back to top

How multiple taxation is ‘killing’ SMEs in Abuja

By, Josephine EJEH

Many businesses have been struggling to survive in Nigeria, even before COVID-19.
But the situation has got worse with the outbreak of the coronavirus pandemic in Nigeria around February. Despite the hard time faced by the Nigerian business community, the local authorities in the Federal Capital Territory Abuja are fleecing small and medium business owners by compelling them to pay multiple taxes.  JOSEPHINE EJEH reports about the frustration of many SME owners in the FCT who are compelled to pay various taxes but yet are denied access to basic social amenities.


SITTING on a bench in front of her shop made of zinc and woods, the expression on the face of Ojo Elizabeth was that of despondency as she thought of how to raise money to buy the next meal for her children.

It was past 2 pm, but she had not made any sales for the day. Lost in thought, all she could do was just wish that customers would come to patronize her before the close of business– to save the day.

Though Elizabeth works very hard, the daily sales are utterly poor, and the proceeds are hardly enough for her family, especially now that her husband’s carpentry business has stagnated due to the recent outbreak of the novel Coronavirus disease.

Petty trader, Elizabeth Ojo

Owing to the alarming unemployment rate in Nigeria and the inability of the government to create an adequate opportunity for more jobs for the teeming population of the unemployed, many Nigerians, like Elizabeth and her husband, rely on beggarly earnings from small scale businesses to pay their house rent, feed their families, pay children school fees, pay electricity bills, and other bills.

Life became even more difficult for the petty trader, since the outbreak of the novel coronavirus disease.

Read Also:

“I wake up very early to open my shop but unfortunately, at the end of each day, I don’t make any tangible sales. The period of the lockdown imposed by the government to curtail the spread of the coronavirus was very bad for us. It was by the grace of God that my family survived it. From that time up till now, we have been struggling to survive by the grace of God,” she told The ICIR.

For her, the day usually begins at 4 am when she wakes up to say her prayers, do the house chores, fix breakfast and lunch for the children before proceeding to her shop located along the Bwari Timber shed market.

Each day, her expectation was to make sales that would enable her to take care of the immediate needs of the family, but she always went home after the day’s business, disappointed.

A few minutes past 2 pm on the day The ICIR visited her shop, Ojo who sells soft drinks, snacks, recharge cards, satchels of milk, milo, detergent, and other items in her shop, looked gloomy, an indication that all was not well with her.

Her countenance soon lit up a bit when this reporter approached her and asked for a bottle of soft drink and snacks.

At the Timber market area where her shop is located, businesses are dwindling due to what operators blamed on the poor road network to the market.

“Since I opened this shop three years ago in the timber shed area, business has not been good. Everything is going down on a daily basis,” she said.

Inadequate basic infrastructure, multiple taxations hampering SMEs growth

The ICIR’s check showed that the common challenges confronting Small and Medium Scale Enterprises (SMEs) in the Bwari area include, inadequate basic infrastructure that could have made the environment more conducive for small businesses,  shortage of water supply, lack of electricity and poor road networks linking the markets and some parts of the town.

This lack of physical infrastructure contributes to hampering the growth of SMEs in Bwari town since it costs business owners so much in providing an alternative in the absence of government intervention.

Read Also:

Further checks also showed that multiple taxation has become a major problem that is stifling businesses in the area as business owners say they pay their taxes, but the area council administration does nothing in return to help businesses grow.

Commonly, the taxes imposed on Small and Medium Scale Enterprises in Nigeria include: business registration fee, environmental sanitation fee, fire service fee, emblem levy, retail permit, and trade permit, development tax, market taxes, produce a fee, revenue tax, most of which from the investigation, are being imposed on traders in the Bwari area council.

Bwari Area Council Secretariat

Elizabeth told The ICIR that initially, she ran her business in the heart of Bwari town, but was later forced to close the shop due to the exorbitant shop rent, coupled with the huge taxes she was compelled to pay.

When she relocated to the present location where she now operates, she thought she had escaped from paying not only shop rent but the taxes which she said, contributed to crippling her business in the other location.

Now she is face-to-face with the same predicament even as she has been notified to prepare to start paying her taxes in her present location.

Elizabeth Ojo’s shop located along the timber shed section

“When I was having a shop inside Bwari town, I used to pay N3, 000 every month to the revenue officials. I moved from that place to Timber Shed because I could no longer cope with the high shop rent and the taxes. I was paying N50, 000 for the shop. Now in this place that I am now, the revenue collectors have notified me to get ready because they would soon serve me papers to start paying taxes for where my shop is now,” she said.

Elizabeth does not see reasons why revenue officials should still bother her with the issue of taxes considering the state of businesses in the area, occasioned by the bad road network that links the Timber market.

“As the roads connecting this market are not good, it is directly affecting my business. People that are supposed to come to this place to patronise timber sellers, mechanic and spare part sellers operating at close proximity, prefer to go to other places. If the road is good, people will troop here. It is the customers that visit these traders that patronize us. Business is very bad here. Since 9 am and up till now (referring to the time The ICIR visited her at around past 2 pm), I haven’t even sold anything today.

Yesterday, I made sales of N500 throughout the day,” she lamented.

Elizabeth is not the only small business owner in Bwari affected by multiple taxations and lack of infrastructure.

According to  PricewaterhouseCoopers Inc (PwC), Small and Medium Scale Enterprises (SMEs) account for 96 percent of businesses and 84 percent of employment in Nigeria. In Abuja, Nigeria’s Federal Capital City, thousands of SMEs operate under harsh conditions. In Bwari area councils, the situation is worse.

SMEs are struggling to Survive

Like Elizabeth, Ekene Sunday’s motor spare part business is also struggling to survive.

Sunday relocated to the Bwari area in Abuja in 2012 to establish the spare parts business at the Technology Village in Bwari, after serving his master for eight years.

Spare parts dealer, Ekene Sunday

He also said business has not been moving well since he started because customers prefer to go somewhere else to buy their motor spare parts and fix their cars.

“Business is very dull in Bwari. Many people living here in Bwari used to go to town to repair their cars, leaving us here to our fate. We have everything that customers need here, yet they will leave us and go to Kubwa and Apo, so we are not doing well at all,” he said.

Sunday says he pays N6,000 tax to the area council every year for operating business in the Motor Spare part section of the Technology Village where his shop is located, yet the council does not show any concern towards the growth of businesses in the area. He also attributed the poor patronage to the bad road network which discourages customers from driving into the market.

Against his expectation, eight years on, Sunday says his dreams of making it in Abuja is far from becoming a reality. His dream was to build a house of his own in Abuja, buy a car and give his family the best of life.

For Moses David, a Keke NAPEP tricycle operator who has been doing business in Bwari town for three years, tricycle business was never something he would have ventured into if his dream to work in an office had come through years ago.

Moses David, Keke NAPEP Operator

He says on a good day, he makes between N3,000 and N6,000 from which he pays the owner of the tricycle and buys fuel. At the end of the day, he is left with peanuts.

Yet no matter how low he made in a day, David is forced to pay N50 levy daily, amounting to an average of N300 every week.

“Apart from paying taxes, another challenge we are facing here is the bad roads. This has caused a lot of damage to my tricycle and unnecessary spending. Today, you are repairing something, tomorrow you are fixing another fault.

“What we want the government to do is to fix the road because bad roads are affecting our business. This will reduce our spending. If the road is good, business will be good,” he said.

Commercial motorcyclists, popularly known as Okada riders operating in different parts of Bwari, also shared similar experiences, lamenting how multiple taxes and levies enforced by transport unions and the area council administration stifle their businesses.

Dr. Cross Ogohi Daniel of the Department of Business Administration, Nile University of Nigeria, Abuja, in his recent research on the Effect Of Multiple Taxation On Small/Medium Enterprises in Nigeria, concluded that multiple taxations affect the survival and growth of SMEs in Nigeria, yet government at all levels keep overburdening business owners with multiple taxes.

The study affirmed that since small-scale enterprises are vital to employment generation, the transformation of the economy and production of goods and services, as such, they should not be overburdened with multiple levies and taxes to enable them to stay in the business and lend their support to the industrialization processes of the state.

“Tax must be done in such a way that puts their revenue and need for survival into consideration. It is expedient that enough profit is allowed for them for the purpose of expanding their businesses,” he said.

Apart from taxes, commercial motorcyclists spend a lot on repairs

Shamsudeen Aliyu, who has been into the Okada riding business for 10 years in Bwari town, says there are different bodies that collect levies from commercial motorcyclists which include Amalgamated Commercial Motorcycle and Tricycle, Motorcycle Transport Union of Nigeria(MTUN), Owners, Repairers and Riders Association of Nigeria, ACOMORAN and the area council.

His daily earning ranges between N1,500 and N2,000 but when business is not good, he goes home with only N1,000, and sometimes he doesn’t even get up to N1,000.

“Sometimes I make a gain, sometimes I don’t make any gain. It is very frustrating’, he said, adding, “to avoid the council tax collectors from confiscating his bike which attracts N1,500 fine, he buys a daily ticket at the rate of N50 which sums up to between N300 in a week, he also buys a sticker for N500 which expires in every 12 months.

His problem is further compounded by the bad road which makes him visit the mechanics regularly.

“Some of the roads here are good but some are in bad shape, so it affects our motorcycle. It cost us a lot of money sometimes to fix our bikes.

He appealed to the area council administration to salvage the Okada riding business by fixing all the bad roads.

Bad roads as “killer” of businesses in Bwari

Haruna Musa, a motor mechanic at the Mechanic Village, says after 28 years of doing business in the area, he still could not boast of having any savings because things have not really changed since these past years.

Haruna Musa(1st from the right) and his apprentices at work

“We are trying to move on. But because of where this workshop is located due to the bad road, business is not moving well as it should be,” he stated.

On a normal day, Musa makes between N3,000, N5,000 and sometimes, up to N7,000 in a day, but spends up to N3,000 or more on the water every week.

“A bag of pure water is N100 or N120. If it is Mai-Ruwa (Water vendor) a jerrycan is N50 or N70. In a week, we spend between N3,000 and N5,000 on the water every week,” he said.

Apart from the N6,000 tax he pays to the area council, Musa says he pays other fees to the association of business operators in the area for maintenance of the road.

Putting the relevance of SMEs to the growth of the Nigerian economy into perspective, recently, Vice President Yemi Osinbanjo noted that: “MSMEs(Micro, Small and Medium Scale Enterprises) are the bedrock of Nigeria’s industrialization and inclusive economic development; and the most important component of industrialization as set out in the Economic Recovery and

Growth plan of the Nigerian government.

A National Survey 2017 Report represented by the Statistician-General of the Federation in Nigeria/ CEO of National Bureau of Statistics, Dr. Yemi Kale on July 11, 2019, further noted that SMEs are critical for economic growth as they play a significant role for economic transformation and industrialization for both developed and developing countries.

The report noted that as of December 2017, MSMEs generated 59,647,954 jobs, 5 percent of the total figure of the jobs which is equivalent to 2,889,715 jobs, were created by SMEs, increasing job creation and skills development, particularly for youth, women, and elderly.

The report was the outcome of a survey conducted in all 36 states of the federation, including the Federal Capital Territory (FCT), Abuja. Both urban and rural enumeration areas (EAs) were covered.

In view of its potential to unlock Nigeria’s economic growth, governments at all levels are expected to create an enabling environment for SMEs to thrive.

This is, however, not the case in the Bwari area council, where authorities have been burdening small business owners with taxes that do not commensurate with deplorable existing infrastructure.

In spite of the revenue the local authorities generate from taxing businesses across the council, traders say there is nothing on ground to show for it because the council authorities are not utilizing the funds adequately, for the benefit of the taxpayers.

Traders Resort to Self Help to Fix Dilapidated Roads After Years of Government Negligence

In the absence of any intervention by the area council, a joint association of traders in the Bwari Area Council, comprising of the Motor Parts Dealers, Motor Mechanics, Timber Shed and Building Materials dealers, have in the past years, resorted to self-help by mobilizing resources from individual traders to fix the dilapidated roads linking the markets.

During this investigation, The ICIR observed that the roads linking the various markets are still in bad shape but probed further, the Chairman of Motor Dealers Association in Bwari, Ossai Godwin opened up that it used to be worse than what it is presently.

In a desperate move to save their business from total collapse, Godwin said as a palliative measure to reduce the effect of the bad road networks on the markets, the association resorted to self-help after years of government negligence.

“Last two years, the four units of this market, consisting of Motor Parts Dealers, Motor Mechanics, Timber Shed and Building Materials, raised one million, fifty thousand Naira to grade the roads. Individual shop owners contributed N5, 000 because when we go to the area council to remind them about our request for them to fix the roads, they will assure us that they are coming but they never did, so we decided not to wait for the government anymore.

“We wrote letters to the area council with no response. We tried on many occasions to follow up, but nobody is taking our complaints seriously,” he stated.

Godwin confirmed that the traders pay between N6, 000 and N9, 000 tax per shop. While bigger shops pay N9, 000, smaller shops pay N6, 000.

Like the other traders, he sees no reason why they should continue to pay taxes since there were no benefits attached to it.

“The light here is not reliable. You subscribe to GoTV but you will not use it for one week before the month ends and it expires just like that. We don’t have boreholes here, we buy from mai-ruwa (Water vendors).

“Government is supposed to provide good roads and boreholes here for traders, so we can have water. We need light because we have welders here, battery chargers and electricians, restaurants, relaxation centres and other people that use electricity,” he said.

As noted by Daniel, taxes generally provide a basis for government revenue, which help

them in carrying out their functions, but in this context, the traders said they have been deprived of their entitlement.

Godwin says if the government was living up to its responsibility of providing “stable electricity and a good road for us, we won’t complain about the tax, but as it is, “we don’t see the benefit of paying taxes. It is not only to come and collect money, the government should do something, at least give us good roads, water and light. Most of our customers say they prefer repairing their cars in town because of the road since there is no use fixing their cars here because the too much gallop and pothole will end up causing another damage to their cars,” he emphasized.

The traders have made it a matter of priority to work on the road at intervals to make it a little bid accessible to would-be customers.

“Again, in the last two weeks the association of spare part dealers and motor mechanics mobilized our people to do the work on the roads and with this little repair we have done on the roads, a few people are encouraged to come to the market,” the chairman added.

A tyre dealer, Eze Mathew says since he started the business in Bwari in 2008, the challenges of infrastructure had been an issue of concern to traders in the markets.

“They say we should pay the N6, 000 tax which we have been faithful in paying. People don’t normally enter this market because they say the road will spoil their cars. We expect that the area council should fix the road and provide water inside the market because we don’t have any facility inside the market,” said Mathew.

A restaurant operator, who preferred not to be named, appears to have lost fate in the ability of the area council to create a conducive atmosphere for businesses to grow in the area.

Asked how his business has been coping with the unstable power supply, the owner of the popular Peace Restaurant located opposite the area council secretariat said the light issue has lingered for about two decades now. “We have gotten used to it.”

Speaking on government failure to provide infrastructure commensurate with tax collected, he said “These issues have been there, so it is not today. I don’t think these issues can be solved. We have been in Nigeria and we have been managing the situation just like that.”

A hairdresser, Odesanmi Blessing whose saloon is also located opposite the Bwari Area Council secretariat, says “with the way business is going, she’s not sure of her chances of survival in the nearest future.

Hairdresser, Blessing Odesamni inside her saloon

Blessing, who has been operating the saloon for 12 years, is sad that the council collects taxes from business owners and yet does not care whether their businesses are doing well or not.

Misappropriation of public funds rampant

Misappropriation of public funds has become very rampant in Nigeria where the masses are left to suffer the consequences which range from underdevelopment, lack of basic amenities because taxpayers funds that are supposed to service the provision of infrastructure end up in private pockets of government officials.

She alleged that the manner the taxes were collected is suggestive that the money may be going into private pockets because the tax collectors usually do not issue receipts for payments made.

“If they serve us the paper, they will give us a week interval before coming back to collect the money. When we pay, instead of giving us a receipt, they will just write it on the paper. Sometimes we give them N1, 500, sometimes, we give them N2, 000, N500 or N1, 000. There was a time they served me the paper, then I went to their office inside the Secretariat to pay. They told me to go back, saying that those that gave me paper will come and collect the tax from my shop. So, they later came, and I gave them the money,” the hairdresser alleged.

“Sometimes I used to challenge them that they are not doing anything to help us. We are the ones working and giving them money and we are not seeing anything. There is hardly any electricity supply. In a month, we can just see light three to four times and they will still bring the bill. We rely majorly on generators. It is very sad because here, whether you use light or not, you still pay electricity bills because they still bring bills for you. We don’t know where the revenue is going. Looking at the situation of this road, there is nothing to show,” Blessing said.

Area Council says no adequate fund to provide infrastructure

Anyadalo Danlami, Chief Revenue Officer, Bwari Area Council who was authorized to speak after the council subjected this reporter to so many protocols and ordeals for days, admitted that the area council was aware of the plights of the traders at the council but was cash- strapped that it cannot address all the needs of the people.

Speaking to The ICIR, he insisted that the amount paid by the traders as taxes was too meagre for them to expect that all their needs for infrastructure would be met by the council.

“We have heard their complaints many times but if you consider how much that is collected from them as taxes, it cannot even do anything,” he said.

He blamed the problem on the poor allocation to the council from the Federal Government, saying, the council Chairman would have done more if the funding was adequate.

“I believe with the kind of Chairman we have now, supposing the allocation we are getting from the Federal Government is enough, all those problems would have been a thing of the past,” he stated.

“We discussed with the market association the true situation of things that the money we are getting is not enough to do everything everywhere. For example, you can see Sabon- Gari road, the Chairman has tiled the road. How much is the allocation we are getting from the Federal Government? It is not something to write home about. So, to me, the Chairman is doing his best and truly, if we are encouraged and the allocation increases, things would be better,” Danlami said.

He called on the federal government to increase its allocations to the FCT administration but also promised to try harder as a revenue unit.

On how the council is spending the revenue collected from traders, the Chief Revenue Officer of the Council said: “It is a thing that is glaring. If you go round around, you see boreholes constructed by the administration and we are getting water from it. It is as a result of the revenue we are getting.”

Anyadalo Danlami, Chief Revenue Officer of Bwari Area Council

Prodded further on the complaints of traders in the market about not having water, Danlami said: “No matter what you do for them even if you build the road for them they will still complain. But the executive chairman is doing his best to ensure that they have a good road.”

He listed some of the taxes the business operators at the council pay to include daily ticketing for Keke NAPEP and Okada operators which is N50 each. Shops pay rental fees of N6, 000, tenement rate which varies from N2, 000, N3, 000, N5, 000 and above, development levies, market fees and other levies.

Speaking on revenue leakages, he said the revenue department carries out intensive supervision to ensure that shop owners pay their taxes directly to the council’s bank accounts, after which they are expected to present the bank tellers to the council to be issued receipts for their payments.

He said all shop owners were expected to pay taxes in the bank, appealing to them to report any tax collector who attempts to collect cash from them directly.

“No tax collector is allowed to collect cash and that is why the demand notice we usually issue to shop owners have account numbers. Anybody found wanting will be disciplined,” he said.

The Chief Revenue Officer of the council could not account for how much money the area council generates either daily, monthly, or yearly when questioned.

The ICIR contacted the information unit of the Federal Capital Territory Internal Revenue Service (FCT-IRS) in Abuja for more enquiries but the officer met on the desk declined to comment, saying all staff of the FCT-IRS were on secondment and answerable to the FCT administration, so they are not allowed to speak on any tax issues.

Earlier, efforts by The ICIR to know how much Bwari area council generates from taxes and how it spends the funds collected from traders was frustrated by officials of the council at the information office.

After several attempts, this reporter was directed to an officer identified as Emma, said to be the right person to speak on the issue.

But when contacted, he was antagonistic, threatening to take action should this reporter publish anything untoward against the council.

Federal Government Allocations Are Evenly and Promptly Disbursed to Area Councils

Olanikpekun Omolola, the Acting Secretary of the FCT Area Council Services Secretariat told The ICIR that from January to May this year, the FCT administration has disbursed over N2.7bn to the area councils in the FCT as their share of the Federal Government allocation, to run their operations and projects.

The secretariat is the mother body of all the six area councils of the FCT which carries out supervisory roles on the council and ensures that the allocations from the Federal Government are being given to the area councils evenly, through the Joint Area Council Allocation Committee (JAAC).

Reacting to comments by the Chief Revenue Officer who blamed the lack of infrastructure in the council to poor government allocation, she says, “As the allocation comes, there is no delay from the administration. The administration ensures prompt disbursement by quickly having a meeting at least within 24 hours everything goes to the council chairmen and nothing, absolutely nothing is taken away from them.”

Omolola says in January, Bwari area council alone received over N90, 306, 851.82 while its entitlements in the subsequent months were also paid promptly.

She disagreed that the Bwari area council had not done much in the provision of infrastructure. According to her, the area council has made some giant strides that is commendable.

“If I will talk about the allocations that have come this year, from January to May there have been allocations coming from the federal government which have promptly been distributed to all the councils. All the councils are getting what accrues to them.

“In January, over N90. 306, 851.82 given to Bwari area council. I wouldn’t say Bwari council is doing really bad because no matter what, recently they have embarked on projects even with what is going on.

“The area council embarked on projects on health which I recalled that they requested the attention of the Minister of State for FCT to come and commission that project. They also wrote to us about the road and the other one I can remember. It is an improvement and a laudable achievement to that area council. They also constructed 5 markets to attract revenue, so the Bwari area council is trying. These facts are not a hidden thing,” she said.

Aside the Federal Government allocation, Omolola said the FCT administration always dedicates 10 percent of its Internally Generated Revenue (IGR) which still goes back to the council for implementing and for servicing the people.

“The FCT administration to the best of my knowledge has not been withholding or delaying any allocation for the councils. As it comes, it gives,” she stressed.

She gave the breakdown of the total revenue disbursed to all the six area councils from January to May respectively, as follows: January-N704,693,562, February-N444.767,553.28, March, N674,379,984.03, April-N293,794,682.43, May-N601,352, 696.88, noting that the FCT administration had a dwindling allocation from the Federal Government this past few months because of the Coronavirus epidemic which has affected not only the Nigerian economy alone but the global economy.




     

     

    Speaking on the efforts of the administration to boost revenue generation of the area councils, she said the administration was making sure there is an implementation of projects that could draw more revenue, like the construction of markets through Public-Private Partnership (PPP) arrangement.

    “We are talking with developers to complete abandoned market projects to speed up revenue generation. We are looking inwards with a survey to see what can help,” said the acting Secretary.

    On revenue leakages, she said the FCT Minister had been working on harmonizing all taxes to make sure it gets into the TSA and that nobody collects taxes directly from taxpayers.

    “We are looking at a system where only one person prints the tickets and then he is controlling it from his own ends to ensure the authenticity of the receipt or tickets. We will assist the area councils in monitoring to ensure individuals don’t collect taxes directly,” she said.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

    Support the ICIR

    We invite you to support us to continue the work we do.

    Your support will strengthen journalism in Nigeria and help sustain our democracy.

    If you or someone you know has a lead, tip or personal experience about this report, our WhatsApp line is open and confidential for a conversation

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here


    Support the ICIR

    We need your support to produce excellent journalism at all times.

    -Advertisement-

    Recent

    - Advertisement