Tag: Abysmally low

• It is incredible that only about 100,000 of 1.9m POS operators are registered

The effort by regulatory authorities to get the Point of Sale (POS) operators to register with the Corporate Affairs Commission (CAC) is commendable, as the advantages are legion. With an estimated 1.9 million POS terminals operational across the country, identity tracking poses a serious challenge, if an operator is not registered. So, we commend the formalisation project undertaken by the CAC to help POS operators to get registered.

But, the report that only 100,000 operators have taken advantage of the special window is worrisome. With banks’ lethargic in the performance of their service of making cash available to customers, POS operators have become the major source of cash- backed financial transactions in the country.

From small amounts to several millions, the POS has become the medium of transaction for many Nigerians, and sometimes these transactions are done while the customer is on transit. Where the transaction fails after the customer has been debited, there is usually the challenge on how to track the POS operator, especially when unregistered.

Getting the POS operators to register with the CAC is important, not just for the customers but also for the nation’s security. Kidnappers and sundry criminals also use POS to execute their nefarious activities. Movement of ransoms and other illicit monies done through unregistered POS can pose a challenge to security operators working to solve a crime. 

According to the Nigeria Bureau of Statistics (NBS), Nigerians paid approximately N2.23tn as ransom to kidnappers between May 2023 and April 2024. Though disputed by security agencies, the amount is staggering. Most of that money would have passed through POS, and where the operator is unregistered, the illicit financial flow maybe difficult to trace. We therefore urge the government to review the security implications of non-registered POS operators, and determine whether to ban banks and customers from patronising them.

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 If the fear that they constitute an untraceable link to criminal activities is true, then the matter should be treated as a security challenge, not merely a commercial choice to register or not.

With banking halls turning ghostly, POS operators are taking advantage to rip off customers. The amount to charge customers for cash sometimes depends on the whims and caprices of the operator, which should not be so. Again, while banks sometimes claim they have no cash to dispense on their Automated Teller Machines (ATMs), POS usually have, at high cost.

 Nigerians indeed believe that the banks and the POS operators collude to cause artificial scarcity in the banks. A trending anomaly is that while some POS operators have newly-minted cash to sell, the ATMs dispense old cash, when the banks have it at all. Of course, the sale of freshly-minted cash by banks is a common phenomenon in our country. We see humongous new notes moved around and sometimes abused at social events and other ceremonies, while banks claim not to have new notes when approached by ordinary customers.

Recently, the Central Bank imposed N1.35 billion fine on Deposit Money Banks (DMBs) for their failure to make cash available in the ATMs during the yuletide.

To check the trend, security agencies should trace and prosecute the offenders, both in the banking sector and the POS operations. Registered POS operators can also be differentiated from unregistered ones by the compulsory display of registration number at the place of business.

Clearly, the unearned income, like excess charges by POS operators or the fees from sale of new notes, which add no value to the national economy, merely fuel inflation across the country. We urge relevant monetary authorities to understudy the challenge posed by unregistered POS operators and proffer solutions for the good of our national economy.

There is the need to codify the operations of POS, and adequate guidelines put in place for the benefit of our economy.

• Nigeria must work on its tax-to-GDP ratio for sustainable development

While the contentions over the tax bills presented by the Tinubu administration rage, House of Representatives Speaker, Tajudeen Abbas, has certainly done well to urge gladiators to focus on the big picture: the country’s abysmal low tax-to-gross domestic product ratio and its long-term fiscal sustainability.

Putting the issues in context at an interactive session on Tax Reform Bills organised by the House last week, Speaker Abbas had stated: “Nigeria, despite being Africa’s largest economy, struggles with a tax-to-GDP ratio of just six per cent, far below the global average and the World Bank’s minimum benchmark of 15 per cent for sustainable development. This is a challenge we must address if we are to reduce our reliance on debt financing, ensure fiscal stability, and secure our future as a nation.

“The proposed tax reform bills aim to diversify our revenue base, promote equity, and foster an enabling environment for investment and innovation…as representatives of the people, we must approach these reforms thoughtfully, understanding their potential implications for every segment of society. Taxes should be fair, transparent, and justifiable, balancing the need for public revenue with the burdens they impose on individuals and businesses”, he was further reported to have said.

Speaker Abbas could not have framed the issues better. To use the Revenue Statistics in Africa 2023 publication for better understanding: Nigeria’s tax-to-GDP ratio, it found, only increased marginally by 1.1 percentage points from 5.5% in 2020 to 6.7% in 2021, whereas the average for the 33 African countries covered by the publication remained unchanged over the same period at 15.6%. The publication further observed that since 2010, the average for the 33 African countries actually increased by 1.5 percentage points, from 14.1% in 2010 to 15.6% in 2021, whereas for the same period, Nigeria’s tax-to-GDP ratio decreased by 0.6 percentage points, from 7.3% to 6.7%. It puts the highest tax-to-GDP ratio for Nigeria since 2000 at 9.7% in 2011, and the lowest 5.3% in 2016. By way of contrast, Ghana’s tax to GDP was 13.1% in 2020 and 14.1% in 2021.

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This, to put it mildly, is scandalous. Unfortunately, the irony isn’t that the issues are any clearer now than they were in the past; rather, it is that successive governments were not ready to confront this patent anomaly by way of a comprehensive tax reform to enhance and streamline the process. For instance, we know that few Nigerians outside of the formal sector actually pay their taxes – and most in this segment actually fall within the category of those whose taxes are deducted at source. The rest, particularly the rich, moneyed class, are more often than not content to pay the minimum possible merely to fulfill all righteousness.

As for the informal sector, their case is even worse; though known to contribute some 58.2 percent of the GDP, representing approximately $1,408 billion at GDP PPP (purchasing power parity) levels, the sector actually accounts for less than what could be considered to be commensurate share of applicable taxes.

The challenge, though already well known couldn’t therefore be clearer in the circumstances: Ensuring that every eligible payer is brought into the tax net, simplifying both the laws and the process to make collection less cumbersome, and using technology to

foster the process; in short, making the process and outcomes fairer, easy and accessible to everyone.

These, being the declared goals of the tax reforms of the Tinubu administration, are measures that ought to have been taken by previous administrations. 

Again, to borrow Speaker Abbas’ words: “This is a challenge we must address if we are to reduce our reliance on debt financing, ensure fiscal stability, and secure our future as a nation”.

We couldn’t agree more. It is the reason we urge the support of every Nigerian.