Two major policy initiatives announced by the Nigerian government on Tuesday are set to reshape its economic landscape, strengthening its global business image and fostering local enterprise.
At the 9th Nigeria-EU Business Forum in Abuja, European Union Ambassador to Nigeria and ECOWAS, Samuela Isopi, revealed that the Federal Government had cleared an $850 million debt owed to foreign airlines. This backlog, which had strained Nigeria’s relationships with international carriers, was a significant hurdle to smooth operations.
In another development, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, disclosed that farmers, small businesses, and manufacturers are now exempt from withholding tax as part of the government’s broader tax reform agenda.
Boost to International Trade and Airline Relations
Foreign airlines operating in Nigeria had long grappled with difficulties repatriating earnings due to the country’s foreign exchange challenges. This bottleneck led several airlines to suspend or scale back their operations in the region.
Mrs. Hakama Sidi-Ali, spokesperson for the Central Bank of Nigeria (CBN), explained that the repayment aligned with the CBN’s broader commitment to resolving outstanding foreign exchange obligations. “The CBN has cleared nearly $2 billion in forward liabilities, emphasizing its dedication to creating a functional and resilient foreign exchange market,” she said.
She added that the initiative would likely stabilize the naira, alleviate exchange rate pressures, and rebuild investor confidence in the Nigerian economy.
Ambassador Isopi applauded the government’s intervention and noted that Nigeria remains the EU’s largest trading partner in sub-Saharan Africa, with bilateral trade reaching €35 billion in the past year. She highlighted the significance of over 230 EU companies operating in Nigeria, providing employment opportunities for women and youth.
Relief for Farmers and Small Businesses
In a move to ease the tax burden on local businesses, Taiwo Oyedele announced that withholding tax exemptions now apply to small enterprises, manufacturers, and farmers. This decision aims to encourage growth within key sectors of the economy while addressing issues of tax evasion and compliance.
Oyedele emphasized that the reforms were part of an ongoing effort to simplify Nigeria’s tax system and align it with global best practices. The changes include:
- Exempting small businesses from withholding tax compliance.
- Reducing tax rates for enterprises with low profit margins.
- Easing credit access by simplifying the tax deduction process.
Introduced in 1977, withholding tax was originally designed as an advance tax payment mechanism, ensuring a steady flow of government revenue. However, the new regime seeks to balance revenue generation with fostering a conducive environment for small businesses and manufacturers.
Policy Implications and Stakeholder Reactions
These developments underscore the government’s commitment to addressing longstanding issues in Nigeria’s economic environment. Clearing the backlog of airline debt signals a renewed focus on fulfilling international obligations, while the withholding tax reforms provide much-needed relief to local businesses.
The Nigeria-EU Business Forum, themed “Investing in Jobs and a Sustainable Future,” brought together key stakeholders, including Vice President Kashim Shettima, Minister Atiku Bagudu, and other industry leaders. Discussions centered on fostering collaboration between the public and private sectors to achieve inclusive development.
Ambassador Isopi highlighted the EU’s role as Nigeria’s largest foreign investor, with investments worth €26 billion, comprising one-third of Nigeria’s foreign direct investment portfolio.
Conclusion
These twin announcements reflect Nigeria’s proactive steps toward improving its business climate. By resolving foreign airline debts and implementing tax reforms for small businesses and farmers, the government aims to bolster economic activity, enhance investor confidence, and lay a foundation for sustainable growth in the years ahead.
