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Market Digest Nigeria

Economy

Nigeria Loses $30bn yearly to revenue leakages -Reps

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ABUJA– The joint House of Representatives Committee on Fi­nance, Banking and Currency on Monday said that Nigeria lost about $30 billion from 2005 to 2019 annually from revenue leak­ages.

leakages

The leakages were ba­sically from activities of agencies and companies in banking, oil exploration, engineering, procurement, construction, installation, marine transportation, manufacturing and telecom­munications upon which the committee noted signif­icant foreign exchange and revenue shortfall infrac­tions against the country.

The Chairman of House Committee on Finance and co-chairman of the joint committee, Hon. James Faleke, at the commence­ment of the investigative hearing said the House at its sitting on March 5, 2020, resolved to conduct an in­vestigative hearing on rev­enue leakages in excess of $30 billion.

He said, “The necessity and commencement of this investigation of the leakages was as a result of growing problems (leakages) in the financial management of all the God-given resources in our country, Nigeria, from our vast natural resources to the value added by these resources in the form of foreign exchange earnings and revenue generation etc. into these investment envi­ronment and opportunities.

“Thus, this committee deemed it imperative to in­vestigate revenue leakages and loopholes in the system that have contributed to a loss of over $30 billion in annual federation tax reve­nue between 2005 and 2019.

“The investigation of the leakages, therefore, was premised on the documents received from target agencies and companies in banking, oil exploration, engineering, procurement, construction, installation, marine trans­portations, manufacturing and telecommunications upon which the committee noted significant foreign ex­change and revenue short­fall infractions against the Federal Republic of Nigeria by these stakeholders.

“This places an impera­tive need to put an end to, or at best, minimise all at­tributable infractions that have been instruments in the hands of some stake­holders in bringing econom­ic woes to this country and her people.

“During our documenta­tion compilation and a fur­ther look at the economic woes caused the country by some companies, the com­mittee has noted the follow­ing major infractions which have multiplier effects on other infractions:

“Lifting of some crude oil and gas by oil exploration companies that were not wholly and legally allocat­ed to the consignors in JV, PSC and PSA exploration activities including those whose crude oil certificates of quantity were not signed by the Department of Petro­leum Resources and termi­nal operators.

“Concealment and non-disclosure of some crude oil lifting that ought to have been subjected to Pe­troleum Profit Taxation at PPT rates ranging between 50 percent of profit for PSC and PSA companies, and 85 percent of profit for JV companies.

“Inflow of foreign invest­ments in the form of equity, foreign cash loans, equip­ment loans whose utilisa­tions are majorly subject to tax, end up in transactions, foreign transfers that were at variance with the pur­pose of such inflows.

“Overnight and fictitious disappearance of naira proceeds of foreign inflows from the bank accounts of Nigerian beneficiaries, and subsequent allocations of foreign exchange by  CBN for capital repatriations, principal loan repayments and interest payments.

“Multiple foreign ex­change allocations to hold­ers of foreign inflow certifi­cates of capital importation (CCI) over and above the amount brought into the country, leading to capital flight of the country’s much needed and scarce foreign exchange.

“Loan backed certificates of capital importations with­out evidence of transfer to the foreign lenders in the form of principal repayment and interest payments.

“Some expected imports that were funded by foreign equipment loans and other direct allocations of foreign exchange for foreign ex­change valid transactions were neither translated to imports nor their import duties paid to the Nigeria Customs Service.

“Capital flight using the Form ‘M’ valid for forex and forex obtained by the bene­ficiary companies without utilisation of the forex to re­flate the economy and taxes paid.

“Export proceeds for both oil and other commodities repatriation by exporters meant to reflate the economy which were diverted by sell­ing directly to other custom­ers without corresponding taxes paid.

“The committee shall ex­tensively review all of the above infractions among others, to ensure that all fed­erally collectible revenues are not only identified and recovered, but also to sanc­tion companies involved in the other non-civil infrac­tions in order to serve as a deterrent to potential class­mates of the affected com­panies.

“These measures shall in the foreseeable future, lead to plugging all revenue loopholes, toward saving the country from recurring up­surges in foreign exchange rates.”

Interfacing with the Man­aging Director of Citibank, the committee accused the bank of not making remit­tances to the federation ac­counts from certain trans­actions.

“Some of the infractions listed against the bank in­cluded outstanding with­holding tax collectible on Form A: $2, 544, 973, 484; outstanding VAT collectible on Form A $1, 081, 383, 885; outstanding withholding tax collectible on known Form A bank transfers by customers $927, 556, 300; outstanding VAT collect­ible on known Form A bank transfers by customers from your bank is $463, 778, 150; breakdown of foreign ex­change leakage infractions on form A transactions filed with CBN as taxation services but not traced to the Federal Inland Revenue Service collection platforms $171, 256, 297 and foreign ex­change inflow from capital importation yet to be ac­counted for in the foreign exchange sales voucher is $17, 655, 410, 376.

“Others were Form A transfers for loan repay­ment and interest with no evidence of capital impor­tation and payment of with­holding tax on interest $210, 013, 266; capital importation on loans with no evidence of principal repayment and interest payment of $1, 072, 868, 110; capital importation on equity with no evidence of dividend payment and capital repatriation is $1, 134, 835, 320; dividend transfers in excess of capital im­portation on equity without payment of withholding tax is $3, 027, 298, 192; Form A transfers for dividend repa­triations with no evidence of capital importation, ei­ther foreign equity and pay­ment of withholding tax is $305, 725, 840. ­

“Also, foreign transfers for principal loan repay­ment and interest payment in excess of capital impor­tation loan without pay­ment of withholding tax on interest is $110, 635, 050; foreign exchange on Form A transferred payment filed with the committee but not traced to CBN returns with­out payment of taxes is $510, 816, 573; foreign transfer payment by customers to other bank accounts with­out Form A documentation is alleged to be $30, 720, 856, 807; foreign exchange pur­chased from oil export pro­cess yet to be accounted for in the foreign sales voucher is $132, 878, 000 dollars”.

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