Nigeria needs to review existing fiscal laws on precious metals, particularly the taxation of gold, if the country must compete favourably in the global market, attract the needed investment to become a leading hub for trading in gold, experts said on Wednesday.
They spoke in Abuja at the BusinessDay Breakfast Meeting, sponsored by Dukia Gold and Precious Metals Refining Company Limited, with the theme ‘Creating enabling environment for investment precious metals in Nigeria’.
They said despite the huge gold potential, the country is not yet competing favourably with other markets for investment flows, adding that the fiscal policy on taxation makes cost of transaction higher and less attractive.
Tola Oshobi, a senior advocate of Nigeria and partner at Babalakin and Co, said in London, Singapore and the European Union, which are leading hubs for all precious metals, gold is exempted from taxes and treated it as a currency because of the multiplier effect it has on investment and the economy.
According to him, Nigeria has all it takes to become a regional or even global hub; hence, it should not just trade in gold for the sake of it, but be deliberate in maximising all the potentials.
He said: “Taxing it is quite interesting, and I think it has to be looked at and has to conform to global best practices. Going by what obtains in other jurisdictions, London is the leading international centre of the gold trade, and in the UK, gold is not subject to Value Added Tax, and not just in the UK, across the EU, but other precious metals are subject to VAT.
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“The reality is that gold is an international commodity and the reality is that we would be competing with other markets for investment flows into our own commodities exchange. If our laws and standards are different from what obtains in competing markets, and the cost of transaction or cost of buying gold in our market is higher, then we would be at a disadvantage. It is important that we benchmark what we are doing to what is happening in other jurisdictions.
“Capital is neutral; it goes where it is treated best, so we need to make our market attractive for investors. It is not sufficient for us to trade gold for the sake of trading gold. If we are not competitive, we are not really helping ourselves and we are not maximising the potential of this resource.”
Oshobi said the right laws and structure in the gold market would
inspire more confidence in the Nigerian economy, increase foreign reserves, and stabilise the value of the naira.
“To achieve this, the government has to put statutory instruments in place to create the proper environment to inspire that confidence that would guarantee investment flows into Nigeria,” he added.
Tunde Fagbemi, chairman of Dukia Gold, described gold as a wise investment choice for Nigerians to secure their financial future.
“Gold is a necessity for Nigeria and Nigerians. If you had N400 at the beginning of 2019, and you converted it to buying gold, you would have bought one ounce worth of gold. If you kept that gold and brought that gold back to us, we would buy it in excess of N623,” he said.
He said Dukia Gold would for the first time simplify the investment process in gold, such that investors do not have to pay for the artistic value of gold. “This time around, you will buy gold in gold itself as a gold content,” he said.
“Indeed, what we are about to do is going to revolutionise the whole economic system; we are coming into an industry that can transform the entire Nigerian economy,” Fagbemi said.
Lamido Yuguda, director general of the Securities and Exchange Commission, said the commodities trading value chain offers significant value addition for the economy in industrial development and export promotion, among others, especially in view of the economic setback.
Yuguda, who was represented by Usman Mohammed, a senior analyst at SEC, said: “There has never been a greater need than now for a pragmatic approach to progressively diversifying our national economy.
“As one of the beckoning alternatives, and with over 44 mineral resources deposited across the nation, the solid mineral sector has the potential to create employment, develop rural settlements, and raise the living standard of the mining communities.”
Olamilekan Adegbite, minister of mines and steel development, commended Dukia Gold for working with the ministry to take the Nigerian gold and precious metals market to the next level, after years of neglect.
He said Nigeria needs to step up investment in gold, in line with global best practices.
“Another lesson we have learnt has to do with national banks in countries investing in gold. That is a step the Central bank of Nigeria is looking at to store its own wealth and reserve,” he said.
Ogho Okiti, managing director of BusinessDay Media, in his presentation on macroeconomic outlook, said the Nigerian economy has seen continuous weak and abysmal growth levels since 2020.
He said only a few sectors had managed to recover from the fallout of the COVID-19 pandemic.
He said foreign direct investment in the country had dropped significantly. “The summary is that investment is drying up in Nigeria and if those numbers don’t go up, we can’t produce; we can’t reduce poverty,” he added.
According to Okiti, inflation rate is expected to reach 20 percent before the end of 2022 due to high energy costs in Nigeria.
