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Removal of subsidy, Election 2015, tax increase…: The 10 issues that will define 2015


Removal of subsidy, Election 2015, tax increase…: The 10 issues that will define 2015

by Bayo Adeyinka

With 2015 fast approaching and considering the issues that doted the landscape in 2014, it becomes pertinent to project and consider what are likely going to be the major issues that will define 2015.

Here’s my Top 10 countdown in no particular order:

1. Election 2015

This is unarguably the major issue in 2015. For the first time in Nigerian history, we have a formidable opposition. In the countdown to the election, there has been several re-alignments of political interests and very succinct political intrigues are being played out. We may see the electoral map being re-drawn across states and several constituencies all over the nation. However, there are several questions begging for answers- will there be elections in the North East currently bedeviled by the violence of the Boko Haram insurgency? Can the opposition actually unseat the incumbent? Will the South West remain under the grip of the APC or are we about to witness a power shift? With the potential of violence occurring in the wake of the election and considering the 2015 ‘doomsday prophecy’ of Nigeria’s disintegration, the success or otherwise of the election will go a long way to determine the continued existence or basis of a united Nigeria.

2. The War Against Boko Haram

As the whereabouts of the Chibok Girls remain a mystery, the war against Boko Haram will continue to be prosecuted by the military. With the recovery of several towns and villages hitherto captured by the insurgents, it is expected that the military will pursue an aggressive strategy once the 2015 election is concluded. With the Federal Government turning towards Russia for armaments, it is certain that a new policy is being evolved to counter the activities of the insurgents. But how far can the military go? Will the insurgents take on new territories especially with the recent alarm that ISIS is collaborating with them? What will happen to the Internally Displaced Persons? Will the Chibok Girls ever be found? Now that Ihejirika has sued the Australian negotiator for libel, how far can negotiation with the insurgents go? Can the local sponsors ever be unmasked?

3. The Price of Oil, Devaluation of the Naira and The Impact On The Budget

With the recent slump in oil prices and the subsequent impact on the benchmark of our national budget, it is clear that the success or otherwise of the 2015 budget rests solely on how the impact can be mitigated. With the foreign reserves at a low point and excess crude savings depleted, it will require astuteness on the part of the managers of the economy to ensure all capital expenditures continue as scheduled while recurrent expenditures are met. But with some states already defaulting in the payment of salaries, it remains to be seen for just how long will states continue to go cap-in-hand to the Centre in order to meet their needs. Will the Federal Government borrow to finance the budget deficit? How soon can the monolithic economy be diversified so as to cushion the impact of the low oil price? Can the Sovereign Wealth Fund come to the rescue?

4. Increase in VAT

With the need to shore up revenue projections, it has become imperative for the Federal Government to seek for other ways to make up for declining oil receipts. At the current rate of 5%, the Federal Government generates about N600b from VAT receipts annually. With the Coordinating Minister of the Economy sounding off a proposed increase to 10%, the implementation may be just a matter of months away. The increase has a potential of doubling the VAT receipts to N1.2trillion, a much needed cash injection which will be shared among the three tiers of government. Nigeria has the lowest VAT rate in Africa and is one of the lowest in the world ( Benin Republic-18%, Senegal-20%, South Africa-14%, Cameroun-19.5%, Ghana-17.5%, UK-20%). But can increase in VAT hinder the flow of investments? What impact will it have on inflation?

5. Introduction of  Luxury Tax

The Federal Government has proposed to introduce luxury tax on private jets, luxury yatchs, luxury cars, business and first class tickets on airlines, champagnes, wines and spirits in addition to Mansion tax on properties in the FCT with value above N300m. It is expected that about N10.5b will be raised in 2015 from this new tax regimen. Are we going to see a reduction in the purchase of these luxury items? How well can the government pursue the implementation of this new tax policy, given that it’s targeted at the nouveau rich? With 600,000 bottles of champagne consumed annually in Nigeria and with Nigerians spending N41b annually on it, it is not unexpected that the country is the second fastest market for champagne in the world. Will the introduction of this luxury tax cure the addicted patrons of their expensive culinary pleasures and recede the market?

6. The take-off of a new Development Finance Institution (DFI)

Described as “a wholesale financial institution that will support our private sector, especially small and medium enterprises (SMEs), to access more affordable financing with longer tenure”, this is one institution whose take-off in 2015 can lead to an exponential growth in the SME segment of the economy. With a seed fund of $400m from the African Development Bank (ADB) and another $700m from the World Bank, this new organization may just be the real deal.

7. Ongoing Power Reforms

With the successful unbundling of the PHCN and the emergence of successor companies and new owners through a bidding process, the search for improved electricity continues. The Federal Government has introduced a N213b Power Intervention Fund which is designed to settle legacy gas debts, procure equipments, purchase transformers, execute metering projects and prosecute maintenance programmes. Beneficiary companies are meant to repay the facility over a ten-year period. How far can this intervention go to guarantee stable power supply across the nation? Will Nigeria finally see the stable power supply which Aso Rock has been promising since 2011?

8. Nigeria Mortgage Refinance Company

With over 66,000 applications received for 10,000 mortgages, the establishment of the Nigeria Mortgage Refinance Company in the second half of 2014 is justified. With a refinancing window of up to 20 years, the actual kick-off of the first tranche of mortgages in 2015 will re-define the housing landscape in Nigeria. With a plan to create about 200,000 mortgages annually, plugging the 17m housing deficit seems to be a herculean task. However, the potential of this initiative viz creation of new jobs and deepening of the middle class is something to be watched out for.

9. Rail Sector Transformation

With the Port Harcourt- Enugu rail line commissioned about a week ago, the intra-city train service in Lagos State, the resuscitation of the Lagos-Kano route and the completion of the track laying work of the first standard gauge railway modernization project linking Abuja with Kaduna, the journey to economic recovery has started. The Abuja-Kaduna project being undertaken by the China Railway Construction Corporation is expected to be delivered by February 2015. Constructed in three years, the rail road project gulped nearly 850 million U.S dollars and lasts 186.5 km with nine stations and a design speed of 150 km per hour.

The Abuja-Kaduna rail line is one of the first Standard Gauge Railway Modernization Projects (SGRMP) undertaken in Nigeria. It is the first segment that is being implemented as part of the Lagos-Kano standard gauge project, which will link the commercial hub of Nigeria and the hub of economic activities in the northwest region of the country.

10. Removal Of Subsidy

The Federal Government has proposed to cut subsidies by half in 2015 – from N971.1b this year to N458.6b subsidies next year. Kerosene subsidies will also be cut to N156 billion from N250 billion. With 70% of the income of the nation coming from crude oil exports, the global decline in oil prices has bitten hard into Nigeria’s income. While the last attempt in 2012 sparked off a week of riots, how the Federal Government will pull this off in an election year remains to be seen.

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