Friday, March 15, 2019 04:25PM / PwC
Nigeria
The National Assembly has passed a new law, the
National Housing Fund (Establishment) Act 2018. The key provisions of the Bill
include the following:
- Mandatory 2.5% contribution
of monthly income by employees earning minimum wage and above in public and
private sectors
- 2.5% of income by self
employed individuals
- 2.5% on cement, locally
produced or imported
- Employers are to deduct and
remit the contributions monthly
- Penalty for non compliance
of up to N100 million for corporates and N10m for individuals
- Sanctions include
cancellation of operating licence of banks, insurance companies and PFAs for
violations
- Withdrawal by contributoirs
who have attained the age of 60 years or 35 years of service to be at interest
rate of 2% per annum
- The Fund and any refund of
contributions are exempted from payment of taxes
10 Reasons Why The Proposed Law is a Bad Idea:
- The contribution is
regressive as it taxes the poor more than the rich. For instance, minimum wage
earners will pay about 250% of their personal income tax (PAYE) to the NHF
monthly
- Making all employers liable
to deduct and remit the contributions monthly (without a threshold) will worsen
the ease of doing business and Nigeria's paying taxes ranking
- Cost of borrowing will
increase as banks are required to invest a minimum of 10% of their profits at
1% above current deposit rates
- Increasing the tax burden
without addressing other fundamental issues like land regulation, REITS
framework etc is not consistent with the 2017 National Tax Policy
- Imposition of the 2.5% levy
on cement is a tax on property development which will make housing even less
affordable
- The 12 years statute of
limitation is too long, this increases the risk to employers and encourages
laxity on the part of government
- The penalty regime is
draconian, excessive and not commensurate with the violations
- The requirement for PFAs to
invest pension funds in the scheme means less returns for pension contributors
which will erode value for pensioners
- The return of 2% per annum
for contributors withdrawing after attaining 60 years of age or 35 years of
service is far below inflation rate and grossly insufficient to compensate for
time value of money
- The exemption from tax
clause is badly worded, it means refunds are exempt but contributions are
taxable.
The National Housing Fund (NHF) was established by the NHF Act of 1992
to facilitate the mobilisation of funds for the provision of affordable housing
for Nigerians. Unfortunately, 27 years after, affordable housing for Nigerians
remains a dream.
While the proposed law may be well intentioned, availability of funds
will not of itself address the myriad of challenges facing the housing sector
which centre mostly on policy and regulations. Nigeria should therefore adopt a
holistic approach to the issue of which affordable financing is only a
component. The fact that there is no marked progress to show for the 27 years
of establishing the NHF is proof that Nigeria’s housing problem cannot be
solved by simply throwing more money at the problem.
Download
NHF Act 2018 Here

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