STAMP DUTIES: Policy will stunt financial institutions patronage — Expert
By Udeme Clement
As the Federal Government continues to put measures in place to prevent Nigeria’s economy from sliding into a recession in 2016, the system faces numerous challenges with a telling effect on the citizens. The Central Bank of Nigeria (CBN) has directed all commercial banks to charge customers N50 on deposits from N1,000 and above, as part of Nigeria’s stamp duties law on financial transactions. The Nigerian Electricity Regulatory Commission (NERC) wants to increase electricity tariff by next month. The CBN said no more sale of dollars to Bureau De Change (BDC) due to scarcity of forex. The naira is depreciating beyond the control of the apex bank, despite monetary policies formulated to shore up the currency. A financial expert and the National President, Constance Shareholders Association of Nigeria, Mr. Shehu Mikail, speaks on issues in the economy and how government can prevent Nigeria’s economy from going bankrupt.
The CBN has directed banks to charge N50 for deposits of N1.000 and above, in line with the Nigeria’s stamp duties law on financial transactions. What is your take on this?
I do not like this type of policy because it will discourage people from keeping money in the banks. At present, Nigeria is largely un-banked, especially the rural areas. So, this type of policy will worsen the situation, in particular for traders doing business in the rural areas. It will have negative effect on the cashless monetary policy that is already in place. It is also another way of imposing extra tax on the poor masses. The CBN should jettison this method of taxation and come up with a monetary policy that will strengthen the naira to grow the economy, instead of putting another tax burden on the people.
NERC wants to increase electricity tariff by next month. How does this affect low income earners in the country?
NERC must not increase power tariff without giving consumers pre-paid meters. Currently, about 80 percent Nigerians do not have pr-paid meters. Aside from that, what is the justification for increase in power tariff? Is it that power supply has improved better that before, and for that reason they want to increase the tariff? These are things NERC should make clear to us before talking about increase in tariff. Is NERC trying to make us pay more for what we are not consuming? Is this another way of taxing the people? If at all, NERC wants to increase power tariff, the amount must not be more than N4 per unit, because now we are paying over N2 per unit.
What is the economic implication of the purported missing budget 2016?
In the history of Nigeria, this is the first time we heard that a budget was missing. This is not good for our economy, because investors will look at us as people who are not serious. If government altered the budget after it was presented to the Senate, it means they do not have a good economic team. Before the budget came out, they ought to have mapped out a good economic plan on how to implement it, in order to rejuvenate the economy. A budget is very important, because that is what investors look at in making decision on whether to put their money in any economy or not. So, for us to hear that the budget was missing, is ridiculous.
The International Monetary Fund (IMF), advised government to restructure the tax system to curtail excessive borrowing from external source. Do you share such opinion?
Borrowing is a way of accumulating more debts for our economy, and at the same time, we spend so much to service debts. For instance, about N1.47trillion is allocated for debts servicing in the purported missing appropriation bill for 2016. But if we have good reasons to borrow to develop our infrastructure, I think we can borrow. The implication is that, continuous borrowing will make our currency to depreciate the more.
The exchange rate now is about N309 per dollar, which is the first time in the last 43years that the naira depreciated so low.
What is the way out?
Government should come up with a good economic blue print on how to restructure the economy. The immediate past minister of agriculture during the administration of President Goodluck Jonathan, did a lot to develop the sector. Let President Muhammadu Buhari look at some of his policies and see how he can build on them. We need to revamp agriculture and the manufacturing sectors, so that we can start producing goods for domestic consumption and export. Continuous depreciation of the naira shows that the economy generally is in serious stress. If nothing is done to strengthen the system, our economy will slide into a recession. Look at the capital market, since the second quarter of last year till 2016, the market has been experiencing huge investments outflow.
The CBN said no more forex for Bureau de Change from its official window. Do you think the forex policy of the apex bank will strengthen the naira?
The CBN is trying to manage the financial system, but the implication of restricting BDC from getting forex can give way to black market situation, because importers will look for other means of getting forex. At the end, the masses will suffer the outcome, because prices of goods and services will increase due to high cost of foreign exchange. As such, there will be inflation in the system.
What can be done to reposition the economy at this point?
As I said earlier, let us come up with a good economic blue print on how to resuscitate the economy to prevent the economy from going bankrupt. Let us look inward to revamp the industrial sector for businesses to thrive and create wealth. The living condition of the people should be improved upon. Let President Buhari get experienced economic team to work with him. He is doing well on tackling insecurity, but he is not doing enough to revamp the economy.