African governments are trying to collect more tax - THE ECONOMIST
They can no longer rely on aid or natural resources
WHAT IS IT like being a taxman in Africa? “A lot of sleepless nights,” says Yankuba Darboe, the Gambia’s top revenue official, describing the pressure to meet targets. Politicians across Africa are asking ever more of their tax collectors, with good reason. The biggest hole in public coffers is not money squandered or stolen, but that which is never collected in the first place.
Government revenues average about 17% of GDP in sub-Saharan Africa, according to the IMF. Nigeria has more than 300 times as many people as Luxembourg, but collects less tax. If Ethiopia shared out its tax revenues equally, each citizen would get around $80 a year. The government of the Democratic Republic of Congo is so penurious that its annual health spending per person could not buy a copy of this newspaper.
Governments once turned to aid and natural resources to stay afloat. Historically “we relied on oil,” says Babatunde Fowler, until last month the head of Nigeria’s Federal Inland Revenue Service. “Nobody took taxation seriously.” Lower oil prices are now forcing a rethink, he explains. So too are shifts in foreign aid. As a proportion of Africa’s income, aid flows have halved since the 1990s. Measured as dollars per person, they peaked in 2011 and then fell. Public debt has risen sharply.
Since the 1980s governments have followed an IMF-inspired recipe: slashing trade taxes, reducing top rates on personal and corporate income, and embracing value-added tax. Data from the OECD for 26 African countries show that over half of their tax revenues come from taxes on goods and services. Only a quarter comes from personal income tax and social-security contributions (about the same as in Latin America, but much less than in the rich world). From 2008 to 2017 the ratio of tax receipts to GDP rose by 1.5 percentage points, but in many countries this was offset by falls in non-tax revenues, such as fines, rents and royalties from resource extraction.
Large firms grumble that they are footing the bill. Just 6% of tax-paying firms generate 78% of receipts, according to the African Tax Administration Forum (ATAF), a club of taxmen. But that statistic gives only a partial picture. Analysis of corporate tax returns in Ethiopia by Giulia Mascagni of the International Centre for Tax and Development and Andualem Mengistu of the Ethiopian Development Research Institute reveals that small firms pay the highest effective rate, perhaps because they lack accountants to find gaps in the tax code. In many countries firms which are considered “informal”—because they are not registered, or do not pay income tax—still cough up for licence fees and market dues.
Ordinary Africans complain the system is rigged. Some 56% of those surveyed by Afrobarometer, a pollster, considered it “very likely” that a rich person could pay a bribe or use personal connections to dodge taxes. They are probably right. When Ugandan tax collectors examined records for 71 government officials in 2013/14, they found that just one had paid any personal income tax. Only 5% of directors at leading companies were paying income tax themselves.
Authorities try to manage such tax-dodging through dedicated units that focus on, say, wealthy individuals or large corporations. In Uganda officials built on their earlier research by drawing up a list of 117 rich folk, then meeting them personally. At the time only 13% were filing tax returns; a year later 78% were. One pastor on the list even started preaching about paying taxes. The taxmen also chased government agencies. “It’s a tax morale issue if you ask people to pay their tax and then the government is not paying its taxes,” says Doris Akol, the country’s top revenue official.
Technocratic tax talk often centres on such administrative reforms, which also include things like strengthening IT systems or adopting taxpayer identification numbers. Yet this package only goes so far. “It says build a good tax register, go to electronic filing, and so on,” says Logan Wort, the executive secretary of ATAF. “Those are all right. But you know what the problem in Africa is? It has signed away its tax base.”
One example is bilateral tax treaties. Originally intended to eliminate double taxation, and later to attract investment, their practical effect is to limit taxation of cross-border income, such as royalties or service fees. The IMF estimates that signing treaties with so-called “investment hubs”, like Mauritius, costs African countries an average of 15% of their corporate tax revenue without increasing investment. Some governments, such as Rwanda’s, have wisely renegotiated terms.
Governments also erode the tax base by dishing out generous exemptions. Estimates of “tax expenditures”, or deviations from usual tax rates, put the cost at up to 40% of revenues that African governments collect. Those figures include some sensible allowances, like tax relief on medicines, as well as questionable ones, such as tax holidays for investors. Most businesses say that tax breaks do not affect their decision to invest; in surveys, they tend to put greater weight on things like stability and roads, which a little extra tax might fund.
How much more could African governments collect? The best estimates are that they lose revenues worth 2% of GDP through corporate-tax avoidance, of all kinds, and perhaps another 1-2% through individual wealth stashed offshore. The revenue forgone through tax expenditures is roughly 5% of GDP. It is neither feasible nor desirable to close all those gaps, so the realistic gains are smaller. Other measures, such as increasing compliance or expanding property taxes, could also add a few percentage points.
The IMF models the “tax capacity” of a country using variables such as average incomes, trade openness, and governance. On that basis it thinks that African governments could increase their revenues by 3-5% of GDP, which is more than they receive in aid (see chart). But in the past few years “there has been little progress,” says Papa N’Diaye of the IMF. The challenge is not starting tax reform, he adds, but sustaining it. Africa’s taxmen are in for a few more sleepless nights.
Oil gains as COVID-19 vaccine hopes outweigh weak fuel demand outlook - REUTERS
By Sonali Paul, Seng Li Peng
MELBOURNE/SINGAPORE (Reuters) - Oil prices rose on Tuesday as high hopes that a COVID-19 vaccine could be on the horizon were enough to cancel out fears that fuel demand is set to weaken in the near term in coronavirus-hit countries in Europe and the United States.
U.S. West Texas Intermediate (WTI) crude CLc1 futures edged up 16 cents, or 0.4%, to $40.45 a barrel by 0805 GMT, while Brent crude LCOc1 futures rose 9 cents, or 0.2%, to $42.49.
Both benchmark contracts jumped 8% on Monday, in their biggest daily gains in more than five months, after drugmakers Pfizer PFE.N and BioNTech 22UAy.F said an experimental COVID-19 treatment was more than 90% effective based on initial trial results. Mass rollouts, however, are likely months away and subject to regulatory approvals.
“A viable vaccine is unequivocally game-changing for oil - a market where half of demand comes from moving people and things around,” JP Morgan said in a note
“But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise.”
Rystad Energy said lockdowns in Europe could result in the loss of a further 1 million barrels per day of oil demand by the end of this year.
“The fast-tracking of multiple vaccines doesn’t mitigate the risk that many U.S. states will have to return to some form of lockdown this autumn/winter,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said.
U.S. oil inventory numbers are due on Tuesday from the American Petroleum Institute, and on Wednesday from the Energy Information Administration.
Five analysts polled by Reuters estimated, on average, that U.S. crude stockpiles fell by 1.3 million barrels in the week to Nov. 6.
Tuesday’s oil price decline was tempered by comments from Saudi Arabia’s energy minister, who said on Monday the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, could tweak their supply cut pact if demand slumps before the vaccine is available.
OPEC+ agreed to cut supply by 7.7 million barrels per day from August through December and then ease the cut to 5.7 million bpd from January.
“If the oil market continues to rally between now and the OPEC+ meeting at the end of the month, it could prove self-defeating, as some members may grow more reluctant to roll over current cuts into next year, leaving the market vulnerable over the first quarter of next year,” ING economists said in a note.
Reporting by Sonali Paul and Seng Li Peng; Editing by Kenneth Maxwell and Kim Coghill
Sterling benefits from dollar weakness but hurdles loom - REUTERS
LONDON (Reuters) - Sterling advanced on Tuesday thanks to a deepening dollar rout though concerns of a second wave of virus infections and a central bank policy meeting later this week capped gains.
The pound has reversed nearly all the losses sustained against the dollar in the wake of the pandemic-fueled selloff in March and April and was rising on Tuesday towards a five-month high hit last week versus the greenback.
Sterling’s recovery has been impressive in recent weeks. It registered its biggest monthly rise in more than a decade in July even though prospects of a breakthrough in Brexit negotiations with Europe before a December deadline remain elusive.
“I think it’s more a case of the dollar giving back some of the gains we’ve seen over the last couple of trading sessions,” said Lee Hardman, a currency strategist at MUFG in London.
“That downward pressure on the dollar is resuming partly because of the (Federal Reserve Bank’s) response to the coronavirus.”
On Tuesday, the pound rose 0.05% to $1.3085 against the dollar and strengthened 0.12% against the European Union’s common currency to 90.09 pence.
Signs that dollar weakness have been the major driver of pound gains can be seen from the performance of the British currency versus the euro and the Japanese yen.
While it has strengthened nearly 15% versus the greenback since the March lows, it has risen less than 6% against the euro and less than 12% versus the yen in the same period.
The pound also faces headwinds from domestic factors as well as global forces.
British Prime Minister Boris Johnson said last week he would postpone the next stage of lockdown easing for at least two weeks due to a pick-up in COVID-19 infection rates.
In the United States, Democrats in the U.S. Congress and White House negotiators are in talks on a new coronavirus relief bill after a deadline was missed on Friday to extend enhanced unemployment payments during the pandemic.
Any delay in unveiling more stimulus measures would fuel another round of selling in risky assets and drag the pound lower.
Investors are also awaiting the Bank of England’s policy meeting on Thursday where money markets are already pricing in the prospects of negative interest rates by early next year.
Reporting by Maiya Keidan and Saikat Chatterjee. Editing by Carmel Crimmins
Nigerian govt gives update on resumption of international flight - DAILY POST
Mr. Boss Mustapha, Secretary to the Government of the Federation and Chairman, PTF-COVID-19, has called on Nigerians to disregard any “fake news” making the rounds, as the aviation sector was working out a protocol to resume international flight.
Mustapha, stated this at the daily briefing of the Presidential Task Force on COVID-19, on Thursday in Abuja.
Recall that the Minister of Aviation, Sen. Hadi Sirika, had said that no resumption date was announced for international flight operations.
He urged Nigerians to be patient and await the real date for resumption of international flights as no date has been fixed yet.
According to him, “the aviation sector has been working assiduously to develop the protocols for the resumption of international air services.
“The PTF remains conscious of the significant contributions of air travels to economic growth and shall continue to push for a safe resumption.
“The next phase is for aviation regulators to engage with stakeholders to facilitate an integrated and seamless resumption of international flights.
”I plead with all Nigerians to await the authentic information from the aviation authorities, discountenance fake news and speculation on dates,” Mustapha said.
However, there were reports that the Nigerian Civil Aviation Authority (NCAA) had selected Oct. 15, as the resumption date for international flights.
Reacting, the Minister said that the Nigeria Airspace Management Agency (NAMA), only issued a routine 90-day notice to airmen (NOTAM).
According to him, “international flight resumption date is not October. NAMA just issued a routine 90-day notice to airmen (NOTAM).
“In liaison with the Health, Foreign Affairs & PTF COVID-19 (groups), we will announce the agreed date, regardless of the ban by Europe and UAE, maybe earlier than October,” Sirika said
U.S. dollar continues slide as euro soars again - REUTERS
BY Chuck Mikolajczak
NEW YORK (Reuters) - The dollar slumped to its lowest in nearly two years on Thursday, as investors continued to sell the greenback on expectations a surge in coronavirus cases will make it difficult for the U.S. economy to outperform its peers.
By contrast, the euro rose to its highest since early October 2018 after breaching the technically important $1.16 level on Wednesday and was up for a fifth straight day against the dollar, still basking in the glow of the European recovery fund approved earlier this week.
“Speculators are pretty underweight a lot of the G10 currencies so there is room for this momentum move to keep going,” said Erik Nelson, currency strategist at Wells Fargo Securities in New York.
“The biggest risk that it stops and the dollar starts to regain its legs is equities, if the equity rally really starts to falter and we see a big move lower then all of a sudden dollar strength is going to come back very quickly.”
A rise in U.S. jobless claims last week, for the first time in four months, also added to pressure on the dollar, as a persistent increase in COVID-19 cases has put an apparent recovery in the labor market on stall speed and dampened consumer demand.
Graphic: Dollar's performance in 2020 - here
U.S. coronavirus cases topped 4 million on Thursday, with over 2,600 new cases every hour on average, the highest rate in the world, according to a Reuters tally.
In afternoon trading, the dollar index was down 0.3% at 94.725 =USD, after hitting its lowest since late September 2018. It has lost nearly 8% since its March 20 peak, when a global dollar funding crunch saw a surge in demand. The index is down 1.3% on the week and on pace for its fifth straight weekly decline.
The dollar briefly strengthened after U.S. Treasury Secretary Steven Mnuchin said the U.S. government will protect the stability of the currency. White House officials and U.S. Senate Republican leaders also continued to work towards a proposal for a new round of aid to buttress the economy.
Against the Japanese yen, the dollar was down 0.37% at 106.75 yen JPY=EBS.
The U.S. currency was also down 0.46% against the Swiss franc at 0.9252 franc CHF=EBS. Earlier it dropped to a more than four-month low.
The euro EUR=EBS was up 0.34% at $1.1609, hitting a fresh 21-month high of $1.1601 hit earlier on Wednesday.
The Australian dollar AUD=D3 retreated from a 15-month peak against the greenback to around US$0.7107, down 0.46%, while the New Zealand dollar NZD=D3 fell 0.41% to US$0.6636, below Wednesday's six-month top of US$0.6678.
Elsewhere, China's offshore yuan recovered losses somewhat from an earlier slide against the U.S. dollar, which was last down 0.1% at 7.0113 yuan CNH=EBS.
China said the U.S. move on Tuesday to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, without further details.
Reporting by Chuck Mikolajczak; Editing by Tom Brown
Executive Order on Ease of Doing Business in Nigeria: Knuckling Down to Get Business Done - LEXOLOGY
President Buhari’s administration is on record as being the first to consciously determine to address Nigeria’s perennially low ranking in global ease of doing business (EDB)/ competitive ratings, acknowledging inevitability of taking composite reform actions to significantly improve Nigeria’s EDB rankings. This is commendable, given anxieties caused by the President’s five month delay in constituting his cabinet, inclement global and national macro-economic landscape headlined by shrinking government revenues from falling crude prices and production cuts as a result of unrest in the Niger Delta, as well as policy actions or inactions that put pressure on Nigeria’s foreign exchange metrics. Little wonder that Nigeria’s EDB rating actually slipped in 2016 from 2015, after marginally improving in 2014.
In pursuance of the declared goal to improve Nigeria’s EDB ratings, the President inaugurated the Presidential Enabling Business Environment Council (PEBEC), chaired by the Vice President, in July 2016. PEBEC comprises the Minister of Industry, Trade and Investment (MITI) as Vice-Chair, 9 other ministers, the Head of Service of the Federation, Governor of the Central Bank, representatives of the National Assembly, and the private sector. PEBEC’s mandate is to make recommendations on institutional reforms to promote Nigeria’s investment attractiveness. In February 2017, PEBEC approved a 60-Day National Action Plan “with clear deliverables and timelines for [MDAs] responsible for implementing each line item in the Plan.”
On 18th May 2017, the Acting President issued three Executive Orders (EOs); effective immediately and targeting public service improvements to touch every sphere of Nigeria’s economy. In this Newsletter, we discuss one of the EOs (and which appear to build on PEBEC’s work), the 26 paragraph Executive Order On the Promotion of Transparency and Efficiency in the Business Environment with its attendant implications on businesses and investors in Nigeria.
1.1 Constitutionality and Use of EOs
EOs essentially are a set of commands directly given by the President to an executive agency, class of persons or body under the executive arm of government. Apparently the instant EOs would not be the first to be issued in Nigeria (examples would be presidential powers exercised pursuant to delegated legislation), but have attracted attention because of their significance and also given our 21st century realities that have basically democratised news media access. They also signal intent to more actively use EOs by the Buhari administration going forward, as a veritable means of championing and instilling reform, short of legislative process which typically takes longer time frames. Clearly, there is so much to do in so little time - the President’s current tenure expires in 2019. Across the Atlantic, as at May 2017, USA’s President Trump has signed 36 EOs since his assumption of office in January, 2017. So it is possible that we will see many more “paradigm shift, game changing” EOs from the Buhari administration.
Irrespective of views whether Nigerian Presidents should use EOs in directing the policy of the Federal Government, such acts are constitutionally sanctioned - as exercise of inherent executive powers conferred on the President. Furthermore, section 315(2) 1999 Constitution (as amended) provides: “the appropriate authority [President or Governor] may at any time by order make such modification in the text of any existing law as the appropriate authority considers necessary or expedient to bring that law into conformity with the provisions of this Constitution.” Since the President is the Chief Executive of the Federation, it behoves him to exercise functions of his office to drive policy direction, especially to give full effect to laws already in place or their amendment to ensure fulfilment of electoral promises. As mentioned previously, it is desirable that the President from time to time issue EOs to steer economic policies which promotes investment in Nigeria.
2.1 Promotion of Transparency and Efficiency in the Business Environment
This EO is particularly focused on improving Nigeria’s EDB through transparent and efficient service delivery by various government Ministries, Department and Agencies (MDAs). To promote transparency in MDAs’ dealings, the EO makes it mandatory for them to make public all the requirements for licence, permits, waivers, approvals and tax related information.
Pursuant to the EO, every MDA must ensure that its fees, timelines and other deliverables it owes applicants are published within its premises and regularly updated on their websites. This is a welcome departure from common situations where applicants faced uphill task accessing information on regulatory processes and requirements for permits, licenses and approvals. The sense of frustration encountered by applicants was a ready excuse for corruption in order to remove ‘intentional’ bottlenecks. With the envisaged transparency, the cover would be blown for public servants who had a penchant for stalling processes so they could “offer to help” in exchange for bribes. The EO puts added pressure on regulators - especially business facing ones (needing to approve new products, or transactions) and whose enabling law actually prescribes timeline for granting approvals, but who observe same in breach, rather than in compliance. It also sends a signal that such historic defaults will no longer be tolerated.
One of its key elements is resolving any conflict on fees or procedure in favour of the application where an applicant has relied on published requirements by the MDAs – per paragraph 2 of the EO. Applicants are entitled to rely on published requirements in their applications; where there is discrepancy between the MDA’s actual practice and any published list relied upon by the applicant, the latter would prevail.
Timelines and deliverables would provide basis for measuring MDAs’ performance and will instil a sense of ‘ownership’ in public servants, and resultant productivity. A colleague shared news of how he just collected a driver’s license he applied for in 2013 in June 2017, albeit the license will expire in August 2017! Another area that the government could look at is the duration of permits and licenses. Given the stresses associated with obtaining driver’s license and international passports, it is the height of inefficiency for them to have three (3) and five (5) year durations respectively. Extending their validity to say ten (10) years for example, means there would be less pressure with dealing with incessant renewal applications.
While public servants may be regarded as ‘having nowhere to hide’ – since the EO compels MDAs to comply upon pain of sanctions, the ultimate effectiveness would also be a result of active citizens’ engagement in demanding compliance with the EOs in their interaction with MDAs.
2.1.2 Default Approval
Another striking development is “default approvals”. Paragraph 3 of the EO provides that: “where the relevant agency or official fails to communicate approval or rejection of an application within the time stipulated in the published list, all applications for business registrations, certification, waivers, licenses or permits not concluded within the stipulated timeline shall be deemed approved and granted.” This provision’s strong potential to de-incentivise undue regulatory delays means that such would no longer be a drag on the pace of business transactions.
In a default approval scenario, the applicant may within fourteen (14) days of the lapse of the MDA’s stipulated timeline to grant the approval, make an application to the relevant supervising Minister for the issuance of any necessary certificate or document to evidence such approval.
The EO is however silent on the procedure for making such application and its supporting documentation. It follows that such applicant desirous of formalising the grant would forward an application showing that the relevant MDA’s requirements have been met and timeline has lapsed including any document submitted in the application to the MDA. One of the blind spots in the EO which needs emphasis is the position of an applicant where the Minister declines to ‘formalise’ a deemed grant. Paragraph 8 of the EO, “an Applicant whose application is deemed granted under this Directive may apply to the Minister for the time being in charge of the application for the issuance of any document or certificate in evidence of the grant within 14 days of lapse of the MDA’s stipulated timeline for the application” presupposes that such an application to the Minister would be discretionary. It is however safe to assume that no reasonable applicant (that had invested resources in making the regulatory application) will fail to take the next step to obtain ministerial approval to regularise the default approval.
Can the Minister refuse to issue a certificate to evidence the deemed grant? The answer would appear to be in the negative, unless the application is patently unmeritorious, given the presumptive intent of the EO.
Another critical issue is the status of regulatory applications predating issuance of the EO. Do they also enjoy the benefit of default approval? Regrettably, applications made prior the issuance of the EO would not enjoy the benefit of a deemed grant – otherwise the EO could become objectionable for being retroactive. However, same is unlikely to be challenged – not by public servants being enjoined to deliver improved services or applicants who are meant to be beneficiaries of the EO. Nonetheless, given that the EO itself has an effective date of 18th May 2017, it would have been helpful to have transitional provisions to deal with prior regulatory applications.
2.1.3 One Government
Another important aspect of the EO is the reiteration of singularity of government MDAs. Thus, where an application to any MDA requires a supporting documentation issued (or to be issued) by another MDA, the onus of verification or certification lies with the MDA processing the application: a photocopy or any other prima facie proof would suffice for such application. Such inter-MDA interface will likely speed up approval processes and also reduce the applicant bearing the burden of regulatory delay of an MDA to jeopardise the prospect or timeliness of its current application before another MDA. Furthermore, MDAs can - unless put on their enquiry by any untoward occurrence rely on the presumption of regularity - rely on documents purportedly issued by sister MDAs. One of the requirements for a government bid is the submission of original copy of bidder’s Tax Clearance Certificate (TCC). The implication of this is that photocopy of bidder’s TCC would suffice for the bid without the need for verification of such TCC.
Also, MDAs are required to publish their Service Level Agreements (SLAs) regulating their service delivery to third parties. These SLAs are particularly important as they stipulate the timeline for application and issuance of licence, certificates, waivers, business registration or permits. The EO further reiterates the bindingness of such SLA while reposing the responsibility of adherence to the head of such MDAs. It is hoped that these SLAs would be implemented with lessons learnt from the pitfalls suffered by SERVICOM established by President Olusegun Obasanjo in 2004. Despite the reports from the public on poor service delivery by MDAs – untreated/missing files, corruption, inefficiency to mention a few - to SERVICOM, no major corrective or disciplinary actions were taken against erring civil servants to produce envisaged culture shift.
2.1.4 Fast-Track Visa Application / Visa on Arrival
Pursuant to paragraph 14 of the EO, ordinary tourist and business entry visas to Nigeria shall be issued or rejected with reason within 48 hours. Arguably, where no response is received from the issuing Embassy or High Commission within 48 hours, such visa application shall be deemed granted (pursuant to paragraph 3).Alternatively, applicants may seek to obtain their visas at any port of entry under the visa on arrival policy and must be issued with a valid visa upon meeting all the published requirements for a grant as stipulated under paragraphs 15 and 16 of the EO.
No doubt, this is a revolutionary shift from what was obtainable previously, as it would further make Nigeria an attractive travel destination for tourists and investors. Needless to say, the airports being investors and tourists’ first point of contact with Nigeria ought to have a welcoming ambience. News that Lagos State Government will soon start rebuilding the expressway to Murtala Mohammed International Airport cannot but be welcoming news, much as the decrepit on condition of the roads leading to Apapa ports – Nigeria’s premier port - is a huge let down.
2.1.5 Port Operations
The ports plays a critical role in Nigeria’s economy and their historic sub-optimality has resulted in massive loss of revenues (e.g. on goods diverted to neighbouring West African ports but would end up being smuggled into, and consumed in Nigeria). Users of the ports have faced various challenges in the past ranging from congestion, delayed cargo clearance, touting, uncoordinated actions of duplicative agencies, amongst others. To ameliorate these challenges faced by users, the EO prohibits any form of touting by official or unofficial persons while allowing only on-duty staff, and except with the permission of the head of the agency, an off-duty staff at the ports. This is to enhance proper identification of officials on duty and any form of solicitation could be reported to appropriate authority.
To ease operations at the ports, all MDAs are required to make arrangements to merge into a single customer interface, making them customer/investor/tourist friendly while taking account of inflow and outflow data which would be sent to the National Bureau of Statistics (NBS). By implication, time spent undergoing numerous checks at the ports would be significantly reduced. More so, the port operation is to run on a 24 hour circle paving way for increased commercial activities, given the EO’s prescription for 48 hour cargo clearance timeline.
2.1.6 Business Registration
The Corporate Affairs Commission (CAC) charged with incorporation of companies and business registration is to ensure that all registration processes including search, filings and payment are fully automated. Prior the issuance of the EO, the MITI had amended the Companies Regulations 2012 so that CAC can decide on name reservation applications within 12 hours of submission, whilst registration of companies, business name and incorporated trustees shall be within 24 hours from submission of completed forms. Previously cumbersome incorporation forms were replaced with a single form CAC 1.1 (Regulation 3). In the same vein, under Regulation 11, options for submission of forms to the CAC have now been expanded to include online submission through its website. Statutory Declaration of Compliance required for incorporating companies which was solely the exclusive preserve of lawyers are now deposed to by CAC’s in-house lawyers, thereby reducing the compliance burden of incorporation.
These innovations should fast track the incorporation process, by obviating hitherto incessant queries. There is greater flexibility as applications can be done anywhere in the world without the need to physically visit CAC’s offices – except to collect original copies of the registration certificate at the designated pick up point. In the future, it should be possible for CAC clients to download and print incorporation certificates or CTCs of corporate filings, upon logging in to CAC’s website. The CAC however, must build its capacity to attend to numerous applications filed on a daily basis. Premium should also be placed on security of its system and routine vulnerability checks.
We hope the EO will signpost similar efforts by the States, as the instant EO provisions are only binding on Federal MDAs. Faithful implementation and adherence to the EOs should improve Nigeria’s investment competitiveness and EDB ratings, but such improvement would be more substantial if all States were to issue similar EOs in respect of regulatory processes under their remit. And this is not to say that some States have not been a purveyor of reforms. Lagos State, the nation’s economic heartbeat, reformed its justice sector and property registration regime to popular acclaim, including digitalising its property records. Lagos also made provision for limited partnerships and limited liability partnerships to widen the options for business vehicles, exemplifying a healthy regulatory competition amongst States in Nigeria.
But there is more to be done. Real estate reform – to optimise ease of acquisition, registration, disposal, secured lending, building approvals, etc across all the States will have dramatic improvement in Nigeria’s competitiveness rating. Real estate is also illustrative of how the Federal and State Governments should collaborate to drive efficiencies that will not only benefit the economy generally (financial services, agriculture, employment, etc.), but help accelerate the bridging of the housing deficit. One further point is that policy actions like EOs should have measurable benchmarks like the ones issued by the Federal Government - these would challenge the public service to pull their weight as everyone realises that non-compliance will raise a red flag and risk exposure to sanctions.
As someone said, eternal vigilance is the price of liberty. Strict implementation of the EOs is therefore key, and it is gratifying that the EO stipulates mechanisms and review timelines in this regard. Anyone in doubt should check BusinessDay’s front page headline on Thursday 8th June 2017: “Executive Order: NPA Re-expels Seven Agencies from Ports”. These agencies whose presence constituted an overhang of MDAs at the ports, had been expelled by presidential directive under the Jonathan administration (October, 2011), but somehow found their way back (or maybe never left the ports)!
The MITI has described itself as the “Ministry of Enabling Environment”. This would be an appellation well deserved if Nigeria were to leapfrog to the top 10s of global/African EDB rankings by 2019 as envisioned by the Buhari administration and driven by PEBEC.
Sterling hit by Barnier's gloomy view on Brexit talks - REUTERS
Sterling fell on Thursday after the European Union’s chief Brexit negotiator said that the UK had shown no willingness to break the deadlock on talks over a new trade agreement.
Speaking after this week’s round of negotiations in London, Michel Barnier said there has been no progress at all on the question of ensuring fairness on state aid.
“Sterling’s slump after Michel Barnier’s comments should come as no surprise as headlines reinforce how far both sides are away from a comprehensive free trade agreement,” said Simon Harvey, currency analyst at broker Monex Europe.
“The game of brinkmanship is likely to continue throughout Q3 and into Q4 in our opinion, resulting in only one certainty: an increase in sterling volatility to levels seen previously when the risk of a hard Brexit increased.”
The pound was down 0.3% at $1.2605 GBP=D3 and at 91.06 pence against the euro EURGBP=D3.
Overnight implied volatility gauges were elevated in the early European trading session, suggesting traders were nervous about emerging Brexit headlines on the last day of Brexit negotiations for the summer. Volatility levels earlier edged to a one-month high of 8.85%. GBPONO=FN
Leveraged funds were shorting the British currency up to July 14, though they have cut their positions in the past few weeks to hold a little more than $1 billion in shorts, the latest CFTC data shows. GBPNETUSD=
Graphic - Overnight vols rise to 1-month high - here In other news, Bank of England interest rate setter Jonathan Haskel said he was worried that Britain's economic recovery from the coronavirus crisis could be slow, signalling his willingness to support more stimulus.
Sterling steady above $1.27 on last day of Brexit talks - REUTERS
BY Olga Cotaga
Sterling stabilized above $1.27 on Thursday on the last day of the Brexit negotiations, with traders looking out for any headlines that may shine some light on whether Britain could walk away from the European Union with a deal at the end of the year.
Media reports suggested the United Kingdon has given up hope on reaching a deal so investors should “watch the tone of the statements coming out of today’s final meetings to see if they are of a conciliatory or confrontational nature,” said Marshal Gittler, head of investment research at BDSwiss Group.
Overnight implied volatility gauges showed traders were slightly nervous about possible emerging headlines on Thursday as levels inched to a one-month high of 8.85%.
The pound was down 0.1% at $1.2716 and down 0.2% versus the euro at 91.02.
Leveraged funds were shorting the British currency as of last Tuesday, but they had cut their positions in the last few weeks to hold just above $1 billion in shorts, according to latest CFTC data.
WEEKAHEAD-AFRICA-FX-Dollar dearth weighs down Kenyan, Nigerian currencies - REUTERS
NAIROBI, July 23 (Reuters) - The Kenyan shilling and the Nigerian naira are expected to weaken in the week ahead, mainly because coronavirus disruptions have led to a dearth of dollars.
Nigeria's naira is expected to ease on the black market after the central bank sent it lower on the futures market last week, as dollar shortages crippled the economy, traders said.
The naira fell to 472 per dollar on the unofficial market on Thursday, weaker than the 388.36 on the over-the-counter spot market, widely quoted by investors and importers.
Dollar shortages have plagued the country for months after sharp falls in oil price, Nigeria's main export, shifting demand to the black market.
The central bank last week told lenders to stop processing new trade documents for maize imports to conserve reserves.
The Kenyan shilling is seen weakening further after this week hitting a record low because of dollar demand from importers after the state eased lockdown measures, traders said.
Commercial banks quoted the shilling at 108.15/35 per dollar, compared with 107.25/45 at last Thursday's close.
"We have opened up the economy but importers are finding it difficult because of the dollar supply crunch," said a senior trader from one commercial bank, referring to the lack of tourists and their dollars.
The Ugandan shilling is seen trading in a stable range due to inflows from non-governmental organisations and an excess liquidity mop-up by the central bank.
At 0948 GMT, commercial banks quoted the shilling at 3,695/3,705, compared with last Thursday's close of 3,690/3,700.
The shilling will likely trade in a narrow band around 3,700 in the comings days, said a trader at one of the commercial banks.
The Zambian kwacha is likely to hold within the same range against the dollar next week, supported by hard currency sales by firms to meet their month-end obligations.
On Thursday, commercial banks quoted the currency of Africa's second largest copper producer at 18.1250 per dollar, from 18.2320 at close of trading a week ago.
"It should continue trading largely the same with support from dollar conversions as companies prepare to pay salaries and other month-end dues," one commercial bank trader said.
Tanzania's Shilling is expected to hold steady next week due to a balanced supply and demand of dollars in the market.
Commercial banks quoted the Shilling at 2,314/2,324 on Thursday, compared with 2,312/2,320 a week earlier.
"We expect the Shilling to continue remaining stable next week due to the contribution of inflows from mining and commodities," said a senior trader in a commercial bank. (Reporting by John Ndiso, Chijioke Ohuocha, Elias Biryabarema, Chris Mfula and Nuzulack Dausen; Editing by Duncan Miriri and Barbara Lewis)
Nigeria's Debt to Hit N33 Trillion As Govt Plans Fresh N4.28 Trillion Loan - DAILY TRUST
Abuja and Lagos — Nigeria's debt burden will hit N32.91 trillion as the federal government has notified the National Assembly of a fresh plan to borrow N4.28 trillion to fund the 2021 budget.
Daily Trust reports that the country's debt stocks currently stood at N28.63trn at the first quarter 2020.
This is even as just only about 30 percent of the 2020 budged has been implemented so far.
The planned borrowing of N4.28trn was contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) forwarded to the Senate Tuesday by President Muhammadu Buhari for approval.
The final draft of the budget would be prepared based on the parameters and fiscal assumptions of the approved 2021-2023 MTEF/FSP.
In the fiscal document, the government projected the sum of N12.65 trillion for the 2021 budget.
It also projected the sum of N5.16 trillion as budget deficit for 2021 up from N4.98trn in the 2020 budget.
The N5.16 trillion deficit represents 3.62 per cent of estimated GDP, well above the threshold of 3 per cent stipulated in the Fiscal Responsibility Act 2007, according to the document.
The government noted that the deficit would be financed by new foreign and domestic borrowing of N4.28trn; N205.15bn from privatization proceeds and N674.11bn draw-downs on existing project-tied loans.
It said that the projected debt service/revenue ratio at 47 percent (actual for 2019 was 58 per cent) raises some concern about the sustainability of FGN debt.
According to the government, the country is faced with a serious revenue problem rather than a classic debt problem.
A political economist and faculty member at the Lagos Business School, Professor Bongo Adi, said: "It is not about borrowing money, somebody has to play, and the burden of payment will be burned by the ordinary citizens.
When the money is borrowed, we don't have the institutions to guarantee conversion to value.
"Our currency keeps losing value. We become a highly indebted country and poverty becomes endemic.
The result is that the funds that we need to provide social services will go to debt service."
According to him, the real question before the fiscal managers is: what are the options if the federal government chooses not to borrow?
He said: "If the kind of money people are wasting in government agencies is anything to go by, it means we are borrowing to waste, so how can we be justifying borrowing in the first place."
A fellow of the Institute of Chartered Accountants of Nigeria and the Chartered Institute of Taxation of Nigeria, Mustapha Hussain Olanrewaju, noted that borrowing to fund a budget is not bad in itself, it has to be a function of the nation's revenue capacity.
"A point where our revenue is unable to support our borrowing and this is largely because Nigeria borrows mostly for consumption.
"If a borrowed fund is not applied to projects that can generate revenue in return, there is no way the fund will be able to fund itself.
"So, any extra borrowing without improving on our revenue sources will amount to excessive gearing," he said.
He advised the Federal Government to expand its tax bracket by bringing more taxpayers into the tax net.
"A lot of Nigerians do not pay tax, so there is a need to drive more non-oil taxes."
Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research, University of Lagos, expressed concern over what he called "the penchant by the current administration to borrow money at the slightest provocation."
He said the government had not made serious efforts to reduce the cost of governance and block leakages.
The economist recalled that the 2020 budget had about N2.9 trn allocated for debt servicing.
He disagreed with the excuse by the government on shrinking revenue, saying, "It is only when you want to maintain your level of expenditure that the government becomes a serious problem but if you cut down on your expenditure, the revenue will not be a serious problem."
Nwokoma is also concerned about the country not getting value for money with the projects being undertaken with the loan, noting that the government in the last five years had tripled the level of public debt.
"They met about N12.1trn debt in 2015, now we are talking of over N36trn and they are borrowing more.
"But we cannot see the trickling of infrastructure," he added.
Also reacting, Muhammad Ali, an Economics lecturer at Prince Abubakar Audu University, Anyigba, Kogi State, said over the years, Nigeria's budget had always been with borrowing as part of sources of financing the budget.
He noted that 2021 budget could not have been different in view of the yawning development gaps within limited resources and the impact of the coronavirus pandemic which has slowed down economic activities and reduced global energy demand resulting in downfall in the prices of crude oil which contributes 70% of government revenue.
He said the debt component of 2021 budget has both negative and positive implications.
"Looking at the proposed debt figure, N4.28bn, that is around 33.8% of the total budget.
"The debt will be financed into the future which implies giving more burdens to posterity thereby undermining the need for sustainable development which is the development that takes care of the present without undermining the welfare of the future generation.
"It is clear that the debt being above 3% of proposed GDP has legal implications.
"But away from that, it is not the issue of debt to GDP ratio.
"It is the issue of debt sustainability ratio" he added.
"There is need for reduction of recurrent expenditure and making the informal sector a major part of the sources of national savings in Nigeria" he said.
An Abuja-based financial economist, Samson Simon Galadima, said Nigeria's level indebtedness had reached unsustainable heights stressing that the problem was not debt to GDP ratio (even though that is above the level set by the fiscal responsibility act) anymore, but a debt service to revenue ratio problem.
"And at present, debt service consumes virtually everything generated as revenue.
"If we continue to borrow ( which is clearly the case as we intend to embark on deficit spending), then our problem would likely become worse," he said.
Dollar hits four-month lows as Sino-U.S. tensions loom - REUTERS
BY Ritvik Carvalho
4 MIN READ
LONDON (Reuters) - The U.S. dollar hit four-month lows against a basket of peer currencies on Thursday, resuming its slide as investors took a wait and see approach to tensions between the United States and China.
The United States gave China until Friday to close its consulate in Houston following allegations of spying.
China has vowed to respond, and the escalating tension between the world's two largest economies sent the yuan CNH= on its sharpest slide in nearly two months on Wednesday.
That slide reversed on Thursday, with the offshore yuan bouncing back to the weaker side of the 7 per dollar mark. CNH=
“Retaliation for the Houston closure is now widely expected - the relative severity of which will offer markets some guidance on Beijing’s engagement strategy into the 2020 elections,” said UBS strategists in a note to clients.
“U.S.-China tensions generate volatility, but it is the stimulus and recovery dynamic that we expect will prove more dominant.”
UBS forecast the yuan - a barometer of Sino-U.S. relations - would reach 6.8 per dollar by the end of 2020, and 6.7 by the first half of 2021.
The index that measures the dollar against peer currencies hit its lowest since March 9. The dollar index has lost nearly 8% since its March 20 peak, when a global dollar funding crunch saw a surge in demand. It is down 1.5% year-to-date. =USD
U.S.-China ties have deteriorated this year over issues ranging from the new coronavirus and telecoms-gear maker Huawei, to China’s territorial claims in the South China Sea and Hong Kong crackdown.
The U.S. State Department said the Chinese mission in Houston was being closed “to protect American intellectual property and Americans’ private information.”
Chinese state media said on Thursday the move was a political ploy ahead of November presidential elections, and one source with knowledge of the matter told Reuters China was considering closing the U.S. consulate in Wuhan in response.
“If China does limit its retaliation to closing the Wuhan consulate, the market will probably take it in stride, but if China instead decides to do something that escalates the tensions between the two countries, we could quickly switch to a ‘risk-off’ mood,” said Marshall Gittler, head of investment research at BDSwiss Group.
Against the safe haven Japanese yen, the dollar was flat at 107.15. JPY=
The euro EUR=EBS was at $1.1573, just below a 21-month high of $1.1601 hit earlier this week after Europe's leaders agreed a recovery fund.
Reporting by Ritvik Carvalho; additional reporting by Tom Westbrook in Singapore and Barbara Lewis