Last week, during the Monetary Policy Committee (MPC) meeting press conference in Abuja, Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), revealed that the banks raised a total of N370.69 billion as stamp duty revenue on behalf of the Federal Government between 2016 and 2022.
Stamp duty is a tax payable in respect of a taxable instrument under the provisions of the Stamp Duty Act CAP S8 LFN, 2004 (as amended), according to the Federal Internal Revenue Service.
It is applicable to all taxable instruments such as agreements, contracts, receipts, memorandums of understanding, promissory notes, insurance policies and other instruments stipulated in the Stamp Duty Act Schedule, Cap S8, Laws of the Federation of Nigeria, 2004 (as amended) (SDA or “the Act”).
The 2019 Finance Act expanded the scope of the SDA to include technology, electronic commerce, and cross-border transactions, consistent with global practice and current economic realities.
Emefiele said that the CBN was not withholding N89 billion by raising N370.686 billion. He said this to clear up allegations by a member of the House of Representatives, Muhammed Kazaure, who raised the alarm in 2022, saying that he had allegedly stolen a whopping N89 trillion collected as stamp duty.
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According to the CBN Governor, the total assets of all the banks amount to 71 trillion naira; The total deposit in banks is 44 trillion naira while in the last six years from 2016 to date stamp duty collection has amounted to 370.69 billion naira.
He said the highest stamp duty collection was N71 billion, which was collected by First Bank of Nigeria. The Federal Internal Revenue Service has disbursed N226.45 billion of the money to the Federation Account Allocation Committee, while the balance of N144.235 is in the CBN.
Emefiele said the CBN had appointed four world-class auditing firms to review the banks’ books and check for any unremitted stamp duty. “If there is any uncollected stamp duty, the banks will pay the last kobo,” she said.
On the other hand, the CBN Governor, after the MPC meeting, laid out the reasons why the largest bank in the largest economy in Africa has continued to grant overdraft credits, also known as ways and means, to the federal government. .
He said doing so was part of the main bank’s responsibility as the country’s lender of last resort. “The Central Bank is a banker to the government and also a lender of last resort to the government”, which makes it responsible for supporting the government in times of need,” he said.
“Because we are the lender of last resort, it will be irresponsible for us to stand by, it will be a breach of our duty as a lender of last resort to ignore the government and allow the economy and Nigerians to suffer.
“What we did by lending to the government as a lender and banker of last resort is normal anywhere in the world, particularly when countries are facing crises. Any central bank, any FED will do what we have done.”
“So we appeal to those who are exaggerating the purpose behind Ways and Means to take it easy and believe that by God’s special grace, as the president has written to the national assembly, we will eventually give the go-ahead to allow CBN to securitize the loans,” Emefiele said.
Analysts believe the proposed securitization of CBN’s N22.7tn loans to the Federal Government depletes investable funds in the market and helps reduce the cost of debt service.
Securitization is considered the conversion of an asset, especially a loan, into marketable securities, usually for the purpose of raising cash by selling them to other investors.
Zainab Ahmed, the finance, budget and national planning minister, had explained that the CBN overdraft would be issued in the form of bonds and treasury bills that investors would offer for subscription.
Commenting, Taiwo Oyedele, PwC’s head of corporate and tax advisory services, said the securitization of Ways and Means funding will have mixed implications for the economy.
On the one hand, he said it will increase the reported public debt-to-GDP ratio and reduce the space for more deficit financing from the government, adding that there is a likely risk that the private sector will crowd out, especially in light of the tax exemption on government bonds that is not available on corporate securities.
On the positive side, Oyedele said, it will help the government comply with the Fiscal Responsibility Law regarding the limits of Means and Forms; reduce the cost of debt service since the return on the securitization is expected to be less than the interest rate currently paid to the CBN.
“In addition, the inflation rate is expected to decline given the liquidity-absorbing effect of securitization,” he said.
Nigeria registered a gradual drop in the inflation rate, which slowed to 21.34 percent in December 2022, slightly below the 17-year high of 21.47 percent in November 2022, according to the National Bureau of Statistics. (BSS).
