Government moves to streamline tax waivers for economic growth

. Optimism as naira sees gradual rise
The Federal Government has created an Incentive Monitoring and Evaluation Platform (IMEP) aimed at cutting down the cost of tax expenditure and ensuring tax incentives positively impact the economy.

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who stated this in Abuja yesterday, explained that the key features of the platform include a duty claw-back mechanism, e-report generation and a centralized database.

Other features include factory geo-location tagging, industry qualification status validation, inter-MDA integration incentive tracking and issuance of Demand Notices to defaulters.

The minister also hinted that the overall intention is to reduce tax expenditures due to the granting of Import Duty Exemption Certificates (IDEC).

He said: “This system is designed to provide a framework to check-mate and restrict ineligible applicants, enforce strict compliance to fiscal policy measures and provide a robust impact analysis of tax incentives on the economy. This would further eliminate the misuse of tax expenditures; support the delivery of economic outcomes from fiscal incentives and strengthen the direct measurement of the impact of tax incentives on the economy.”

The electronic monitoring and evaluation framework in addition to the current IDEC process provides the Federal Ministry of Finance with a robust automated tool for more effective monitoring and evaluation measurement of the impact of all customs duty exemptions issued by the Ministry, government entities, companies, NGOs and international organisations.

MEANWHILE, the naira has maintained a steady rebound in the last week strengthening to about N1,100 to the dollar from about N1,900 it was a few weeks ago.

But can the naira maintain this strong stance against major currencies in the long term? Though experts differ on the staying power of the naira, it was agreed that there is a need for monetary authorities to remain true to steps that have resulted in this and the fiscal authorities to complement the monetary side with trade policies that are aimed at boosting export as well as curtail oil theft in the Niger Delta.

There is also the urgent need to rally diasporan remittances to boost forex inflows.

A former Chairman of the Nigerian Economic Summit Group (NESG), Kyari Bukar, expressed optimism that with the right framework, diasporan remittances could surpass N25 billion.

His words: “Diaspora Nigerians will begin to bring in more dollars into the market; it used to be ₦25 billion but went down to less than ₦20 billion in the last two years or so. This year, we should be able to breach that ₦25 billion and above. And if you think about it, diaspora Nigerians’ remittances are higher than oil receipts.”

Indeed, remittances are crucial to forex management policy, especially in the global south. Remittances are non-liability inflows, which means they are not like ‘hot’ money because the funds are not coming in and they fly back out to the owners. This gives the market a constant stream of supply, independent of the macroeconomic performance on trade and investment indices.

According to statistics obtained from the Brookings Institution, Nigeria is the largest recipient of remittances on the continent.

While Nigeria gets more than two-fifths of sub-Saharan Africa’s total remittances, most of these come through unofficial channels as a result of bad policies or outright ignorance of top government officials.

Some of the inappropriate policies in the last few years include slow licensing and poor supervision of digital International Monetary Transfer Operators (IMTOs) that led to most remittances being sold locally in foreign currencies.

The policy requiring remittances to be paid out in dollars locally made sending and receiving remittances officially was a bad decision.

Also, the pegged exchange rate and wide unofficial market premium meant selling to the official window meant losing out, and families and friends back home got less.

While this was going on, the immediate past governor of the apex bank, Godwin Emefiele, was not just idle and helpless. As part of the step to reign in those engaged in the act, he subsidized remittances, adding an extra N5 for every dollar with the CBN’s ‘naira for dollar’ initiative but this was ineffective in the face of an 18 per cent unofficial market premium.

The gap was a ‘broken system’ that ensured that the remittances were coming in but were not coming in because it was not impactful on the economy.

To show the impact a working system can have, the nation recorded remittances that accounted for 57 per cent of foreign exchange inflow stood at about $1.3 billion representing a 333 per cent jump from that of January 2024.

Analysts said the new IMTO framework is fair because it was done in collaboration with the industry players.

They believe that the next step should be to bring down remittance transaction costs because they are higher for sub-Saharan Africa than anywhere else in the world.