I have read many documents on the Central Bank of Nigeria’s e-Naira including the presentation which the apex bank made to financial institutions. Yet, there is one thing many are not discussing: efficient tax collection through the visibility e-Naira will give the central bank and the tax agency. Yes, I expect the tax revenue in Nigeria to improve by 17-24% by 2023 if this new currency is adopted at scale. The government has made it clear that companies must accept the new currency. Why not if I may ask? In the next coming quarters, expect digital platform classification and how transactions therein could be taxed, automatically.

Nigeria’s digital currency, eNaira, is a legal tender just like the naira that must be accepted by all merchants and business outlets as a form of payment in the country, Musa Jimoh, Central Bank of Nigeria (CBN) director of payment system management, has said.

The CBN official disclosed this during an interview on Channels TV’s ‘Business Morning’ show on Monday.

“Today, anywhere you present naira to pay, compulsorily it must be accepted because that is our fiat currency. So, the same way naira is accepted that you can’t reject it, is the same way e-naira must be accepted,” Mr Jimoh said.

The CBN on August 30 announced plans to launch its own digital currency on October 1 after instructing banks to close crypto-related accounts in February.

The CBN governor, Godwin Emefiele, said the e-Naira would operate as a wallet against which customers can hold existing funds in their bank account, and that the currency would accelerate financial inclusion which will enable cheaper and faster remittance inflows.

This national playbook will track the nation’s plan to boost ecommerce from the current market value of $13bn to about $75bn by 2025: “The Federal Government has said that it is targeting an increase in e-commerce trading, from the current market value of $13bn to about $75bn by 2025. The Permanent Secretary, Ministry of Industry, Trade and Investment, Dr Evelyn Ngige, who disclosed this on Tuesday in Abuja at the second National E-commerce Roundtable organised by the ministry noted that e-commerce had grown from 14 percent in 2019 to 17 percent in 2020.” If you can efficiently collect VAT of 7.5% on that number, you get $5.6 billion which is ahead of the $5.5 billion total VAT, across all sectors, planned for 2022.

Nigeria is ahead planning that it would rake in N2.26 trillion from VAT despite the agitation of some states like Rivers and Lagos states. Yet, the key data there is that Nigeria will be spending about 13 trillion in the plan: “Based on the key parameters driving the fiscal framework, the net amounts accruable to the Main Pool and VAT Pool Federation Account are projected at N10.52 trillion and N2.26 trillion respectively in 2022. The share of oil revenue is about 51.1% of total Federation Account receipts.”

If e-Naira is well executed, Nigeria can double its VAT tax receipts by 2024. My thesis remains that Nigeria is innovating on tax collection but not doing enough on growth initiatives. The biggest impact of e-naira in the short-term for the government would be an efficient tax regime especially on digital platforms.

All Together

Simply, if you have a national strategy to boost ecommerce and digital platforms trade and business, with e-naira which will make transactions more visible to the apex bank, you have a higher chance of collecting VAT. Why? I can say, any payment leaving any e-Naira wallet to Jumia (an ecommerce platform) must be assessed 7.5% (VAT rate) at source with no need of even asking Jumia to do that. Yes, CBN can help FIRS do that automatically.

The 6th edition of Tekedia Mini-MBA (Sept 13 – Dec 6, 2021) has since started for the self-paced program. But registration continues till next week. Yes, you can still join our academic excursion into the mechanics of business systems. Begin here and join us.

Value Added Tax (VAT) is the tax levied by government on consumer goods and products. It was introduced into Nigeria in the year 1993 via decree 102 of 1993 by the then military government to replace the Sales tax in the states introduced in 1987. The then formula for the distribution when it was first introduced was 50% to FGN; 35% to the States; and 15% to LGAs. The formula was later adjusted to 15% for the FG, 50% for the states and 35% for the LGAs and area councils of the FCT. (source; pwc Nigeria).

The VAT collection ruse and fuse between the FG and states all started when some states that generates more VAT for the FG began to feel cheated and shortchanged by the federal government. They raised an alarm that the FG can’t be robbing and ripping them off in the guise of maintaining one Nigeria but the good news is that the VAT squabble will be an eye opener. It will open the eyes of Nigerians and the eyes of indigenes of the individual states to see and know the kind of persons they elected to occupy the highest political seats in the states or being more ‘unpolitically’ correct, to see the kind of person that rigged his way in and is occupying the highest political seat in the state.

Every sane and reasonable political leader who has the interest of masses at heart should back and support the push for the VAT collection by the states or the regional government as against the collection by the federal government as this will definitely lead to economic boast in individual states and pave way for the restructuring the country called Nigeria so much need at this moment.

The background; 

The Federal Inland Revenue Service (FIRS) has been collecting consumer tax in all states of the federation for the Federal Government since 1993. The Rivers State Government decided that it is enough and dragged the FIRS to court where the state challenged the FIRS of their power to collect VAT in states of the federation including the Rivers state. The Federal High court sitting in Portharcourt gave the judgment which was delivered by Justice Stephen Pam that the VAT should be collected by the state governments and not the federal government through the FIRS and that the FG lack the constitutional power to collect VAT whether by themselves or through their privies called FIRS. This judge should be highly commended for his courage and deep sense of reason for despite being a federal judge was not biased and maintained the canon of the impartiality of the judiciary unlike other judges for the fear of displeasing their pay masters and the employers which is the FG may be tempted to hold otherwise.

The FIRS was displeased with the decision of the Federal High court and went on appeal and appealed against this decision of the Federal High Court. The court of appeal ordered all parties in the suit to maintain status quo till finally decision is reached. This implies that the FG through FIRS should continue with the VAT collection till when the court arrives at the final judgment.

My argument; 

This is a golden ticket for state governors and political stake holders of the state to develop their individual states’ economy but some political e-thugs who has turned to paupers of the FG thereby throwing away the sense of reason on a platter of food are criticizing the states that are fighting that the VAT should be collected by them.  They have closed their minds to the fact that if states start collecting VAT they will come up with ideologies, policies, plans and initiative on how to increase the economic activities of the states thereby boasting the economy, creating jobs and leading to long term development so that they will have more VAT generated in the state.

The smart and proactive governors who are initiative will definitely embrace and support the states collection of VAT as against the collection by the FG as this will lead to the economic development at state/regional level thereby boasting the collective economy; investors will be attracted when there’s an enabling environment to invest, more industries will be established in states, more jobs will be created, policies that support small and medium scale enterprises will be initiated etc.

Despite the economic advantages of states collecting VATs thy we have averted our minds to, there are also other numerous political advantages which one of the resounding advantage is that this will definitely lead to the restructuring that Nigerians have been yearning for from time immemorial. This will pave way to the reality that the states/the region can stand and flourish on their own, with or without the interference of the central government.

Do you wish to have state/ regional security? This is time to go for it, through the VATs generated in your state you can be able to funds it.

Do you have policies and projects you wish to execute and haven’t been able to execute them due to the long wait for approvals and release of funds by the FG then support the VAT collection by the states.

Do you wish to have more money to loot in your state without unnecessary censorship from the FG then this is your time to shine.

These and many more are some of the political and economic advantages and reason why state governments should collect VATs instead of the federal government and for the political stake holders of the state who are selfish and are only occupying political offices for selfish interests; can’t you see that you will be able to loot and embezzle more funds without much scrutiny when VATs are collected by the state because you are the political overlord of the state and the rest are your minions who’d rather keep eating the crumbs you through at them than calling you out.

The truth is if you generate more VAT in the state you will definitely want to collect and control the VAT so generated in your state despite party affiliation because it is the sane and reasonable thing to do if you really want the good of your state. For instance, Lagos state is not an opposition party like the Rivers state but they are also pushing for the collection of VATs by the states, no wonder the state is economically ahead because the political stake holders of the state want the right thing to be done despite the political party affiliations.

My conclusion;

It is a pity that when you call for good governance and cry out for the right thing to be done in government you are either tagged opposition or it is said that you have been bought and sponsored by the enemies of the country that want to destabilize the government and hit up the polity.

Ask yourselves, would you rather keep begging for fish and keep waiting for the fish to be given to you when you can catch your own fishes by yourself and have control over what you want and can do with your fishes?

Some state political stakeholders will answer in affirmative but it won’t be surprising as they would rather be dummies and throw away sense of reason than displease their political god fathers or go against their political parties.

No wonder some state governors like Dave Umahi of Ebonyi state is championing for the FG that the VAT should be collected by the FG. If Dave Umahi is a governor of a state like Lagos or Rivers State will he still maintain the same position? I will leave that to him to think and answer.

His state is backwards economically and he should see this an opportunity develop economy of the state and boast more economic activities is the state in order to generate more VATs from the state for the state.

This is not a political witch-hunt neither is it a sponsored turfs by the opposition against the ruling party, rather it is a great opportunity for the development of the state/regional governments of Nigeria and thereby in turn, the economic development of the country Nigeria in general. Therefore, all and sundry must embrace this move initiated by some states who has been bold enough to embrace what’s right despite party affiliations.

Nations matter and people are nations. The passport you hold could open and close many futures. A few years ago, I was in Moscow to keynote an important event. The Mayor of Moscow and the Minister of Economy had both invited me (see one of the invitation letters below). I had just written a book which received the IGI Global Book of the Year Award.

I went to Russia, they put me in the best hotel in Moscow. Then, when I was coming back, at the airport, their special agent stopped me, and wanted to know how Russia could have bestowed all these niceties to a Nigerian. The problem was not my capabilities but my passport. Needless to note that I made it back to the US, and the next day went for a US passport.

That takes me to the story of Meng Wanzhou, Huawei’s CFO who was detained in Canada for the US Government. The US  Department of Justice closed a deal with her and she has been released. Meng has been detained in Vancouver since 2018 on accusation that she worked to evade U.S. sanctions against Iran. 

The case against Huawei’s chief financial officer — one that triggered diplomatic tensions between the U.S., China and Canada — is finally coming to an end. The Department of Justice reached a deal with Meng Wanzhou in which she admitted “some wrongdoing” in the multiple charges of fraud against her, The New York Times reports, a move that will allow her to leave Canada (though her charges will not be dropped until December 2022). The Chinese tech giant’s CFO, who has been detained in Vancouver since 2018, was accused of conspiring to evade U.S. sanctions against Iran.

People, if Meng had not been travelling with a Chinese passport, her case would have been concluded and she would be in jail now. But because she is Chinese, she got to walk. It is a lesson for everyone: nations matter and economic power raises a nation. And to show that, the Chinese government has also released Canadians it locked up after Canada held the lady. Yes, it is all tit for tit and tat for tat.

In the past, Nigerians used to fly from Lagos to watch Liverpool games. Right in England, they could decide to check the Yankees in New York. The airlines will issue the US visa right in the flight. Why? Nigerians were coming home after their studies because we had a real great economy. In my village, finishing a secondary school education was celebrated with egbe nkponala (a special gun) because the next day, opportunities would come. We need the past, economically, in Nigeria.

Empires never want men and women to serve two masters: yes, no binary. For e-Yuan to rise, Bitcoin, Ether, etc must fade. And in Nigeria, for e-Naira to hold its space, BTC and cousins must be off-network. China will not kill Bitcoin but if China disconnects it as it executes a global playbook to insert e-Yuan into the commerce ordinance, fighting the US dollars, Bitcoin will struggle.

The People’s Bank of China (PBoC) has on Friday declared all cryptocurrency-related transactions illegal. The central bank said every crypto activity in the country must be banned as they pose a threat to national security and the “safety of people’s assets.”

China started an onslaught against cryptocurrencies earlier in the year, fuelling a massive crash of the market as it clamped down on miners. The latest of the series of China’s crackdown on cryptocurrency is likely the final, as the Asian country is at the verge of launching its Central Bank Digital Currency (CBDC) E-yuan.

Bitcoin is quickly losing what made it amazing to many: decentralization. Yes, even though it is decentralized technically, it has been centralized at the exchange. How? The Biden Administration now does not pursue BTC wallet owners – they simply sue the exchange, and make a case that exchanges are expected to know their customers (KYC) and adhere to anti-money laundering (AML) protocols because for exchanges to have received their operating licenses (they need them to be connected to banks), they promised to do so.

I wrote here last year that China will be opening banks in many countries to help them push e-Yuan. A Chinese bank is coming to Nigeria soon, according to the ambassador. Bitcoin is a distraction for China: there is the US dollar to battle. Who wins will take the mantle as the economic superpower of the 21st century.

China’s central bank has deemed cryptocurrencies, including bitcoin and ether, to be illegal. The People’s Bank of China said via an online statement the move was to “maintain national security and social stability,” per The Wall Street Journal, and it comes as the country tests its own digital currency. China has been trying to regulate cryptocurrency for years — it banned bitcoin back in 2013 — and just this past May it announced a crackdown on crypto-trading.  What does this mean for the U.S.? One blockchain expert says “it could impact market volatility for investors.” (LinkedIn)

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Comment: The play book is to make e-Yuan and e-Naira a weapon that will jointly reduce fx issue by US dollars. BTC will not be an issue because it doesn’t symbolize any country currency.
We expect naira to gain value in the long run due to the benefit to be derived from e-Naira on the strength of its cross border trade.

My Response: If e-Naira becomes a node within e-Yuan making it possible for Nigerian importers to pay for things in China, few will need USD.  At least, 70% of USD people fight for are used to import things from  China when you exclude education and healthcare from Nigeria. Yes, I will not buy any thesis that is built on the efficiency of transactions to move pricing equilibrium without a shift in the balance of trade. So, e-Naira will not fix the FX issue if Nigeria does not produce things. Simply, any gain will be ephemeral.

China Declares Everything Cryptocurrency Illegal