Central Bank of Nigeria (CBN), has said that the plan to increase Value Added Tax (VAT) from five per cent to 7.5 per cent is in the right direction to raise country’s revenue.
This is as it insists on carrying out the cashless policy even as the House of Representatives has directed it to suspend action on it.
The CBN Governor, Godwin Emefiele, stated this while fielding questions from journalists after the Monetary Policy Committee meeting held in Abuja.
He said the government had responsibility to fend for every citizenry by providing basic infrastructure like roads, electricity and hospitals among others.
He explained that the government had only two ways to fund such projects, which are by raising revenue and through loan collection.
According to him, the present government has been criticised by some people for high rate of debt incurred.
“Government unfortunately has no option, if it does not borrow, it must raise revenue and you all agree with me that it has obligations to meet up with.
” The increase of VAT to 7.5 per cent is low compare to other countries, in fact, with this increase, Nigeria has the lowest in the world.
“If the government can meet its obligation through this increment, it should be supported,” he said.
He appealed to Nigerians to show understanding and support government’s policies.
He said that contrary to claims in some quarters that many Nigerians would suffer the negative impact of the cashless policy, only about five to 10 per of bank customers would be affected.
It has imposed three per cent processing fees on withdrawals and two per cent processing fees on lodgements of amounts above N500, 000 for individual accounts.
For corporate accounts, the apex bank in the circular said that DMBs would charge five per cent processing fees on withdrawals and three processing fee on lodgements of amounts above N3m.
The House of Representatives had on Thursday through a resolution directed the apex bank to suspend the policy.
But responding to the development, Emefiele said if the Nigerian economy was to compete effectively with those of developed countries, a payment system that encourages the use of non-cash channels was desirable.
He said that before the cashless policy was first inaugurated in 2012, a lot of stakeholder engagements were done to sensitise Nigerians on its benefits.
He said the policy was suspended in 2014 to allow more payment channels to be developed by Deposit Money Banks.
The governor said that since the policy was suspended, currency management cost had continued to increase year-on-year at an average annual growth rate of 33 per cent.
However, he said the bank had continued to provide alternative channels, adding that people had embraced it.
He said Point of Sale transactions had moved from N48bn in 2012 to N2.2tn while electronic transfer had moved from N3.8tn in 2012 to N80.46tn in 2018.
Emefiele said, “Since the policy was first launched, currency management costs have continued to increase year-on-year at an average annual growth rate of 33 per cent.
“Notwithstanding, electronic transactions have increased within the economy. We have provided alternative channels and people have embraced it.
“This is a strategic timing of these actions because on Monday, September 23rd, the mutual evaluation by GIABA (Inter-governmental Action Group Against Money Laundering in West Africa) on the country’s anti-money laundry and CFT (Combating Financing of Terrorism) regime will begin.
“Passing the mutual evaluation positions Nigeria as a safe and credible destination for financial transactions across the world.
“GIABA will be in Nigeria to access the rate at which Nigeria has embraced anti-money laundry and CFT regime. It is important that we display and show to them that Nigeria is indeed in conformity with their practices as enshrined in their anti-money laundry and CFA laws.”
