may tap into the larger African market through the opportunity offered by AfCFTA.
The best natural advice should be to plan ahead by arranging for expert tax lawyers or tax consultants.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Looking for where you can find more women entrepreneurs in the world, look no farther than Uganda and Ghana. According to Mastercard Index of Women Entrepreneurs (MIWE)’s latest findings, Uganda is the first in the global ranking of countries with most women entrepreneurs, closely followed by Ghana.
“Their ability to thrive in these aspects explain their particularly high standing in society as business owners, despite poor underlying entrepreneurial supporting factors,” the report says.
Here Is All You Need To Know
The results revealed that some of the highest women business ownership (WBO) rates are found in less wealthy and less advanced economies. For instance, out of the top 10 markets in terms of WBO, 3 are from low income, factor‐driven economies (Uganda, Ghana and Malawi), 3 from upper middle income, Factor or Factor/Efficiency driven markets (Russia, Botswana, Angola), and 4 from High Income, innovation‐driven economies (United States, New Zealand, Australia and Portugal).
The report however notes that in the lower‐income and less developed economies where social, economic, financial and educational conditions are less favorable and accessible to women, the need/pressure to survive or increase income sources by pursuing business opportunities tend to be higher compared to wealthier and more advanced societies where job opportunities, access to education and business/financial infrastructure is more widespread and prevalent.
Consequently women in these wealthier markets tend to have access to more support in the form of government programs for SMEs, high financial inclusion, and more social acceptance, support and recognition of women pursuing entrepreneurial activities. These markets include United States, New Zealand, Canada, Ireland, Switzerland, Australia and Portugal tend to be ranked high in the Mastercard Index of Women Entrepreneurs (MIWE).
Mastercard Index of Women Entrepreneurs (MIWE)’s annual report which provides insights into the progress and achievements of women in business found that nearly 4 out of every 10 business owners in Ghana are women which is the second-highest in the world after Uganda.
Sub-Saharan countries that made it to the Top 10 globally in terms of Women’s Business Ownership rates include Uganda (rank 1), Botswana (rank 3), Malawi (rank 7) and Angola (rank 9).
According to the report which assessed 58 countries globally, despite many challenges, female entrepreneurs are opening successful businesses faster than ever before.
The challenges of women business owners in sub-Saharan Africa include disparity in access to the internet and technology, barriers to accessing funding, restrictive cultural and social norms among others.
Despite being undermined by the prevalence of such persistent and widespread disparities and inequalities, women’s determination to start their own business in these Sub-saharan markets is nearly at the same level as men.
“More importantly, it brings to light how much more women can contribute economically and socially if such barriers are removed, or systems improved,” the report said.
While general business ownership rates, the index noted, tend to be driven by perceived good opportunities whereby individuals seek to improve their income or financial independence, the findings of the index showed that there are cases where businesses are not always initiated on opportunistic grounds.
In sub-Saharan markets including Ghana, women tend to start businesses out of necessity, especially in Ghana, Botswana, Russia, Malawi, Angola and Brazil where around 4 in 10 entrepreneurs are driven into business out of necessity.
According to the report, Ghanaian women continue to flourish in women’s advancement outcomes, including high labor force participation (89.0, Rank 4), women business leadership (37.2% of total, rank 11) and surpassing their male counterparts in engaging in entrepreneurial activities.
Compared to their regional peers in Malawi, Uganda, and Angola, women in Ghana tend to be more inclined to have a bank account, likely due to their higher level of engagement in business activities. For instance, nearly 40 percent of women in Ghana have an account at a bank or financial institution compared to only around 20% in Angola, Malawi, and Nigeria
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
Droppa, a South African logistics startup, has secured a R5 million funding from IDF Capital to expand across the country. IDF is the first female-led African private equity fund by Polo Leteka.
Founded in 2018, Droppa is an on-demand delivery service that makes it safer and easier to move office or household goods and furniture. The startup has been expanding its offering over the last year, launching the Droppa Retail B2B platform for retailers, warehouses and small businesses, and introducing Droppa API to allow e-commerce platforms to integrate with Droppa for last-mile deliveries.
Based in Johannesburg, Droppa plans to expand to more cities across South Africa, including Port Elizabeth and Durban, and that process can now begin after raising funds. IDF has funded Droppa from its seed stage through its I’M IN Accelerator and has made further investment after seeing the startup experience quick growth.
The investment will see Droppa penetrate the national logistics market, while it also aims to drive an increase in skillsets for business communication through technological development to ensure constant and uninterrupted two-way communication channels as well as feedback. Part of the Droppa business development plan is to create a booking management system customised per the retail sector.
IDF Capital has ensured a pan-African presence through a partnership with Nigerian private equity firm, Alitheia Capital, under the brand Alitheia IDF.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
From Uber to Bolt to Yango, drivers in Ghana who rely on ride-hailing to sustain their livelihood would start paying a mandatory GHC 60 ($11) annual fees for ride-hailing platforms in the country, in addition to their cars undergoing roadworthy tests every six months. Ghana’s Driver and Vehicle Licensing Authority (DVLA), which imposed the GH¢60 ($11) annual fee noted that the guidelines will cover the current ride-hailing platforms like Uber, Bolt, and Yango and will also cover companies who intend to operate ride-hailing platforms in Ghana in the future.
Here Is All You Need To Know
The fee is being imposed as part of new guidelines introduced by the Ministry of Transport, National Road Safety Commission, and the MTTD of Ghana Police Service.
In addition to the annual fee, owners of vehicles who use ride-hailing platforms will have to obtain a registration certificate at the Digital Transport Center at DVLA’s Headquarters in Cantonments for “verification and authentication.”
The DVLA also stated that ride-hailing cars must undergo roadworthy examinations and certifications every six months, making it twice a year roadworthy renewal.
“Having successfully signed up, the vehicle must now undergo roadworthy examination and certification every six (6) months as it is the case for all commercial vehicles,” DVLA noted in the statement.
Beyond the guidelines for the car owners, the DVLA said drivers of the vehicles must mandatorily be present for their verification and authentication.
“Unlike in the case of the vehicle owner, the driver must be physically present for this activity…..Drivers must ensure that, at all times, they possess a valid Driver’s Licence,” it added.
Online Taxes May Be A Turn Off For The Gig Economy
Indeed, Ghana is showing example of what may happen to the gig economy should government decide to regulate or over-regulate it. As at 2016, Ghana had a record number of over 3000 drivers using the Uber ride-hailing platform alone. This figure did not take into consideration the number of drivers registered with Bolt and Yango. And as expected, it is not clear from the new regulations whether a driver who is registered across different ride-sharing platforms may be required to make the yearly renewal remittance of $11 on each of the platforms.
Uber Revenue and Usage Statistics — Source: BuildFire
Obviously, this development is sending a message to the proliferation of technology-enabled ride-hailing services who rely on independent workforce to execute their business models. The message is however simple: if the government decides to over-regulate the sector any day, the sustainability of the model may be put to question. And indeed, Ghana is also sending a message to other jurisdictions that collecting levies from city mini-bus drivers by using physical agents could easily be replicated online simply by widening the government’s tax net.
“It is another money making tool by government, twice a year roadworthy renewal at the expense of drivers who are already suffering. Accidents by Uber and Taxify cars are extremely low and so the road worthiness of these cars is not in question,” said Promise Torgbo Wise, Public Relations Officer for the Online Private Drivers Association of Ghana.
The drivers argued that the already 25% charge by Uber and Taxify, is exorbitant and therefore wants the new regulation scrapped to enable them survive the hardships in the country.
“We do not like the taxes DVLA has placed on our job. The App we use for our online service takes 25 percent for every trip. We also pay GH¢ 60.00 for authentication and verification of our vehicles every month. And DVLA wants to add this also, how do we survive this?” They said in a recent interview.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
