Wobbling Economy, Cash Deposit Charges And Vision 2020

By Casmir Igbokwe

Last week,the government of President Muhammadu Buhari was upbeat. It flashed a semblance of some seriousness in tackling Nigeria’s ailing economy. The President, for instance, appointed an Economic Advisory Council made up of renowned economists like Professors Doyin Salami and Chukwuma Soludo. The issues of the cashless policy and value added tax (VAT) also made headlines.

With effect from 2020, VAT will increase from 5 per cent to 7.5 per cent. For government, this increase will yield more money to its coffers, especially after huge campaign/election spending and dwindling oil revenue. But to average private and corporate individuals, this is like trying to treat a sore thumb by cutting it off.

Remember, there are also companies income tax, education tax, personal income tax, withholding tax, road taxes, land use charge and many others. Sometimes, government agents allegedly divert these taxes to the detriment of both the people and government. The Auditor-General of the Federation, for instance, reported some errors in the amounts included as the Federal Government share of VAT for 2016.

Without tackling these errors, increasing VAT in 2020 will engender more problems. It will affect prices of goods and services. Many consumer goods companies that have been posting decline for some months now may be forced to lay off more workers.

Simply put, it is inconsistent with the current economic reality in the country. It will also make a mess of the now elusive new N30,000 minimum wage for workers signed into law by the President more than four months ago.

On top of this, the Central Bank of Nigeria (CBN) introduced charges on cash transactions from N500,000 and above for individuals and N3 million and above for companies. This means that withdrawals will attract 3 per cent processing fees, while deposits will attract 2 per cent processing fees for amounts above N5000,000 for individuals. For corporate bodies, banks will charge 5 per cent processing fees for withdrawals and 3 per cent for lodgements above N3 million. The charge on deposits took effect from Wednesday, September 18, 2019, in pilot states such as Abia, Anambra, Kano, Lagos, Ogun and Rivers as well as the Federal Capital Territory. It will take effect nationwide from March 31, 2020.

To the CBN, the charges would drive development and modernisation of the country’s payment system. This, it said, was also in line with Nigeria’s Vision 2020 goal of being among the top 20 economies by the year 2020.

Well, it is largely the economies of banks and some government functionaries that will likely improve. A recent media report indicated that, between January and June 2019, four leading banks generated N24.3 billion from account maintenance charges on their customers. In the corresponding period last year, they generated N20.39 billion. The banks also charge customers for card maintenance, automated teller machine (ATM) withdrawal, SMS alert, commission on turnover (COT), stamp duty and all that.

I am not sure how these charges will enhance the financial inclusion policy the apex bank is championing. Rather, people will naturally avoid putting money where it will generate huge losses than profits for them. Some will start multiple deposits and withdrawals to beat the charges.

Granted, there are risks involved in moving huge cash from one point to the other; granted, online transactions save time and cost associated with cash payments; but how many Nigerian traders are literate enough to use online banking services? And does the announced intention of the Federal Inland Revenue Service (FIRS) to impose VAT on online transactions not negate the drive for cashless transactions? Even if you want to impose charges to encourage cashless policy, do they have to be this high?

Small and medium-scale businesses will feel the impact more. Most times, government agents equate their turnover to profit. It is not necessarily so. Turnover may be high, but profit may be less than 2 per cent. When you impose heavy taxes or charges on the little profit, you are indirectly preparing grounds for high inflation and the liquidation of those businesses.

Already, the prices of essential food items like rice have increased. This is partly attributable to the closure of Nigeria’s borders. Banning some foreign food items is okay, if we have enough local and cheaper alternatives. But we don’t. We have not given enough incentives to local manufacturers. We have not provided the necessary amenities. We have not tried to better the low ranking of Nigeria on the world ease of doing business index. Little wonder some foreign companies now prefer to establish in Ghana than Nigeria that has a bigger market.

Government should consider entrepreneurs and manufacturers in churning out its policies. This is because what will move us closer to Vision 2020 is production, not increased taxation, and definitely not reckless accumulation of debts. As at March 31, 2019, Nigeria’s debt profile rose to N24.95 trillion from N21.725 trillion it was in 2017.

Before imposing heavy taxes on people or borrowing to service our leaders’ ostentatious lifestyle, government should first of all prune down the cost of governance. Many public office holders, for instance, go home every month with outrageous allowances. They change cars like clothes and acquire other choice properties with reckless abandon. That is why some of them are ready to kill to get to that position.

Recently, some civil society groups took legal action against the alleged plan of the Senate to buy exotic cars for principal members of the ninth Senate worth N5.5 billion. Socio-Economic Rights and Accountability Project (SERAP), BudgIT, Enough is Enough and 6,721 concerned Nigerians are asking the court to, among others, restrain and stop the Senate from collecting the said money until downward review of the amount proposed by the Senate.

I believe citizens will gladly pay their taxes if they discover that their leaders utilise the money well; if they find out that public officers live moderate lifestyle; if they notice that there is genuine fight against corruption; and if they see fiscal discipline among the three tiers of government.

 

Re: Now that Buhari is ‘eminently qualified’

My friend, Casmir, seeing how Walter Onnoghen, Sylvester Ngwuta and many others were subdued and humbled at their age and near the peak of their professional career, if you are in the position of the five judges at the Supreme Court, in a so-called entity, a fraud mine tagged Nigeria, won’t you hold your peace? Will you want your house broken into, vandalised before your wife and children and nailing exhibits planted therein to end your integrity? My friend, please forgive the five ‘wise’ judges. Nigeria’s destiny and glory is in perpetual chains by organised strong political criminals that were around at Independence and are still there. They have intimidating looted resources, unspeakable wealth, coordinated overbearing influence and ‘unlimited’ power to hold down the status quo – the system that frustrated our youth, pushed them to criminality worldwide and made us a laughing stock in the comity of nations. A land of wastage where nothing ever works but treasury or commonwealth looting and nepotism! I weep for Nigeria, my country, seeing her fragmented and dying every day in the hands of the mediocre!

– J.A. Solomon, Kaduna, +2348099577661

Casmir, as you rightly said, Buhari has been certified ‘eminently qualified’. However, the judges, Buhari and APC have made quality of our judiciary doubtful. Our democracy can be likened to Fela’s demonstration of craze. The fight for corruption is a ploy to destroy the opposition. The judgement will be sending a wrong message to the youths just like Ps 125 v 3 said, “The wicked will not always rule over the land of the righteous. If they did, the righteous themselves might do evil.”

– Pharm. Okwy H.A. Njike, +2348038854922

 Sarcastically, Buhari is overqualified to rule Nigeria. Without a certificate! What a country! I am laughing o. He stifled the judiciary; the legislature is a rubberstamp; the security agents are the attack dogs. Nigeria will remain a pariah in the comity of nations. The evils men do live with them nowadays. Nigeria is reaping herdsmen, banditry, kidnapping, Boko Haram, robbery, and yet no lesson learnt. Nigeria is cursed and sick.

– Smart, Abakaliki, +2348134774884

I hold Alhaji Atiku Abubakar of PDP in high esteem because of his doggedness in politics and business. But now that the presidential election tribunal has declared President Buhari as rightfully elected President of Nigeria, my advice is that all opposition contestants should accept the decision by congratulating President Buhari. In every contest, winners and losers must emerge.

– Gordon Chika Nnorom, Umukabia, +2348062887535

Casmir, I thank God Almighty for your guts over national issues. For the verdict of the presidential election tribunal, I was able to have clear verdict from the inception of the tribunal, and it became clearer to me when the former Chief Justice of the Federation, Walter Onnoghen, was intrigued out. This is Nigeria and Nigeria is eminently owned, and this cannot be disputed. Like you said, xenophobia has existed in our nation from far back and, if I may say, whatever xenophobic feelings the South Africans are displaying today on their soil is a carryover from their Nigerian counterparts.

Now to you our President, now that you are convinced of your mandate, relax to see Nigeria as your single constituency and make amends where needs be. With your security chiefs, let Nigerians travel on their roads, sleep at night and hear less of banditry, kidnapping, killings, armed robbery and the like.

– Pastor Livy Onyenegecha, Ibeku Okwuato, Aboh Mbaise, Imo State, 08036174573

 

  • Also published in the Daily Sun of Monday, September 23, 2019.

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