 Welcome back now straight to the issue of the day. President Mohammad Buhari has approved increase in some taxes as his parting gifts to Nigerians as he runs off his tenure. It is the new fiscal policy measures for 2023. The FPM introduces additional exercise duty ranging from 20% to 100% on alcoholic beverages, tobacco, wines, and spirits. Nigeria will begin to tax single-use plastics while 5% telecoms tax has been approved. The taxes will take effect on June the 1st this year, immediately after the end of the Buhari administration. Financial analyst Shabu Shukriton joins me now to discuss further on this issue. Many thanks for joining me, Shabu. Thanks for having me. Okay, let's just look at this revised exercise duty rate. Additional exercise taxes ranging from 20% to 100% increase on previously approved rates for alcoholic beverages, tobacco, wines, and spirits have been introduced, effective from June the 1st, just a day or so, or two days after the president leaves office. What does this really entail? What would be the impact on the manufacturing sector specifically on the alcoholic and non-acoholic beverages sector? Well, I had always said, so before we think about or talk about the impact of this policy, both the fiscal policy measures and this new approval from the president with regards to some additional taxes, we need to just oppose this within the context of our reality, the reality of Nigeria. And I think this is important because that will then enable us to relate with this issue better, from a better perspective. In the last couple of weeks, I've had reason to talk about this, so it's very instructive that it's coming up again, that Nigeria's biggest problems is the capacity of our government to generate revenues. It's one of our biggest problems as a country. And I have always said that the much-bounded diversification of our economy is actually mirage, it's a myth, that's not our problem. Our economy is very widely diversified. If you look at GDP and the breakdown of our GDP, you find that in fact, the much-talked about dependence on oil revenues is not true. The reason the oil appears to be a problem is because we depend on oil for majority, for the bulk of government revenues. So Nigeria has a revenue-generating problem. Just to demonstrate or illustrate this, our tax to GDP ratio as a country is 3.7%. This is atrociously low. This is the lowest, more or less, technically speaking, it's the lowest in the world, practically, because there are only six countries that have lower tax to GDP ratios at the 2021. And those countries are four countries in the Arab, in the Arabian Peninsula, who do not tax their citizens at all. In fact, who actually give their citizens stipends on a monthly basis. And then two countries that are at war, besides these six countries, Nigeria's tax to GDP ratio is the lowest in the world, is the lowest in Africa. Togo, Ben-Republic, Ghana, have far higher tax to GDP ratios. We have Togo having 20% tax to GDP ratio. The highest tax to GDP ratio in the world is always fluctuates between Sweden and Denmark. And it always hovers between 45, 46% to 50%. So to juxtapose that against the 3.7%, you begin to see the enormity of our problems. So any policy that will enhance the revenue-generating capacity of government must be encouraged. And it is within that context that my own perspective on all of this, this recent policy action by the president comes from. So now coming back to the exercise and duties on alcoholic beverages, spirits, and all of that, and you see increases of between 20 to 100%, I have always actually advocated for this. I know people that like their alcohol may not really like this because obviously it is going to increase the retail prices of these things and perhaps affect some people's disposable income, affect the manufacturing sector because obviously they would have to pass the additional cost increases that that means to them, to their consumers which could suppress consumption. So there is a wider economic implication of some of these things that I think that government needs to be careful to play a careful balancing act on, but it's an initiative in the right direction. I don't think it's been implemented properly. Some guidelines that need to be followed are not being followed, but it's a move in the right direction, just needs to be better implemented. All right, before I get into my next question, something just thought just occurred to me as you just rounded off your thoughts just now. You said it's a step in the right direction, but my question would be that school of thought believes that adequate stakeholders' consultation was not done and it was actually ear-timed. I don't know if you agree. Yes, absolutely. So that's why I said, well, on the one hand, it's a step in the right direction, but on the other hand, the implementation approach is faulty, but there are a lot of things that haven't been done by the government in approaching this. Again, for context, these things take effect less than a month from today. Today is the second of May and the President has approved a policy that will significantly impact the manufacturing sector, the productive sectors, our trading sectors, motor vehicles, telecoms, almost every facet of our lives significantly. And he wants those things to take effect in 28 days time. That is unacceptable. That can't happen. So for example, what you've just said now, the stakeholder engagement. Of course, you can't just slam taxes like this on the economy and on citizens without speaking with critical stakeholders. In this case, who are the critical stakeholders? Organized private sector, manufacturer as a session of Nigeria, NECA, you know, government must sit down with these people, convince them of the need for these policies and then present to them an implementation timetable, timelines that will ensure that they can also prepare, they can also sensitize their own stakeholders. For example, if you're going to increase prices as a manufacturer or say bear, or other alcoholic beverages or even tobacco, you want to send some sort of a notice to your wholesalers, your distributors, a lot of these organizations don't deal directly with the open markets. They have large distributors and those distributors are critical to their success. If you just slam a price increase on them without adequate notice, there is a multiplier effect, there's a triple down effect that would also impact their own businesses negatively and some of them may have no choice but to seek other partners to do business with, or some might even leave their business line entirely if the changes are too impactful to them. So government needs to give all of the stakeholders time to make the necessary adjustments, implementing a policy you've just approved now in 28 days are acceptable. Also, there's a legal requirement for this. The appropriate tax laws actually makes a provision for a 90-day notice before increases in a lot of these taxes that government is trying to increase. So government really needs to look at this, and ensure that they are. Let's talk about policy and direction and all of that, specifically for that of the telecoms and taxes or excise as it were. We're looking at them on 5% or so. But before now, we had an approved rate for between 2022 to 2020 for a roadmap. It was approved sometime last year with the FPM. But right now we're seeing another increment when the supposed 2022 to 2024 has not actually elapsed. Well, so what happened? That particular law, the fiscal policy measure that you speak about that was approved in 2020, as a part of the Finance Act in 2020, and that was gazetted sometime in 2022 last year, was eventually not implemented. I think this must be made clear. So especially the telecom tax part of it. So there was a bit of an outcry from telecom sector stakeholders and I think from sections of the general public. For example, there's an association of telecom subscribers. And that association also spoke at the time. I recall very clearly. And government then suspended the implementation of that policy. So I think what is happening now is that the government is trying to bring it back as a part of this new document that the president has just approved. So it's not really, it hadn't been implemented before. So it's not as if there was a 5% tax on telecoms spend that was introduced last year and were introduced in another 5%. That 5% was actually not implemented and it is that same tax that is now being reintroduced. But I think that everything that I said with regards to the timing, with regards to the notice as required by law applies to this as well. Signing a policy into law or bringing out an approved policy on the first of May for implementation on the first of June is illegal actually. And I mean, people that want to sue the government can actually do so. All right, Shergo, let's talk about compliance requirement. Because as it is right now, it is a bit still unclear how these new taxes would be administered. Specifically, the federal government talked about the green taxes. They talked about single-use plastic and all of that. So how do we know about the frequency of payment compliance, some timelines, penalties and detailed regulations? This has not been clearly spelled out. So typically what happens when government comes up with new policies, new laws like this is that there will then be further clarifications from the relevant government agencies, paracetals or ministries. In this case, talking about the green tax what one would expect. First of all, there are two angles to this. There is the environmental impact, climate readiness, carbon zero impact. All of those things fall under the purview. I would imagine of the ministry of environment. And then there is a tax angle, which falls clearly and directly under the purview of the ministry of finance and the FIRS. So you would expect that there will be a policy clarification, memos, circulars that will be released in due course before those tax, before this will be implementable. So like you say, at what point will this be applied? And when I say at what point, I mean at what point in time as well as at what point in the value chain. So who is paying this tax? Is this tax being going to be payable by the manufacturers of the single use plastics? Is it going to be paid by the manufacturers of the imputes by high density polymers, HDPs, for example? Or is it going to be applied at the point of sale? So a lot of these things have not been clearly spelled out. And indeed, I think that they cannot. So what one would expect to see is that there will be further clarification in the coming weeks from the relevant government agencies. One final question for you, Narshego, before we leave off from this tax matters. I'm still interested in the telcos tax and all of that because virtually all Nigerians will be affected in one way or the other by this. Do we see a situation where Nigerians will pay more for calls for internet data and of course for even SMS? No, I don't think so. I think that what this would mean would be that the telecom operators would absorb this additional cost. It's a 5%, it's significant, but it's not something that they can't adjust for. Let's not forget that the Nigerian telecoms market, even though it's now about 20, 21 years old, is still far from being a mature market. In a lot of markets, mature markets, in developed economies and in developed societies, voice calls are free. So we're still not in that place at all. In a lot of those places, data is the source of revenue for telecom operators and voice calls are either completely free or heavily discounted, extremely cheap. So I think that even though there's a counter argument with regards to operational costs in Nigeria because of infrastructure challenges and infrastructure deficits, but I think that one can still argue that this additional tax most likely because also of competition in that space, I do not see the telecom operators having the courage to increase tariffs. They could do it in some underhand measure, in some underhand manner, where they are not announcing those increases and just making careful small adjustments across their various tariff platforms. But I don't think that it will come out in the open and state calls will now be more expensive. All right, thank you so much. We have been speaking with Sheldon Shukwito, financial analyst on the recently introduced tax by the federal government. We do appreciate your time. Thanks for having me. As we go today on the show, we'll leave you with this feature. Over 400 women in the limo show area of Lagos State have received free digital training to scale their business. This form part of financial literacy and inclusion program organized by the She Enabled project in collaboration with Google details in this report. I am Justin Akadone. I'll see you again next time. Bye for now. Women in Nigeria are highly interested in becoming entrepreneurs, but face unique challenges including access to financial and business development services, as well as information that are critical to formalizing and growing their businesses. We need to help you get into the digital field. She Enabled is a financial and digital inclusion project by the EGO Foundation which seeks to empower women and girls living in underserved communities in Nigeria. Tuluwashi Olanio is executive director. He speaks alongside others. Designed to support women, particularly women at the grassroots, to help them in terms of deepening their financial literacy, financial knowledge, and also deepening their digital knowledge. If we have good education, if we have the same training the men do in terms of from primary education, teach them, teach them digitalization, teach them digital transformation, how to move your business, how to scale up. And now with what's going on everywhere, you need to scale up. We have to create more methods to be able to help them understand why. It's necessary to have some certain things in place and how those things can be beneficial. So for financial institutions, microfinance banks, insurance companies, the regular cluster, they need to be able to change the way they interact, document, and how they promote their knowledge or disseminate information so that these people can actually benefit. The She Enabled project addresses the United Nations Sustainable Development Goals one, three, and five. Targeting unemployed females living below $2 per day. Some of the participants share concerns and opportunities. There are so many challenges out there, like one. Though we are in digital world now, so visibility is part of it. Then secondly, at times, financial support. Benefits are actually limitless because we are people from different categories of businesses, we do different things. I don't know when I'll need someone's services. So I feel that events like this will help us meet people outside of our own niche. The major problem is the same problem that we have always had, right? And we need to continually re-emphasize. It's that, I mean, a lot of them feel that it's not needed for them as such because they feel that the home is built around the man. According to Global Entrepreneurship Monitor, Nigeria has the highest number of women entrepreneurs in the world. This high level of women's participation in entrepreneurship has been found out to be necessity driven. Just in Nakadone, plus living in these Lagos.