Last week during the Monetary Policy Committee (MPC) meeting press briefing in Abuja, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) revealed that a total of N370.69 billion was collected as stamp duty revenue by banks on behalf of the Federal Government between 2016 and 2022.
Stamp duty is a tax payable in respect of a dutiable instrument as provided under the stamp duties Act CAP S8 LFN, 2004 (as amended), according to the Federal Inland Revenue Service.
It is applicable on all dutiable instruments, such as agreements, contracts, receipts, memorandum of understanding, promissory notes, insurance policies and other instruments stipulated in the Schedule to the Stamp Duties Act, Cap S8, Laws of the Federation of Nigeria 2004 (as amended) (SDA or “the Act”).
The Finance Act, 2019 expanded the scope of the SDA to include technology, e-commerce and cross-border transactions, in line with global practice and current economic realities.
Emefiele said the CBN was not withholding any N89 trillion by collecting N370.686 billion. He said this in clarification to the allegations by a member of the House of Representatives, Muhammed Kazaure, who raised an alarm in 2022, saying that a huge sum of N89 trillion collected as stamp duty has been allegedly stolen.
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According to the CBN governor, total assets of all banks are N71 trillion; total deposit in banks is N44 trillion, while in the last six years, from 2016 till date, stamp duty collection has amounted to N370.69 billion.
He said the highest collection of the stamp duty was N71 billion, which was collected by First Bank of Nigeria. The Federal Inland 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 audit firms to go into the books of banks to verify if there was any unremitted stamp duty. “If there is any uncollected stamp duty, the banks will pay the last kobo,’’ he said.
On the other hand, the CBN governor after the MPC meeting gave reasons why Africa’s largest economy’s biggest bank has continued to extend overdraft credits, also known as Ways and Means, to the Federal Government.
He said doing so was part of the apex bank’s responsibility as the lender of last resort to the country. “The Central Bank is a banker to the government and also a lender of last resort to the government” making it responsible for back-stopping the government in times of need,” he said.
“Because we are the lender of last resort, it will be irresponsible for us to sit idle, it will be a dereliction of our duty as the 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 lender and banker of last resort is normal in any part of the world particularly when countries face crises. Any Central Bank, any FED will do what we have done.”
“So that we appeal to those who are exaggerating the purpose behind Ways and Means to take it easy with us and believe that by the special grace of God that since the president has written to the national assembly, we will eventually give the approval to allow CBN to securitize the loans,” Emefiele said.
The proposed securitisation of the N22.7 trillion loans from the CBN to the Federal Government is seen drying up investible funds in the market and helping to reduce debt service cost, by analysts.
Securitisation is seen as the conversion of an asset, especially a loan, into marketable securities, typically for the purpose of raising cash by selling them to other investors.
Zainab Ahmed, minister of finance, budget and national planning, had explained that the CBN’s overdraft would be issued in the form of bonds and treasury bills to be offered for subscription by investors.
Commenting, Taiwo Oyedele, head of tax and corporate advisory services at PwC, said, securitisation of the Ways and Means financing will have mixed implications for the economy.
On one hand, he said it will increase the reported public debt-to-GDP ratio and reduce the room for further deficit financing by the government, adding that there is a likely risk of private sector crowding out especially in view of the tax exemption on government bonds which is not available on corporate securities.
On the positive side, Oyedele said, it will help to bring the government into compliance with the Fiscal Responsibility Act regarding Ways and Means limits; reduce debt service cost given that the securitisation yield is expected to be lower than the interest rate currently being paid to the CBN.
“Also, inflation rate is expected to decline given the liquidity mop-up effect of the securitisation,” he said.
Nigeria recorded a gradual drop in inflation rate, which decelerated to 21.34 percent in December of 2022, down slightly from a 17-year peak of 21.47 percent in November 2022, according to the National Bureau of Statistics (NBS).