New Tax Rules in Nigeria including Green Taxes on Plastics

Welcome back to 'The Vault’, a weekly newsletter on public policy developments, insights, and current events from across the continent.?

We took a three-week hiatus to redesign our newsletter and content, we are officially back to bringing the most informative policy updates from across the African continent. Feel free to let us know what you think about our new design here. We kick off our restart with recent policy events in Nigeria and Ghana.

Ghana to Receive US$3 Billion IMF Lifeline to Ameliorate Economic Crisis

?After almost a year of negotiations, this week the International Monetary Fund (IMF) approved a US$ 3 billion loan to aid Ghana’s economic recovery. This entails:

• Immediate release of US$600 million to Ghana
• Cooperation and technical support on economic and public finance reforms necessary for economic recovery
• Here are some facts about the current state of the Ghanian economy:
• The domestic currency has depreciated by over 30 percent to the dollar in the last 6 months and is currently the worst-performing currency in West Africa in the last 12 months.
• Inflation rate has increased to 41 percent in April 2023 from 12 percent in December 2021.
• Public debt crisis: total public debt is over US$46 billion, with interest payment consuming over 70 percent of government revenue.

Given these issues, there is a need to ensure the focus of the economic reforms and IMF technical support align with local macroeconomic issues affecting the economy, namely uncontrolled inflation and currency depreciation. Additionally, the Ghanaian government must work with development partners for debt restructuring agreements as it takes up these new loans. This is necessary to ensure Ghana does not suffer the same fate as Zambia; where negotiations on debt restructuring stalled after it accepted a new loan from the IMF in 2022, plunging the country into a debt crisis.

New Tax Rules in Nigeria including Green Taxes on Plastic Containers

A few weeks ago, the Nigerian government released a circular notifying the public of several new tax rules and tariff measures. The main highlights of these new fiscal measures are:

• Increases in excise duty ranging from 20 percent to 100 percent on alcoholic beverages, tobacco, wines, spirits, and vehicles.
• Green taxes on single-use plastic containers and bags
• Supplementary protection measures in line with the ECOWAS Common External Tariff Agreement signed in 2022.

As expected, there are several public concerns with these new tax rules. While the green taxes would help address environmental concerns over the unsustainable use of plastics, several tax specialists believe the arrangements of the green taxes do not follow the required regulatory due processes. Some critics also believe the new fiscal measures are a hasty attempt for quick wins by the outgoing president who has less than 10 days in office yet makes policies that could significantly shape the country’s short-term economic output and fiscal space.

These public criticisms could be justified since the increase in tax rates would not only raise prices for the consumer but could also increase supply-side input costs at a time when the country is experiencing tepid economic growth, high inflation, and significant currency depreciation to the US dollar. The policy could be counterproductive—reducing aggregate demand, increasing unemployment, and by implication reducing government tax revenue.

Of course, there is a need to redesign the country’s tax rules to address revenue generation problems. In the last two budget cycles, government expenditures are almost twice greater than government revenue. However, these issues have less to do with tax rates. Better policy solutions lie elsewhere, such as

• Designing policies that expand the tax base rather than increase tax rates.
• Curbing leakages in government revenue sources such as crude oil theft which allegedly cost the country US$ 2 billion in the last year.
• Cutting the cost of governance to align government expenditure with revenue. For instance, now could be a good time to implement too much talked about yet procrastinated merging of redundant government agencies and departments into single units.

New National Seed Policy in Nigeria

This week, the Federal Government of Nigeria launched the revised National Agricultural Seed Policy 2022, which had been approved by the Federal Executive Council in March. It replaces the 2015 National Seed Policy. The principal objective of the revised policy is to ensure that Nigerian farmers have access to improved-quality seeds. Other objectives highlighted by the Minister of Agriculture include:

• Strengthening the identified weaknesses and fostering innovations that optimize the regulatory, promotional, and protective roles of the National Agricultural Seeds Council (NASC).
• Improving quality assurance and screening of seeds by introducing new technologies such as the SEEDCODEX.
• To encourage active participation of women and youth in seed business along the seed value chain.
• To establish satellite and private seed testing laboratories and strategic seed banks to serve as reserve and buffer stocks in case of food emergencies.

This revision of the National Agricultural Seed Policy is a positive step towards ensuring that Nigerian farmers have unrestricted access to quality seeds.?Successful implementation of this policy will ensure food security across the country and increase foreign exchange earnings from the export of agricultural products.

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In the News ?

We're also tracking the latest current events in the news, and how they may affect the decisions of policymakers. Below are some of the latest developments.?

Food Security | The Northeast region of Nigeria risks famine as farmers-herders crises and insurgency persist. ?

The United Nations has warned that at least $396 million is urgently needed to prevent the widespread hunger and malnutrition in northeast Nigeria from becoming a catastrophic event. It was reported that half a million people could face emergency levels of food insecurity, with extremely high rates of acute malnutrition and death cases, if there is no rapid and significant increase in humanitarian aid.?

Humanitarian Affairs | The United States has provided more than $103 Million to Sudan and its neighbours affected by the crisis in Sudan.

The U.S. Agency for International Development (USAID) has announced an initial $103 million in additional humanitarian assistance to?Sudan, and neighboring countries affected by the crisis. This new funding includes $8 million for the Central African Republic, $17 million for Chad, $6 million for Egypt, $22 million for South Sudan, and $50 million for Sudan, to help meet the increased humanitarian needs caused by the ongoing crisis.

Finance | The new Kenya Finance bill proposes an increase in taxes.

The bill proposes new excise duties on beauty products, imported cell phones, and other items. Additionally, the government plans to introduce a digital assets tax, which will target cryptocurrency transactions. The proposed new taxes are expected to generate 289 billion shillings, which would support the 3.6 trillion shillings ($26.2 billion) budget drawn for 2023/24.

Want more? Check some of our recently published insights, which provide you with deeper analysis and context at the intersection of public policy and current events.

How has Kenyan President William Ruto Fared Six Months into his Tenure?

Elected on the promise of a "Bottom-Up Economic Transformation," President Ruto has taken several early actions in line with his pledges of economic transformation. He recently promised a KES50 billion annual commitment to the Hustlers Fund initiative —a financial inclusion fund to provide affordable credit to businesses, aimed at boosting economic growth and employment. He has also kept his promise on the housing and settlement plan by launching several affordable housing projects across the country. Read more…

INEC’s Failures Define the Nigerian General Elections?

The All Progressives Congress’ Bola Tinubu has been announced as the President-elect and the victor of this process. Given the range of problems, it’s likely that this result will be contested by the other major parties and disputed by a significant share of the public. In fact, the People’s Democratic Party, Labour Party and New Nigeria People’s Party have already called on INEC to cancel the results and hold fresh elections. That’s a demand that will most likely not be met, leaving the convoluted electoral dispute resolution process at the Courts as their only real recourse. Read more…

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