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External reserves drop to $24bn

Written by Maritime First
  • As  FIRS targets N5.2b from 10 million new taxpayers, says Fowler

The country’s external reserves have depleted further to a record-low of $24.8bn, according to the latest data posted on the Central Bank of Nigeria’s website.

The foreign exchange reserves fell by $600m in two weeks before shedding $1bn in four weeks, the CBN statistics showed.

Specifically, the reserves fell from $25.8bn on August 16 to $24.8bn on September 16. It decreased by $600m from $25.4bn recorded on August 31 to $24.8bn on September 16, the current CBN data revealed.

The spate of decline in the external reserves follows the CBN’s almost daily interventions at the interbank/official foreign exchange market in recent weeks, as chronic dollar shortage continues to weigh on the economy.

In its efforts to defend the naira and prevent it from falling further at the official interbank market, the central bank has been selling dollars there more frequently.

The naira had fallen to an all-time low of 365.25 to the dollar at the interbank market on August 18 before making a gradual recovery.

On Tuesday, the local currency traded at 307.25 against the greenback.

At the parallel market, the naira, which has been under persistent pressure, closed at 424 to the dollar on Tuesday, after trading at 425 against the United States currency on Monday.

The external reserves fell by 2.86 per cent to $25.45bn on August 29, 2016, up from the $26.2bn it recorded at the end of July.

Year-on-year, the reserves have fallen by 18.9 per cent. They had fallen by 0.4 per cent at the end of July, down from the $26.34bn recorded on June 29.

The foreign exchange reserves stood at $26.42bn on May 28, down by 9.2 per cent year-on-year.

The CBN had on June 20 lifted its 16-month-old currency controls and auctioned about $4bn on the spot and futures market to clear a backlog of dollar demand and help boost interbank market trading.

The global plunge in oil prices has caused the reserves to be depleting very fast. The development had forced the CBN to introduce foreign exchange controls, which were abandoned in June.

The CBN’s Monetary Policy Committee announced plans to adopt a flexible exchange rate policy after the external reserves fell to $26.56bn on May 23.

The external reserves have lost over $2bn this year. The nation recorded a balance of payments deficit of 1.4 per cent in its Gross Domestic Product at the end of 2015 owing largely to its first current account deficit (three per cent of the GDP) in over a decade.

The nation’s external reserves reduced by $6.7bn within a period of 21 months, the Minister of Budget and National Planning, Senator Udo Udoma, said on March 23.

In the meantime, Nigeria plans to raise N5.2 billion from taxes next year, Federal Inland Revenue Service (FIRS) Executive Chairman Babatunde Fowler, said yesterday.

He also said the agency has a target of 10 million new taxpayers to bring the number to 20 million people.

About 700,000 firms that have never paid taxes are to be brought into the tax net as the country seeks new revenue sources to offset low oil prices that have pushed the economy into its first recession.

Fowler, in an interview with Reuters news agency, said: “We collected a little over N2.3 trillion, so far – from January to 31 August.  It is almost at par with last year but take into consideration that the economy is going through a little slowdown.”

He said that the revenue from Value Added Tax (VAT) has increased by 25 per cent year-on-year and corporate income tax held steady over the same period but petroleum profit tax was expected to have halved, mainly due to low oil prices.

Fowler, Lagos’ former tax chief, who increased monthly tax revenues by 70 per cent within four years in the nation’s commercial capital, said a new unit created early in the year has deployed inspectors, armed with laptops to update databases, registering businesses and individuals, who are then tracked to check whether they have paid taxes.

“From our estimates, we expect that we have 60 million individuals who should pay some form or level of tax,” said Fowler.

He said tougher enforcement would be combined with a planned waiver on interest and penalties covering the period from 2012 to 2015 under which people and businesses would only be asked to pay the principal amount of tax liabilities due.

“We will give them a 45-day window to come forward and register and that will make them eligible for that waiver,” said Fowler of the proposal, which was submitted to the finance minister for approval.

He said: “A lot of people who are not in the tax net are a bit jittery or afraid to come and register, thinking that we might go back two or three years and the amounts might be considerable.”

But he warned that those who failed to register for the scheme – which he said could be rolled out as soon as October 3 – would face stiff penalties.

Individuals and businesses who did not come forward voluntarily would be asked to pay back taxes plus interest and penalties, he said.

“We will also consider criminal prosecution of chief executive officers or board members,” Fowler said.

He was cautious on the idea of an increase in the VAT rate which, at 5 per cent, is among the lowest in the world.

The government, struggling to fund a record N6.06 trillion (about $18.6  billion) 2016 Budget that aims to stimulate growth by tripling capital expenditure, set FIRS a target of raising N4.95 trillion in taxes, up from N3.73 trillion last year.

International Monetary Fund (IMF) Managing Director  Ms. Christine Lagarde suggested a VAT rate hike when she visited the country in January and Vice President Yemi Osinbajo later said the government was considering tax regime changes to raise funds.

Fowler said it was part of the government’s remit to “take a decision” on VAT but he thought “the economy is not ready for a VAT increase right now”.

“The level of compliance was too low so that if we increased the rate of VAT it would be a punishment and unfair on those who are collecting and remitting VAT,” the tax chief said.

Upshot with additional report from Nation

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Maritime First