INSIGHT: Covid-19 Pandemic—Nigeria’s Fiscal and Economic Measures

As the world grapples with the Covid-19 pandemic, many governments have rolled out palliative measures to stabilize their economies and provide necessary support to their business communities. Nigeria, like many countries, has been adversely affected by the pandemic—from the slump in the crude oil price to disruption of supply chain as a result of the lockdown in China, which is a major trading partner with Nigeria. The Nigerian economy is now heading for the second recession in less than four years.

This article examines the various fiscal and economic palliative measures announced by the Nigerian government.

Measures by Tax Administrators

The Federal Inland Revenue Service (FIRS) announced a number of palliative measures on March 23, 2020, as highlighted below:

• extension of filing deadlines for monthly value-added tax (VAT) and withholding tax (WHT): the deadline for filing monthly VAT and WHT returns has been shifted from the 21st day of the month following the month that the report relates to, the last working day of the month;
• extension of filing deadline for companies income tax (CIT) returns: the due date for filing CIT returns has been extended by one month. Companies are statutorily required to file annual CIT returns within six months after the financial year-end date. With this palliative measure, the Executive Chairman has exercised his power to extend the deadline by one month. Thus, a company with a December 31 year-end date now has up to July 31, 2020 to file the returns for 2020 year of assessment.
• filing CIT returns with unaudited accounts: the FIRS is also permitting taxpayers to file their annual CIT returns without an audited financial statement. However, such taxpayers must submit the audited accounts within two months from the revised due date for filing their tax returns. For instance, a company with a December 31 year end that is yet to finalize its statutory audit by the extended deadline of July 31, 2020 may proceed to submit its CIT returns using its unaudited financial statement. However, the taxpayer will have to submit the audited financial statement by September 30, 2020;
• increased use of electronic platforms: in its announcement the FIRS encouraged the use of the FIRS electronic platform and emails for submission. For the conduct of tax audits and desk reviews, the FIRS intends to create a web portal where taxpayers can upload documents for both the taxpayer and authority to access.

In addition to the measures proposed by the FIRS, the Lagos State Internal Revenue Service (LIRS) and Federal Capital Territory Internal Revenue Service (FCTIRS) appear to be the only sub-national tax administrations that have so far announced palliative measures for taxpayers. The LIRS extended the deadline for filing annual tax returns for employees and self-employed persons by two months, from March 31 to May 31, 2020, while the FCTIRS extended the deadline by three months (March 31 to June 30, 2020).

It is interesting to note that both tax administrations did not announce any palliative measures in respect of monthly WHT and pay-as-you-earn (PAYE) taxes.

Measures by the Central Bank of Nigeria

The Central Bank of Nigeria (CBN) announced palliative measures on March 16, 2020 aimed at ensuring the financial stability of the economy in light of the ongoing Covid-19 pandemic. The CBN announced policy measures that include the following:

• extension of the moratorium period on all principal repayments on CBN facilities by one year: all intervention loans extended by the CBN to financial institutions which are currently under moratorium are automatically extended by one year with effect from March 1, 2020;
• reduction in the interest rate on all CBN intervention facilities, from 9% to 5% per annum;
• establishment of a 50 billion Nigerian naira ($129.5 million) credit facility through the NIRSAL (Nigeria Incentive-Based Risk Sharing System for Agricultural Lending ) Microfinance Bank for households and small and medium-sized enterprises (SMEs) that have suffered the adverse effects of Covid-19. The NIRSAL Microfinance Bank was established to empower small businesses across Nigeria and drive financial inclusion. It is expected that further information/guidance will be provided by the CBN and NIRSAL on the modalities for extending these funds to the beneficiaries;
• extension of loan facilities to pharmaceutical companies who intend to expand or open drug manufacturing plants in Nigeria and hospital and healthcare practitioners who intend to expand or build first class health facilities. This is expected to boost the health care industry which is an important sector of the Nigerian economy. Similar intervention funds have also been provided in recent times to other key sectors of the economy, such as the agricultural and manufacturing sectors;
• deposit money banks (DMBs) to consider a temporary and time-limited restructuring of the tenure and loan terms they have with businesses and households most affected by the Covid-19 outbreak. The CBN will work closely with the DMBs in this regard.

Securities and Exchange Commission and Nigerian Stock Exchange

Similarly, the Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) have announced the extension of filing deadlines by 60 days. It is believed that this extension will help reduce the compliance pressure on companies regulated by these entities. The SEC and NSE are also encouraging the use of online channels by their stakeholders.

Emergency Economic Stimulus Bill, 2020

The House of Representatives also proposed a bill for enactment, the Emergency Economic Stimulus Bill, 2020 (the Bill) which seeks to provide the following:

• Tax rebates to companies that do not lay off their employees from March 1 to December 31, 2020

The tax rebate for companies who retain their employees within the stated period is 50% of the actual amount due or paid as PAYE taxes under the Personal Income Tax Act, 2004 (as amended). The tax rebate, which is a refund of the employer’s income tax, does not apply to employers partly or wholly regulated under the Petroleum Profits Tax Act (PPTA), 2004;

• Deferment of residential mortgage payments by individual contributors to the National Housing Scheme for a period of 180 days

The proposed incentive applies to all payments for residential mortgage obligations by individuals for 180 days from March 1, 2020. This is expected to ease the financial obligations of the individual contributors (whose jobs may be uncertain), such that their funds are not sunk into committed fees/payments;

• Waiver of import duties on medical goods

Import duties on medical equipment, medicines, personal protection equipment and other medical necessities required for the treatment and management of Covid-19 are waived from March 1 to December 31, 2020. This should minimize the cost of the items as well as increase their availability. This can also be extended to other essential supplies such as preserved food items and toiletries that are imported.

While the tax rebate proposed by the Bill is expected to prevent a massive lay-off of employees and reduce the cost borne by employers as a result of the downtime created by the pandemic, employers may carry out a cost-benefit analysis in order to take an economically feasible decision.

Although the Bill just passed a second reading and is still in the process of being finalized for presidential assent, it is expected that the proposed relief should provide some succor to businesses and individuals if eventually passed into law.

Summing Up

There is much uncertainty and anxiety surrounding the pandemic at the moment, and this calls for countries to unite and collaborate, share knowledge and seek/provide financial support and aid both at the global and national level, in order to curtail the spread of this highly contagious virus.

Despite this, all is not gloom, as some industries appear to be benefiting from the pandemic. For instance, there is an increase in the need for telecommunication and technological tools/support to aid remote working, a spike in demand for health manufacturing equipment and accessories, and a hike in consumer product demand as a result of panic buying and stockpiling, online deliveries, etc.

As the Nigerian government keeps abreast of global best practice in containing the pandemic and minimizing the effects of an economic downturn, the question arises as to what further timely measures (physical, fiscal, economic) the Nigerian government can adopt to ease the adverse impact of the pandemic on individuals, households, business and financial institutions, and markets.

Victor Adegite is a Senior Manager and Nana Abu is a Manager with KPMG in Nigeria.

The authors may be contacted at: victor.adegite@ng.kpmg.com; and nana.abu@ng.kpmg.com

The opinions expressed in this article are strictly those of the authors.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.