Nigeria considers excise tax on parallel market transactions

The federal government is considering the implementation of an excise tax on foreign exchange transactions conducted outside the official market aimed at discouraging the prevalence of multiple exchange rates in the country.

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, revealed this on X.

According to the post “Imposition of excise tax on foreign exchange transactions outside the official market,” is being considered.

The development is just one of the twenty recommendations presented by the Presidential Fiscal Policy and Tax Reform Committee.

The proposed recommendations intend to address critical economic issues ranging from exchange rate management, the impact of fuel subsidy removal, moderation of inflation, and facilitating economic growth.

Over time, the Nigerian foreign exchange (FX) market has witnessed a continuous downturn. The decline intensified, leading to a naira depreciation of over 50 percent following the Central Bank of Nigeria’s (CBN) announcement in June to merge all forex exchange windows into the Investors and Exporters (I&E) window.

Subsequently, the gap between the official market rate and the parallel market rate has significantly widened.

Hence, several measures including the removal of an eight-year ban on 43 items that were previously restricted from accessing fx through the official investor and exporter window, and have been implemented to stabilise the FX market.

As per the committee’s suggestions, potential developments for implementation in the foreign exchange market may involve allowing Nigerian businesses to pay taxes on foreign currency-denominated transactions in Naira. – Business Insider Africa

Also, there are considerations to “Digitalise Nigeria’s fx regime and discourage speculative demands and hoarding of fx in cash.

“Discontinue the fx verification portal and requirement for Certificate of Capital Importation and export proceeds restriction.”

Additionally, the federal government is striving to minimize the number of taxes collected at the federal, state, and local government levels.

This initiative, as explained by Oyedele, would eliminate obstacles for small and medium-sized enterprises and foster economic growth and development in the country.

Earlier in the month, he announced the Federal Government’s plan to reduce the current number of taxes, which stands at about 62, down to less than 10, stressing that the existing 62 taxes imposed across various government levels place a heavy burden on Nigerian businesses and taxpayers. Business Insider Africa