₦airaland Forum

For those querying the rationale behind the rush to pass the tax reform bill, I say look no further—the World Bank loans approved in June 2024 are to blame. Some may recall that the World Bank announced in June 2024 that two loans worth 2.25 billion US dollars had been approved for Nigeria under two new programmes. These loans were approved based on the agreement that Nigeria will increase VAT rate to “at least” 12.5 per cent by 2026.

These programmes will have negative implications for the country, leading to inflation. It is surprising that a government struggling with a 34 per cent inflation rate would agree to these terms. But before we discuss the consequences, let’s discuss some details of the loan, including the actions to be taken.




The first, ‘Accelerating Resource Mobilisation Reforms’ (AMOR), is worth 750 million US dollars. It is a programme for results with disbursed linked indicators. To my knowledge, no detailed information on the World Bank website shows any disbursement or financial agreement for the AMOR programme.


The second loan, 1.5 billion US dollars, is under the ‘Reforms for Economic Stabilisation to Enable Transformation’ (RESET) programme. Under this programme, two World Bank agencies—the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD)—share the financing of 750 million US dollars each.

According to the World Bank’s website, the RESET loan of 1.5 billion US dollars is active. IDA disbursed all 750 million USD of the RESET loan on June 28, 2024. IBRD claimed its front-end fee—a payment made at the beginning of a financial arrangement—of 1.875 million US dollars on June 26, 2024. These transactions happened without the Senate announcing approval unless they were done in secrecy.


The costs of these loans are also different. Nigeria will pay an 8.33 per cent interest rate on half of the loan under IDA, which will commence between 2030 and 2036. For the other half, with IBRD, the payment will begin in 2035 and end in 2048 at 3.85 per cent.

These 8.33 per cent and 3.85 per cent interest rates are too high for a World Bank loan to a low-middle-income country like Nigeria. The loans reflect non-concessional terms stipulated under the Fiscal Responsibility Act of 2007. Concessional loans from the IDA typically have 0% interest, a 40-year repayment period, and a 10-year grace period to ease the financial burden. Ironically, these rates contradict the fiscal laws outlined in the Fiscal Responsibility Act. This also contrasts with the World Bank’s principle of providing affordable financing for development.


In all seriousness, this is not a rate designed to help a country seeking to build a fiscal space. But my sympathies or suspicions lie with the administrators of this Tinubu-led government who sought this loan. But that’s not it.

The worrying part comes under the actions to be taken under the programme. They are divided into two pillars. Pillar 1 is about building fiscal space, and Pillar 2 is about protecting the poor and economically insecure. I wrote about these in one of my previous columns in June, titled “Counterproductive World Bank Loan: Reasons to Reject.” The expenditure mainly duplicated existing projects because Nigeria has digitised its tax collection since 2015. We have the Integrated Tax Administration System (ITAS), e-filing Platforms, Tax Identification Number (TIN) System, Remita, Treasury Single Account (TSA), Payroll Management, e-payment Channels, Automated VAT Collection, and Electronic Tax Clearance Certificates, among a few others.


The fiscal trap is under item 2 of Pillar 1. The agreement reads, “To increase non-oil revenues and reform the VAT regime, the Borrower has submitted to the National Assembly a draft bill to progressively increase the VAT rate to at least 12.5 per cent by 2026 and allow input tax credits for capital and services.” This agreement is what is pushing the government to get the Tax Reform Bill passed.

As we are already in December, this agreement means the government will increase VAT rates by two-thirds within 12 months. Recall that the FIRS Chairman has proposed an increase of 33.3 per cent in 2025, from 7.5 to 10 per cent, some few days from now. They will then raise the VAT rates by “at least” another one-third to 12.5 per cent in 2026, which will have to be announced in December 2025. There will be consequences.

The VAT system in Nigeria covers all finished goods and services, with a few exemptions that hardly impact the average person. Given the present hardship, with the inflation rate touching 34 per cent, people will see a direct spike in the prices of all VAT-able items—the vast majority of consumer goods.

The scary part is that this will not be like the inflationary trends after the removal of fuel subsidy in June 2023, where the burden will be shared between many products. This impact will be directly felt on every product as soon as the announcement is made. Let us also not ignore that once people expect prices to rise, they will increase regardless of what the government does.


The immediate consequence is a reduction in total consumption. When people buy less, producers will be affected because their goods and services are not selling. This will press them to reduce the cost of production, including workers, which means higher unemployment in the country.

These expensive World Bank loans will only increase economic instability in an already volatile economy because the repayment period is in 2030. Nigeria will still be working through the VAT increase shocks. As many policymakers and experts have advised, the government should postpone approving this tax reform and consult much further.

https://dailytrust.com/costly-world-bank-loans-behind-tax-reforms-rush/

Oh boy! This administration is dead set on blaming it all on the World Bank, IMF, or even the West. Nigeria is truly in deep shitee but worse the people will still bite down on every single one of the many lies. 😩😩😩😩😩😩

Ignorance personified. In the whole scheme of things VAT that is 85% distributed to the states. Total lack of joined up thinking in linking this to FG loans.

We need to demonstrate that we do have smart people amongst those spreading propaganda about their ability to do something different to turn the Tide in Nigeria but alas they are full of empty vessels making loud noises.

Bobloco:
For those querying the rationale behind the rush to pass the tax reform bill, I say look no further—the World Bank loans approved in June 2024 are to blame. Some may recall that the World Bank announced in June 2024 that two loans worth 2.25 billion US dollars had been approved for Nigeria under two new programmes. These loans were approved based on the agreement that Nigeria will increase VAT rate to “at least” 12.5 per cent by 2026.

These programmes will have negative implications for the country, leading to inflation. It is surprising that a government struggling with a 34 per cent inflation rate would agree to these terms. But before we discuss the consequences, let’s discuss some details of the loan, including the actions to be taken.




The first, ‘Accelerating Resource Mobilisation Reforms’ (AMOR), is worth 750 million US dollars. It is a programme for results with disbursed linked indicators. To my knowledge, no detailed information on the World Bank website shows any disbursement or financial agreement for the AMOR programme.


The second loan, 1.5 billion US dollars, is under the ‘Reforms for Economic Stabilisation to Enable Transformation’ (RESET) programme. Under this programme, two World Bank agencies—the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD)—share the financing of 750 million US dollars each.

According to the World Bank’s website, the RESET loan of 1.5 billion US dollars is active. IDA disbursed all 750 million USD of the RESET loan on June 28, 2024. IBRD claimed its front-end fee—a payment made at the beginning of a financial arrangement—of 1.875 million US dollars on June 26, 2024. These transactions happened without the Senate announcing approval unless they were done in secrecy.


The costs of these loans are also different. Nigeria will pay an 8.33 per cent interest rate on half of the loan under IDA, which will commence between 2030 and 2036. For the other half, with IBRD, the payment will begin in 2035 and end in 2048 at 3.85 per cent.

These 8.33 per cent and 3.85 per cent interest rates are too high for a World Bank loan to a low-middle-income country like Nigeria. The loans reflect non-concessional terms stipulated under the Fiscal Responsibility Act of 2007. Concessional loans from the IDA typically have 0% interest, a 40-year repayment period, and a 10-year grace period to ease the financial burden. Ironically, these rates contradict the fiscal laws outlined in the Fiscal Responsibility Act. This also contrasts with the World Bank’s principle of providing affordable financing for development.


In all seriousness, this is not a rate designed to help a country seeking to build a fiscal space. But my sympathies or suspicions lie with the administrators of this Tinubu-led government who sought this loan. But that’s not it.

The worrying part comes under the actions to be taken under the programme. They are divided into two pillars. Pillar 1 is about building fiscal space, and Pillar 2 is about protecting the poor and economically insecure. I wrote about these in one of my previous columns in June, titled “Counterproductive World Bank Loan: Reasons to Reject.” The expenditure mainly duplicated existing projects because Nigeria has digitised its tax collection since 2015. We have the Integrated Tax Administration System (ITAS), e-filing Platforms, Tax Identification Number (TIN) System, Remita, Treasury Single Account (TSA), Payroll Management, e-payment Channels, Automated VAT Collection, and Electronic Tax Clearance Certificates, among a few others.


The fiscal trap is under item 2 of Pillar 1. The agreement reads, “To increase non-oil revenues and reform the VAT regime, the Borrower has submitted to the National Assembly a draft bill to progressively increase the VAT rate to at least 12.5 per cent by 2026 and allow input tax credits for capital and services.” This agreement is what is pushing the government to get the Tax Reform Bill passed.

As we are already in December, this agreement means the government will increase VAT rates by two-thirds within 12 months. Recall that the FIRS Chairman has proposed an increase of 33.3 per cent in 2025, from 7.5 to 10 per cent, some few days from now. They will then raise the VAT rates by “at least” another one-third to 12.5 per cent in 2026, which will have to be announced in December 2025. There will be consequences.

The VAT system in Nigeria covers all finished goods and services, with a few exemptions that hardly impact the average person. Given the present hardship, with the inflation rate touching 34 per cent, people will see a direct spike in the prices of all VAT-able items—the vast majority of consumer goods.

The scary part is that this will not be like the inflationary trends after the removal of fuel subsidy in June 2023, where the burden will be shared between many products. This impact will be directly felt on every product as soon as the announcement is made. Let us also not ignore that once people expect prices to rise, they will increase regardless of what the government does.


The immediate consequence is a reduction in total consumption. When people buy less, producers will be affected because their goods and services are not selling. This will press them to reduce the cost of production, including workers, which means higher unemployment in the country.

These expensive World Bank loans will only increase economic instability in an already volatile economy because the repayment period is in 2030. Nigeria will still be working through the VAT increase shocks. As many policymakers and experts have advised, the government should postpone approving this tax reform and consult much further.

https://dailytrust.com/costly-world-bank-loans-behind-tax-reforms-rush/

What is 5he connecti9n between the loan and the bill

gabbytabby:
Ignorance personified. In the whole scheme of things VAT that is 85% distributed to the states. Total lack of joined up thinking in linking this to FG loans.

We need to demonstrate that we do have smart people amongst those spreading propaganda about their ability to do something different to turn the Tide in Nigeria but alas they are full of empty vessels making loud noises.

It seems you don’t know that anti Tinubu Bobloco?

blacknp:
It seems you don’t know that anti Tinubu Bobloco?

Daily Trust opinion is my opinion

You are just irredeemable

The tax bill is a welcome development if we'll implemented but of course there is always something sinister to any seemly genuine intention of this satanic government

The immediate consequence is a reduction in total consumption. When people buy less, producers will be affected because their goods and services are not selling. This will press them to reduce the cost of production, including workers, which means higher unemployment in the country.

These expensive World Bank loans will only increase economic instability in an already volatile economy because the repayment period is in 2030. Nigeria will still be working through the VAT increase shocks.

Remember "widen the tax net, reduce their purchasing power and slow down the economy"?

Bobloco:
For those querying the rationale behind the rush to pass the tax reform bill, I say look no further—the World Bank loans approved in June 2024 are to blame. Some may recall that the World Bank announced in June 2024 that two loans worth 2.25 billion US dollars had been approved for Nigeria under two new programmes. These loans were approved based on the agreement that Nigeria will increase VAT rate to “at least” 12.5 per cent by 2026.

These programmes will have negative implications for the country, leading to inflation. It is surprising that a government struggling with a 34 per cent inflation rate would agree to these terms. But before we discuss the consequences, let’s discuss some details of the loan, including the actions to be taken.




The first, ‘Accelerating Resource Mobilisation Reforms’ (AMOR), is worth 750 million US dollars. It is a programme for results with disbursed linked indicators. To my knowledge, no detailed information on the World Bank website shows any disbursement or financial agreement for the AMOR programme.


The second loan, 1.5 billion US dollars, is under the ‘Reforms for Economic Stabilisation to Enable Transformation’ (RESET) programme. Under this programme, two World Bank agencies—the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD)—share the financing of 750 million US dollars each.

According to the World Bank’s website, the RESET loan of 1.5 billion US dollars is active. IDA disbursed all 750 million USD of the RESET loan on June 28, 2024. IBRD claimed its front-end fee—a payment made at the beginning of a financial arrangement—of 1.875 million US dollars on June 26, 2024. These transactions happened without the Senate announcing approval unless they were done in secrecy.


The costs of these loans are also different. Nigeria will pay an 8.33 per cent interest rate on half of the loan under IDA, which will commence between 2030 and 2036. For the other half, with IBRD, the payment will begin in 2035 and end in 2048 at 3.85 per cent.

These 8.33 per cent and 3.85 per cent interest rates are too high for a World Bank loan to a low-middle-income country like Nigeria. The loans reflect non-concessional terms stipulated under the Fiscal Responsibility Act of 2007. Concessional loans from the IDA typically have 0% interest, a 40-year repayment period, and a 10-year grace period to ease the financial burden. Ironically, these rates contradict the fiscal laws outlined in the Fiscal Responsibility Act. This also contrasts with the World Bank’s principle of providing affordable financing for development.


In all seriousness, this is not a rate designed to help a country seeking to build a fiscal space. But my sympathies or suspicions lie with the administrators of this Tinubu-led government who sought this loan. But that’s not it.

The worrying part comes under the actions to be taken under the programme. They are divided into two pillars. Pillar 1 is about building fiscal space, and Pillar 2 is about protecting the poor and economically insecure. I wrote about these in one of my previous columns in June, titled “Counterproductive World Bank Loan: Reasons to Reject.” The expenditure mainly duplicated existing projects because Nigeria has digitised its tax collection since 2015. We have the Integrated Tax Administration System (ITAS), e-filing Platforms, Tax Identification Number (TIN) System, Remita, Treasury Single Account (TSA), Payroll Management, e-payment Channels, Automated VAT Collection, and Electronic Tax Clearance Certificates, among a few others.


The fiscal trap is under item 2 of Pillar 1. The agreement reads, “To increase non-oil revenues and reform the VAT regime, the Borrower has submitted to the National Assembly a draft bill to progressively increase the VAT rate to at least 12.5 per cent by 2026 and allow input tax credits for capital and services.” This agreement is what is pushing the government to get the Tax Reform Bill passed.

As we are already in December, this agreement means the government will increase VAT rates by two-thirds within 12 months. Recall that the FIRS Chairman has proposed an increase of 33.3 per cent in 2025, from 7.5 to 10 per cent, some few days from now. They will then raise the VAT rates by “at least” another one-third to 12.5 per cent in 2026, which will have to be announced in December 2025. There will be consequences.

The VAT system in Nigeria covers all finished goods and services, with a few exemptions that hardly impact the average person. Given the present hardship, with the inflation rate touching 34 per cent, people will see a direct spike in the prices of all VAT-able items—the vast majority of consumer goods.

The scary part is that this will not be like the inflationary trends after the removal of fuel subsidy in June 2023, where the burden will be shared between many products. This impact will be directly felt on every product as soon as the announcement is made. Let us also not ignore that once people expect prices to rise, they will increase regardless of what the government does.


The immediate consequence is a reduction in total consumption. When people buy less, producers will be affected because their goods and services are not selling. This will press them to reduce the cost of production, including workers, which means higher unemployment in the country.

These expensive World Bank loans will only increase economic instability in an already volatile economy because the repayment period is in 2030. Nigeria will still be working through the VAT increase shocks. As many policymakers and experts have advised, the government should postpone approving this tax reform and consult much further.

https://dailytrust.com/costly-world-bank-loans-behind-tax-reforms-rush/

SW and fulanis destroyed Nigeria
History & posterity should never forget that.

Buhari bin don kill Nigeria since, na the turn of Tinubu to bury the people wen dey inside.

aribisala0:
What is 5he connecti9n between the loan and the bill

Denial will not help you guys
The article stated it clearly how the World bank wanted VAT increased, just as they did with fuel subsidy, yet you're still asking what the connection is.

You don't know that VAT increment is part of the bill or you're just feigning ignorance

One day they will ask some people to place a gun on their head and fire .

Gladly they will fire if the order was given to them by Tinubu or Seyi.

Most people have turned from supporters to big time SLAVES.


🤣🤣🤣🤣🤣🤣🤣

VAT or no VAT, Subsidy or no Subsidy...

I go dey chop massively, Buhari finished me, but under Tinubu, I just dey fat like the real meaning of "fat"

.

To every agbadorian, living the subject matter of Daily Trust editorial àbi naa column to attack Boblico you are all a sure candidate of YABA left down to Aro..

Any agbodo chewing empty head that quote me, his/her will be use for sacrifice B4 d end of this year. Àse gún.

Tinubu is a devil, bent on causing untold hardship to Nigerians. Why on earth will he contemplate increasing VAT under the present circumstances of rampant inflation? This is terrible and must be vehemently resisted.

See what Tinubu has turned this Country to. He doesn't even have a say in his own administration. He takes orders from World bank/IMF. Shame on Tinubu and all his supporters

Dailytrust is a greenhorn at propaganda journalism. This same Northern media defended every single atrocious policies and corrupt practices under the Buhari Administration but its fangs have been unleashed on a Southern presidency once again. Unknowing to them, this game is above their wits and the water above their head.

Northern media are on overdrive, this was how they wrote all kinds of nonsense against the Petroleum industry bill just to kill it. These people sha.

D

Now here's an idea

PressMyButton:

Northern media are on overdrive, this was how they wrote all kinds of nonsense against the Petroleum industry bill just to kill it. These people sha.

Stop advertising your ignorance
The PIB actually favours the north
Just stick to buttlicking Tinubu

Wahala dey o

Who do 9ja like dis

Kukutente23:
Now here's an idea



Stop advertising your ignorance
The PIB actually favours the north
Just stick to buttlicking Tinubu

And it was delayed for 20 yrs?.. Kid, how old are you?

PressMyButton:
And it was delayed for 20 yrs?.. Kid, how old are you?

Stop writing nonsense
You're just a sycophant
The bill was delayed because of the portions that were deemed anti-north
All those portions were taken care of before it was passed
Who do you think the bill favour now?
Host communities 3%
In land basin oil exploration 10%

Kukutente23:
Stop writing nonsense
You're just a sycophant
The bill was delayed because of the portions that were deemed anti-north
All those portions were taken care of before it was passed
Who do you think the bill favour now?
Host communities 3%
In land basin oil exploration 10%

Kid, take a backseat, you goofed.

PressMyButton:
Kid, take a backseat, you goofed.

Sycophant
You're ignorant
Let's leave it at that

What is the connection between the loan and the bill?

AcadaWriter0:
What is the connection between the loan and the bill?

Increase in vat as encased in the various tax reform bills was a precondition by the WB to grant those loan requests by Nigeria.

V.A.T is the connection

AcadaWriter0:
What is the connection between the loan and the bill?

aribisala0:
What is 5he connecti9n between the loan and the bill

See question. Read again slowly

XerXers:
See question. Read again slowly

na jeje I dey

I did not ask your mother or father question

So why are you bringing that mouth in that head that Ogun will strike dead to my matter?
You want to show yourself?

Guy if you don't want Ogun to strike your mother dead just dey your dey unless you want see craze