The new rules on Commercial Papers (CPs) issued by the Securities and Exchange Commission (SEC) could change how taxes are collected in Nigeria. Companies now have to show proof of what they’re doing with money they raise. For example, a factory borrowing ₦500 million to expand must explain how it will spend every kobo. While this helps the government track income better, smaller businesses might find it too complicated and turn to informal, untaxed ways to raise money.
Companies must now report regularly on how they spend the money they raise. This stops businesses from claiming funds are for farming tools but using them for luxury cars instead without being caught. However, this creates more work for tax officials, and some dishonest activities might still slip through if checks aren’t thorough. Worse of all, if tax officials accept bribes to look the other way.
Additionally, breaking these rules comes with heavy fines, starting at ₦5 million. This should stop companies from avoiding taxes or misusing funds. But if the rules aren’t enforced fairly, some companies might take the risk anyway.
Furthermore, Shariah-compliant CPs (NICPs) are a new type of CP that avoids interest and is backed by real assets. A real estate company, for instance, could use NICPs to raise money without paying interest. But the tax system doesn’t fully explain how to handle this kind of profit, creating confusion. Without proper rules, some companies could avoid paying taxes on these earnings.
To sell CPs to regular people, companies need at least ₦500 million in assets. This keeps things safer but leaves out smaller businesses. If a small startup needs money to build an app but can’t meet this requirement, they might have to use unregulated loans, which makes it harder to track their income and pay income tax.
This will also affect companies that issue CPs as they may miss out on smaller businesses that could be profitable. Companies make profits from CPs by selling them for less than their full value. For example, they might sell a CP worth ₦100 for ₦95. When the CP matures, they pay back the full ₦100, making ₦5 profit. This helps them raise money quickly for short-term needs without taking on long-term debt.
Finally, charities can now raise up to ₦20 million without strict oversight, compared to ₦5 million before. This helps genuine causes like building schools but could be misused. Someone could pretend to run a charity, raise ₦19 million, and spend it on personal luxuries instead. Without proper checks, this could become a loophole.
These changes aim to make companies more accountable and bring more money into the tax system. If done well, they could make things fairer. But without proper enforcement, they might end up creating more problems, especially for small businesses and newer financial tools.
