About a fortnight ago a correspondence from the Federal Inland Revenue Services (FIRS) notified business owners on the modalities for payment of monthly tax returns (VAT). The correspondence directed that due to the COVID-19 lockdown, business owners should utilize the e-payment platform for tax payment. Also, in compliance to social distancing measures, business owners were directed to send a copy of the electronically generated bank invoice to a designated e-mail address against the usual physical submission of payment evidence to the tax office. However, many business owners consider the absence of tax breaks, an additional burden associated with the pandemic.
The reality of the lockdown has impacted businesses in diverse ways. The uncertainties about the future of business have further compounded the incidence of COVID-19. As it stands, the lockdown has resulted in new realities such as an obvious waste of rent without commensurate income. Productions have halted and inflow distorted. Perhaps, a decline in taste for certain commodities among customers.
From the moral angle, payment of salaries to workers is another problematic dilemma for many business owners. Though firms are not generating income, yet, a wage cut would have a dire impact on the wellbeing of the workers.
The future of many businesses also appears uncertain due to the pandemic. For instance, restarting some businesses may require huge “re-investment” in advertising and publicity to get them standing. Also, businesses that depend on imported products, and those with international outlook may be poised with extended imbalances even after the world has conquered the pandemic.
But that is not the entire dilemma confronting small business in the country. The primary understanding that due to the high cost of production, many Nigerian businesses thrive on loans raises other series of burdensome questions. Loan repayment without corresponding business transactions must have become a daylight nightmare for many Nigerians in business.
In fact, to absorb some of these unexpected shocks on businesses, governments across the world are offering financial relief to businesses. In France, for instance, the government pledged to give businesses an aid of $50bn to cope with the lockdown. In South Africa, a debt relief fund was activated for businesses to cushion the effect of the pandemic. And in the United Kingdom, £350bn aid was set aside for businesses as part of the coping measures during the lockdown.
Sadly, such expectation in Nigeria will be an illusion considering the country’s financial realities. From the beginning of the budget cycle, the fiscals have been faced with a host of imbalances and a budget deficit of ₦2.175tn was recorded.
Further, oil price crises, as well as the COVID 19 pandemic, dealt the country a fatal blow plunging it into a further financial mishap. Thus, while the thought of business aid and relief might be highly stimulating, it may be impracticable as such relief might kill the economy. Perhaps, the decision of the central bank to retain the Monetary Policy Rate at 13.5% despite the COVID 19 situation explains the impossibility of any business relief plan.
However, while a huge basket of financial relief for businesses might be impossible, there is still a need for the government to consider the plight of small businesses. For instance, if tax reliefs are impracticable, cash transfers and provision of public goods can provide an alternative. Also, the provision of requisite infrastructure that can reduce the cost of business operation is an alternative worth exploring. A cut of government’s frivolous expenditure can as well expand the coffers thereby increasing the possibility of more robust business relief.