In a bid to secure a new $750 million loan from the World Bank, Nigeria is reportedly contemplating reinstating previously suspended fiscal measures, including telecom taxes and excise duties. The revelation comes from the Stakeholder Engagement Plan for Nigeria’s Accelerating Resource Mobilization Reforms (ARMOR) program, dated March 2024, which outlines measures aimed at bolstering the country’s financial position.
According to documents obtained by Nairametrics, the proposed tax reforms under the ARMOR program could see the reintroduction of excise duties on telecommunications services, alongside an Electronic Money Transfer (EMT) levy on transactions processed through Nigerian banks, among other taxes.
The suspension of the 5% excise duty on telecommunications and the Import Tax Adjustment levy on certain vehicles, ordered by President Bola Tinubu in July 2023, may now be lifted to meet the targets outlined in the ARMOR program, pending World Bank approval.
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Negotiations between the Federal Government and the World Bank are reportedly underway, with the overarching objective of enhancing Nigeria’s capacity to manage and mobilize domestic resources effectively. This includes measures aimed at improving tax and customs compliance while safeguarding oil revenues.
“Domestic Revenue Mobilisation drive in the government ARMOR program seeks to increase revenue on some targeted industries and sectors of the economy,’’ the document partly said.
The proposed tax reforms are poised to have far-reaching implications across various economic sectors, with stakeholders ranging from manufacturers to service providers and the general tax-paying public set to be affected. Manufacturers of goods such as alcoholic beverages, tobacco products, and sugar-sweetened beverages (SSBs) are among those likely to feel the impact of the proposed excise duties.
Key industry groups, including the Association of Licensed Telecom Operators of Nigeria (ALTON), the Committee of Bankers, and the Manufacturers Association of Nigeria (MAN), are actively engaged in discussions concerning the potential reforms. These discussions aim to ensure the buy-in of stakeholders and facilitate the successful implementation of the proposed measures.
While these measures hold the promise of augmenting government revenues, the document emphasized the need for caution to ensure that vulnerable segments of society are not disproportionately burdened by these changes.
The engagement plan emphasizes the significance of leveraging existing regulatory mechanisms within key public sector agencies to facilitate the effective implementation of the proposed revenue measures.
“Services that will be subjected to the newly introduced excises are regulated by key public sector agencies. The introduction of the new revenue measures will require the application of existing regulatory mechanisms available within these institutions,’’ the document reads.
Institutions such as the Nigerian Communication Commission (NCC) and the Central Bank of Nigeria (CBN) are identified as pivotal players in this regard, tasked with overseeing the regulatory framework governing the affected sectors.
Moreover, the ARMOR program acknowledges the intersecting domains of health and environmental protection, recognizing the pivotal role of government institutions such as the Federal Ministry of Environment, the National Environmental Standards Regulatory and Enforcement Agency (NESREA), and the Federal Ministry of Health in shaping policy frameworks aligned with public interest objectives.
At its core, the ARMOR program forms part of a broader governmental initiative spanning from 2024 to 2028, aimed at ushering in comprehensive reforms in tax and excise regimes, enhancing administrative capabilities in tax and customs administration, and fostering transparency in oil and gas revenue management.
With the World Bank’s substantial contribution of $750 million, complemented by the Federal Government’s commitment of $1.17 billion through annual budgetary allocations, the program’s ambition is expected to be matched by its scale.
Technical assistance constitutes a pivotal component of the ARMOR program, with specific allocations earmarked for the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS). The allocation of $5 million each aims to fortify the capacity of these agencies to implement the proposed reforms effectively, encompassing initiatives such as data sharing, risk-based audits, and compliance processes.
Furthermore, the allocation of $10 million for project management, tax policy capacity-building, and other expenses underscores the comprehensive approach adopted by the ARMOR program. This holistic strategy, buttressed by substantial investments in capacity building and program management, underscores Nigeria’s commitment to achieving fiscal sustainability.
However, it is coming at a time when Nigerians are lamenting over overwhelming economic hardship, underpinned by skyrocketing inflation and unemployment. Additional tax burden is the least they’re expecting from the government still struggling to address any of their numerous challenges, after one year in office.
The plan document reads in full:
“Domestic Revenue Mobilization drive in the government ARMOR program seeks to increase revenue on some targeted industries and sectors of the economy. Specific groups and agencies within affected sectors include
“1. Association of Licensed Telecom Operators of Nigeria: The introduction of excises on telecom services requires that all telcos are mobilized to fully participate in the collection of such revenue.
“2. Committee of Bankers: Introduction of EMT levy on electronic money transfers through the Nigerian Banking System would need the buy-in of all banking institutions
“3. Manufacturer’s Association of Nigeria: Manufacturers of tobacco products, sugar-sweetened beverages(SSBs), and alcoholic beverages who would be required to collect excises on their products are critical stakeholders for the introduction of the new excise regime. They are currently organized into various sectoral groups under the Manufacturer’s Association of Nigeria (MAN). Producers of alcoholic beverages organized under the Distillers and Blenders Association of Nigeria also need to key into the reforms
“4. Importers: Strategic partners involved in the importation of different items into the country will be mobilized to participate in the ARMOR program. A key stakeholder group is the Association of Nigeria Customs Agents (ANCLA).
“5. Vehicle Importers and Manufacturers: Stakeholders in the automobile trade industry must be engaged on reforms involving the introduction of green taxes on high GHG emission vehicles. Local manufacturing and assembly of vehicles is growing through a phase of growth in Nigeria. The demand for vehicles is mostly met through importation by vehicle importers under the aegis of Association of Motor Dealers of Nigeria (AMDON).”
It also added policy-making agencies: The concerned institutions include
“1. Nigerian Communication Commission
“2. Central Bank of Nigeria.
“There are also agencies with the mandate for making policies on some of the issues covered in the ARMOR program with respect to policy framework on matters of public interest in Health and Environmental Protection. The government institutions relevant to ARMOR in this regard are.
“1. Federal Ministry of Environment
“2. National Environmental Standards Regulatory and Enforcement Agency (NESREA)
“3. Federal Ministry of Health”
“The PforR Program scope includes a subset of actions from the government program to be conducted during 2024 to 2028 at the federal level. The alignment ensures that the World Bank’s intervention supports and enhances the sustainability and impact of the government initiative during the main period of implementation with a focus on reforms of tax and excise regimes, tax and customs administrative improvements, and enhanced transparency of oil and gas revenues remitted by NNPCL.
“The government program is funded from annual budget allocations of $1.17 billion to FMF, FIRS and NCS. The PforR with results based financing of $730 million, and $20 million investment financing, is 62 percent of the program budget”