May 26, 2024

Zacch Adedeji, Acting Chairman of the Federal Inland Revenue Service (FIRS), Taiwo Oyedele, Chairman, Presidential Committee on Fiscal Policy and Tax Reforms and President Bola Tinubu

Oredola Adeola

 

The Federal Government has been charged to implement forward contracts for the importation of Premium Motor Spirit(petrol) suspension of Value Added Tax (VAT) on diesel and tax waivers on Compressed Natural Gas (CNG), CNG conversion, and renewable energy items, as a short-term measure pending improvement in key economic indices.

 

 

This was part of the items contained in the key recommendations by the Presidential Fiscal Policy and Tax Reforms Committee set up by President Bola Ahmed Tinubu to review and advise on reforms to shape Nigeria’s fiscal policy and tax system.

 

 

The report, known as the “Quick Win Report,” was presented to President Tinubu on Tuesday, with key recommendations to address critical economic issues ranging from exchange rate management, the impact of fuel subsidy removal, moderation of inflation, and facilitating economic growth.

 

Based on the recommendation of the Reforms Committee, the implementation of forward contracts for the importation of PMS would serve as an attempt by the Government to hedge against the risk of fluctuations in currency exchange rates.

 

EnergyDay gathered that the forward contract can provide a hedge against FX volatility which has been having significant impacts on the cost of importing PMS.

 

Further, checks showed that forward contracts can help firms adequately project cash flows. It was revealed that when the government locks in a price for PMS in advance, it can better predict their expenses and budget accordingly.

 

 

The risk management instrument through forward contracts by importers, traders, and refineries can help the Nigerian Government manage risk exposure to fluctuations in the price of PMS.

 

 

EnergyDay gathered that the forward contracts can be made for up to a year in advance, making them a suitable short-term measure for FG to manage the cost of importing PMS.

 

 

The Presidential Fiscal Policy and Tax Reforms Committee also called for the suspension of Value Added Tax (VAT) on diesel and tax waivers on Compressed Natural Gas (CNG), CNG conversion, and renewable energy items.

 

 

This is aimed at encouraging the use of cleaner energy sources and reducing the cost of doing business in the country.

 

 

The committee further recommended measures to address duplication of functions in public service, ensure prudent public financial management, and optimize value from government assets and natural resources.

 

 

It, therefore, proposed the stoppage of 190 taxes choking businesses in the country and the pruning of the long list of officially collectible taxes to under 10.

 

 

 

President Tinubu while responding to a presentation by Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, assured them of his support for the review and implementation of key recommendations.

 

 

 

Tinubu said, “I have listened attentively to your report. Charting the critical path forward for Nigeria’s economic recovery is crucial to all of us. I want to say thank you to your delegation.”

 

 

He granted the request of the Committee to address a meeting of the Federal Executive Council (FEC) and apprise cabinet members of their work and expected outcomes to facilitate economic growth.

 

 

Zacch Adedeji, Acting Chairman of the Federal Inland Revenue Service (FIRS), in his comment on the report, pledged to ensure the implementation of the recommendations of the committee, as they may apply, pending the approval of the President.

 

 

Adedeji declared that beyond supporting the fiscal and tax reforms, the FIRS will explore opportunities to diversify the nation’s revenue sources, as the historical overreliance on oil has made the economy vulnerable.

 

 

He said, “Nigeria’s fiscal policy serves as the foundation of economic stability. It dictates how the government collects, manages, and allocates resources for the betterment of our people. A well-developed fiscal policy is crucial for the provision of infrastructure, healthcare, education, and social services to our growing population. Tax reforms are an integral part of a robust fiscal policy.

 

 

“While our current tax system has contributed significantly to our revenue, there remains room for further enhancement; enhancement that can be driven with digital technology. To achieve this, we are collaborating with the Presidential Committee to streamline our tax laws, improve voluntary compliance, and expand the tax base to ensure equity and fairness,” Mr. Adedeji said.