When the news broke that Nigeria has escaped the clutches of economic recession, it was good news for hungry investors who were eager to see the Nigerian economy grow again after five consecutive quarters of contraction that started in 2016 and killed their investments appetite.
But the news did not matter so much to the politicians and the Nigerian elite who kept the champagne flowing even more during the economic downturn.
The ‘so called’ good news then did not also matter to the poor masses who do not know the difference between economic recession and boom as they have always been under the pressure of hardship.
For the poor masses, the economy has been in recession ever since because their welfare has never been taken seriously by the government. Worse still, the many promises of good life, jobs, security among others during political campaigns are never fulfilled, especially by the present administration.
Few months after mouth-watering campaign promises were made to the masses, the politicians seem to renege on them and, instead of fulfilling them, government is introducing policies, measures and initiatives that will make Nigerians poorer, while the rich is getting richer.
In two months (January 2020) when the approved increase in Value Added Tax (VAT) rate from 5 percent to 7.5 percent will take effect, more Nigerians with low purchasing power will become poorer as prices of everything will go up.
While commenting on the VAT increase in BBC Pidgin, Funsho Ola-Oju, tax expert at Andersen Tax, expressed worry that the increment would affect the purchasing power of Nigerians, which is still struggling to improve since the 2016 recession.
While VAT increment is yet to take effect, the recent Central Bank of Nigeria’s policy on 3 percent charge on withdrawal and 2 percent on deposit is going to distort business as many hard working Nigerians are not ready to give out 3 or 2 percent of their hard-earned money to a bank that does not carter to their interests, rather the government it serves.
Looking at the imminent hardship, Phillip Ekunem, an economist, observed that the increment in VAT is in spite of the many taxes people and corporate organisations are paying already and fears bandwagon effect. He thinks that the federal government is over-taxing people, while state and local governments are also doing same at their levels.
“You pay income tax, pension deductions, health insurance, land use charge if you are a house owner, pay for security levy in your estate, pay electricity bills, waste disposal bills, power your generator, dig your borehole among others, yet government is increasing VAT. How do they want us to survive?” Ekunem asked.
For Ekunem, the attacks on the poor masses are from many fronts, and sadly unnecessary as the Nigerian economy is still recovering and requires huge spending and not further cutting the purchasing power of Nigerians with anti-welfare policies.
Expressing his fears further, the economist said the states, local government, government agencies and parastatals will also toe the line of the federal government by increasing their respective taxes as well, with the poor masses bearing the brunt.
“What is happening now is a game of ‘we have escaped, let them suffer’ and the suffering group has always been the poor. So, that is why people are doing a whole lot of things to escape poverty. Have you heard the amount our legislators appropriate to themselves just to be sure they and their generations unborn are far from poverty? What about the poor that elected them?” Ekunem queried.
The anti-masses policies seem unending. Yet again, banks and businesses have started deducting N50 stamp duty on every Point of Sale (PoS) service from N1,000 and above. One wonders what the Central Bank of Nigeria hopes to achieve with the directive when depositors are complaining of many charges by the commercial banks.
The intrigue is that customers paying with cash will not be charged, hence encouraging many to go back to the cash system, after the CBN has claimed to achieve success with the cashless policy.
Ekunem said the 50 stamp duty directive is anti-cashless policy. “The Central Bank is confused, if not, why tell Nigerians to go cashless and now introduce something that will make people pay less when the transaction is cash-based”, he argued.
In line with Ekunem, Ademola Oketunbi, an investment analyst and university lecturer, noted that the 50 stamp duty directive is not only anti-cashless policy, but also many steps backward in the financial inclusion target of the CBN.
It would be recalled that a few years back, the CBN set a target of 80 percent financial inclusion by 2020, a target that will get Nigerians who do not bank or do online transactions to get onboard. Then, the apex bank claimed that meeting that target would help in reducing poverty in Nigeria.
With the counter policy, some analysts think the CBN is no longer mindful of financial inclusion and lifting people out of poverty.
Oketunbi explained that it was sad that Nigeria has about 96.4 million adult population, out of which 40.1 million (almost half of the population) are financially excluded in a digital age where ePayment, eCommerce, among other hassle-free financial services, products and banking innovations are trending.
“So, how are they going to get more people to be financially inclusive when new policies are unfavorable to online transactions; it means that if I need to pay someone N5 million, I may resort to cash and withdraw N499,000 until the money is complete instead of allowing the bank to collect 3 percent for withdrawing my money ”, he said.
Looking at the increments in a practical way, Ada Onyeka, a house wife and mother of four, said that it meant she could not buy 10 litres of fuel at N145 per litre at the filling station if she has only N1,450,00 in her account because the amount is not enough and did not cover theN50 stamp duty on POS.
“If my children’s school fees amount to N500,000 and that is all I have in my account, it means I cannot pay through transfer because the bank needs to deduct 3 percent withdrawal charge. So, 3 percent withdrawal charge means I need up to N600,000 in my account for the transaction to be successful. That is a huge burden on parents”, she said.
The increments are not welcome development for the average Nigerian business owner because they are additions to the many taxes and expenses they incur in doing business in Nigeria. It also means increasing prices of goods and services in a country where low purchasing power is impacting negatively on patronage.
The impact is already felt in the hotel business as occupancy has never been stable after recession, leaving Nigerian hoteliers to battle high cost of operation, dwindling revenue amid challenges of doing business in Nigeria, especially multiple taxation, which most of them say is gulping as much as 10 percent of their profit.
According to Obidike Osakwe, a hotelier and member of Hotel and Personal Services Employers’ Association of Nigeria (HOPESEA), apart from VAT, there are over 24 different taxes paid to the three tiers of government across the country amid high cost of daily operations.
Apart from VAT, some of the other taxes include company tax, consumption tax, hotel license, personal income tax, environment impact assessment, parking permits, waste water request, land use charge, radio and TV permit, LAWMA, LASAA, security among others.
“Guests are complaining that Nigerian hotels are overpriced; if the taxes are so much that we cannot operate at profit, we will shut down, and many family members of staff who will be sacked will suffer”, he said.
According to BDSunday investigations, in Lagos alone, over 15 hotels have been redeveloped into real estate and private schools as the profit margins were not big enough to pay all the 24 taxes across federal, state, local governments and agencies, and also sustain the business.
The investigations also discovered that some luxury flats in Ikoyi and Lekki axis in Lagos are empty because of the high rent. With the many charges and taxes from the lean pockets of the masses, more luxury flats, according to MilesAway, a real estate company, will be empty as many tenants would not be able to afford such flats due to declining purchasing power.
He added that companies that were struggling to save cost and stay afloat would not keep their executives in such flats.