Taxation And Investment In A 3rd World Economy- A First World Approach | Olajide Ademola Omosebi

Taxation And Investment In A 3rd World Economy- A First World Approach | Olajide Ademola Omosebi

the second half of the twentieth century, the emergence of scores of new states
has made international politics and economics truly global for the first time
in history. At the same time, technology has made it possible for nearly every
country to participate in events in every part of the world as they occur.
Unfortunately, the explosion has not been accompanied by similar increase in
knowledge. The continents interact but they do not learn from each other.

uniformity in technology, access to information, is accompanied by an implicit
assumption that nations, both developed and developing world learn from each
other, to fast-track growth and boost the economy.

differ in their economic success because of their different institutions, the
rules influencing how the economy writes, and the incentives that motivates
economic institutions, such as those in South Korea or in the United States,
allow and encourage participation by the great mass of people in economic
activities that make best use of their talents and skills and that enable
individuals make the choices they wish. To be inclusive, economic institution
must feature secure pirate property an unbiased system of law, and a provision
of public services that provides a level playing field in which people can
exchange and contract; it also permits the entry of new business and allow
people to choose their careers.

country no matter how ingenious can thrive on a mono-economy and avoid economic
volatility. There must exist a paradigm shift from a mono-economy to
diversification of the economy. This will culminate into economic growth
thereby creating employment, infrastructural development, increase in standard
of living, improved GDP and composite IGRs, and solve myriads of problems on
the economic front. Taxation as a socio-economic tool could be used to achieve
these aims via tax holidays, tax incentives, law tax tariffs, widening the tax
base to include informal sectors thereby making these nations attractive to
Keywords: Economic  Growth, Taxation,
 FDIs, IGRs, 3rd  world nations, Tax holiday,
 Tax Haven.
has become a muse for government of developed and developing nations. As a
socio- economic tool, it can be used to drive the economy forward. The shift
from a developing nation to a developed nation might require rigorous
government policies to transform the economy.

the lessons to learn from developed nations is, „how they make their economy
and sustain
it. This Lee Kuan Yew, who arguably is the founding father of Singapore,
utilized in moving Singapore from a 3rd word nation to a first word nation.

of the world must interact and take cue on administration, investment from each
other. Though circumstances may differ, but will surely put us on the right
pedestal. If I have learnt to see clearer, it is by standing on the shoulder of

burgeoning problems facing third world nations necessitate a restructuring in
the way the economy is being administered.
aphorism that one cannot repeatedly to a thing in a particular way and expect a
different result remains tenable, even today.

developing nations, more attention is paid to taxation of formal sectors, thereby
neglecting the informal sectors. While this has helped sustained the economy in
the revenue generation, and meeting the needs of the society. It does not
acutely represent the proper economic status of these nations. The informal
sector, which makes profits though depleted by the vicissitude of life, is a
booming sector that should be taxed and developed.

major factor that has bedevilled the potential of these nations is their
„consumption culture
. They are nations who only import and never export.
There is over dependence on one major source of revenue. This has long stifled
the growth of these nations.

is also the quick-fix elixir to seek for FDIs, loans and aids from developed
nations to finance the already failed institution still operative in these
archaic solutions will only bolster us to keep moving in circles.
desirability of developing nations becoming first world nation does not augur
well with the quick-fix panacea been adopted by the government of these nations
for decades. The stratagem has been utilised well to sustain them at their
complacent state. The solution lies above this medium.

is noteworthy to point out that, taxation and investment are like Siamese
twins. The relationship between tax and investment transcends this present
treaty, but the focus here is to see how tax can bolster the economy of a state
above the status quo been earlier adopted.

espoused by Professor A. D. Lawton, tax could be used to foster production and
investment as a contemporaneous pursuit of subsidiary aims by the government.

are always seeking for means to increase their wealth-base, whilst, government
are also seeking for ways to increase their revenue to accomplish more for
their individual states. They are always seeking for means of getting
more and paying less tax
. Tax could be seen to be Janus-faced- tax being
used to attract investors, and, also used to boost the economy.

of the problems facing these nations is that they run a mono-economy. For
example, Nigeria only depends on oil and the shake in the international market
has affected its economy thereby culminating into recession. To increase the
revenue base of these nations might be herculean but it is achievable. Of
course, their budget being passed yearly cannot transform their economy. The
suggested solution would be that governments of these nations would meet with
investors to invest in their ailing sectors- health, education, industry,
agriculture, infrastructure, entertainment, power, technology, roads, rail
transport, tourism, sports. This will not only boost the economy, but
will also increase the standard of living, create jobs, increase IGRs, and
boost the GDP. However, to attract the investors, tax holiday must also been
given to them, and repatriation of funds back to their home country. These
nations will then become tax havens for individuals willing to migrate, and tax
holidays given to investors willing to incorporate their companies there.

investment by foreign investors, partnership with firms and corporations in
other climes making them have subsidiaries in these nations could boost the
economy. Here, these firms/corporations  would  then  have  subsidiaries  to  create  a  venue  for  development,
employment, etc. Subsequent upon this, they will enjoy tax holidays in turn.
This investment would then help revive sectors which have been left to age, and

area of focus is the taxation of informal sectors.The broader spectrum of
business being run in these nations is under the informal sector. This probably
explains why attention has not been given to them. Taxing these sectors will
help revivify the IGRs of components states. This is achievable by ensuring
that these businesses are registered by the government, thereby increase the
tax-net to cover them.

is evident that the yearly budget in developing nations cannot help boost,
revive, and maintain their redundant sectors. Investments in tourism,
agriculture, infrastructure, sports, technology, education, could help
transmogrify these nations to a 1st world nation and solve myriads of problems
on the economic front.

its drive to attract investments and position the state economy on sound
footing, one of the states in Nigeria- Lagos established an Office of Overseas
Affairs and investment (LAGOS GLOBAL). The office is tasked with the
responsibility of creating an enabling environment for global competitiveness and
promoting inward and outward foreign direct investments in the state.

to make the Lagos economy a self-sustaining one, the tax net was widened to
include more groups and individuals. This was done by the overhauling of the
informal sector.

achieving these aims and goals, there must be a synergy between the governments
of these countries, to ensure its smooth passage. For this to be achieved, the
legislature, executive, accountants, and technocrats must collaborate together.
peroration, synergy and partnership between developed and developing nations,
foreign and local firms, foreign and local investors should be encouraged as a
sure path to progress, and economy boom.

of the economy as opposed to a mono-economy being run by 3rd world nations is
the sure path to progress. And, technology which has virtually transformed most
first world nations must be invested in. Education will surely help maintain,
and transform any society, and its neglect will definitely spell doom for any

nation of this world can ever survive on its own; no man can.

Olajide Ademola Omosebi

Legal Officer/ In-house Counsel

Mactay Group/ Global Manpower Ltd

Company Name Co.

Ed’s  Note – This article was first published here
Photo Credit – 
Nigerians and the MMM Craze by Ahmed Olaitan Banu

Nigerians and the MMM Craze by Ahmed Olaitan Banu


 “Mystery creates wonder
and wonder is the basis of man’s desire to understand”
Certain events occur in
life that we find quite difficult to wrap our minds and thoughts around. It
took me a while to make up my mind on the need for this write up. Why? Because
I just can’t seem to understand what is going on – I see irrationality every

There has been a recent
craze in the Nigerian financial sector that I am sure a lot of you are aware of
– MMM. From my research, MMM is a scheme that enables its participants to earn
an interest of 30% per month on the capital pledged into it. Hence, making it
some sort of investment. This was my initial understanding. However, further
probing revealed interesting findings which led to my conclusion that it’s more
of a Ponzi scheme where money flows between participants without recourse –
some sort of an Hybrid Ajo
A common term of the scheme – provide
help and get help –
started to ring bells in our ears from its very courageous
. I call them courageous participants because my
discussions with the participants who market – some have taken it upon
themselves to self-market to earn a bonus – made me realize that sufficient due
diligence was not been done on where and how their return on capital will be
generated to pay the 30% interest prior to making their pledges. 
If we think of the annual
interest to be earned by pledging to MMM which is 240% (12 x 30%) return on
capital, one sees irrationality coming to play. Let me reiterate; 240% return
per annum. Seriously!!!!! Then the available capital in Nigeria should be
diverted to MMM as the traditional knowledge on capital allocation is that
capital should be allocated to resources that generate the highest return. Even
entrepreneurs like our boss; Aliko Dangote, should be into MMM. Banks should
also cease to exist. I don’t even think there is a company in the world (yes,
the world) that provides a return of such figures to its shareholders. (if you
know such company please contact me). 
Also, I see Nigerians
exhibiting the recency bias. This is a behavioral cognizance where
people tend to remember only recent events and wipe out the memory of all other
events that had previously occurred. In Nigerian terms, this is synonymous to “As
E Dey Hot
”. This is a normal behavior in Nigeria; everybody wants to be
involved in the latest trend, events, happenings etc. The “do not let it
pass me by
” syndrome. Funny how we have forgotten about the Nospecto and
Wonder Banks of early/mid 2000’s and how they dealt with us. For people that
certainly do not recall, please google them up and read stories. 10 years ago
is not too far off, probably in 10 years’ time schemes like this will spring up
again.- that is if MMM does not last till then. Additionally, I see traces of
the Herding behavior where people do things just to follow the crowd so
as not be seen as losers or fake people. In Nigeria, this is also known as the
Follow-Follow” syndrome – The act of doing what the people around you
are doing, even if you do not know what that are doing. 
Could all these behavioral
biases be the reason for the MMM prominence?
Going further to look at
the impact of the MMM Craze on the world I am most passionate about – the
Investment Sphere, I get scared and see a serious disintermediation risk occurring.
The fact that Nigerians are pulling money out of Mutual Funds, Banks etc just
to participate in MMM is absurd. Moving money from the safe to the unsafe
leading to unexplainable excessive risk taking. Investors are now demanding for
returns equivalent to the 30% per month promised by MMM. If it can’t be
matched; No Deal. Investors have started asking industry operators to find out
what MMM is doing and replicate it. 
One of my unsolved puzzle
in the Nigerian investment industry is that the industry is controlled by
foreigners. Occasionally, I hear industry operators’ concerns about the lack of
foreign participation and how they watch out for monetary policies that
increase foreign capital participation in the market. So where are all the
domestic investors and their capital? Nigerians save but where do the money go?
At least for now will it be safe to say MMM?  
The MMM trend has got a
lot of Nigerians wagging their tails. They have wagged their tails so bad that
there are indications that the National Assembly wants to enact a policy to ban
MMM. I doubt if that ban will succeed. Why? Because it’s a rage and when
Nigerians are crazy about something you dare not interfere. 
So what has MMM done to
make Nigerians – the poor, middle-class and rich – bring their money out from
their hiding places to take such excessive risk? The risk in excess of
equity investing. I have mentioned below some of the reasons I believe MMM is
currently a hit in our environment.
1) The love for big
returns: the 30% interest per month was very attractive. This may be true
because recently, there was the Treasury Bill craze (discussion for another
day) ; 
2) Timing: MMM caught us
at the right time when recession kicked in hard and there is a need for money
to match rising cost of living; 
3) Greed: Nigerians like
quick money. The love to earn money we did not work for. Fast money syndrome. 
4) Social Media: helps in
self marketing MMM. A lot of people brag about their winnings on social media
platforms which has got other people interested – the “Follow-follow” syndrome
So the question is “How
long is this craze going to last?” Why? I have observed that the MMM model is built
on participation and the moment the participation seizes and money stops to
change hands, the participants left holding the bag will be left stranded. This
brings to mind the drinking game we indulged in while in school where someone
spins a bottle and the person the bottle is pointed at when it stops spinning
drinks all the beer in his cup. 
So imagine the MMM craze
stops while you just provided help, who will be there when you want to get
help. Aha!

Photo Credit – 


Source: Google

One major fear every foreign investor has is the stability of government in the investment destination  and the  security of investments. Many times, investors have been short changed due to National policies that take away their wealth by the governments of the investment state.

As part of the efforts to provide
an enabling environment that is conducive to the growth and development of
industries, inflow of foreign direct investment (fdi), shield existing
investments from unfair competition, and stimulate the expansion of domestic
production capacity; the federal government of Nigeria has developed a package
of incentives for various sectors of the economy. These incentives, it is
hoped, will help revive the economy, accelerate growth and development and
reduce poverty.

Expropriation or “wealth
deprivation” could take different forms: it could be direct where an investment
is nationalized or otherwise directly expropriated through formal transfer of
title or outright physical seizure. Expropriation or deprivation of property
could also occur through interference by a state in the use of that property or
with the enjoyment of the benefits even where the property is not seized and
the legal title to the property is not affected.

Section 25 of the Nigerian Investment Promotion Act  guarantees against expropriation of foreign investments, it provides that:

(1) Subject to subsections (2)
and (3) of this section-

(a) No enterprise shall be nationalized or
expropriated by any Government of the Federation; and

(b) No person who owns, whether wholly or in
part, the capital of any enterprise shall be compelled by law to surrender his
interest in the capital to any other person.

(2) There shall be no acquisition
of an enterprise to which this Act applies by the Federal Government, unless
the acquisition is in the national interest or for a public purpose and under a
law which makes provision for-

(a)   Payment of fair and adequate
compensation; and

(b)  A right of access to the courts for the determination of the investor’s
interest or right and the amount of compensation
to which he is entitled.

(3) Any compensation payable
under this section shall be paid without undue delay,and authorisation for its repatriation
in convertible currency shall where applicable, be issued.

Criteria for determining indirect expropriation

The degree of interference with the property

There is broad support for the
proposition that the interference has to be substantial in order to constitute
expropriation, i.e. when it deprives the foreign investor of fundamental rights
of ownership, or when it interferes with the investment for a significant
period of time. Several international tribunals have found that a regulation
may constitute expropriation when it substantially impairs the investor’s economic
rights, i.e. ownership, use, enjoyment or management of the business, by
rendering them useless.

Source: Google

the character of governmental measures, i.e.
the purpose and the context of the governmental measure,

A very significant factor in characterizing a government measure as falling within the expropriation sphere
or not, is whether the measure refers to the State’s right to promote a
recognised “social purpose” or the “general welfare” by regulation. “The
existence of generally recognised considerations of the public health, safety,
morals or welfare will normally lead to a conclusion that there has been no
‘taking’”. “Non-discriminatory measures related to anti-trust, consumer protection,
securities, environmental protection, land planning are non-compensable takings
since they are regarded as essential to the functioning of the state”.

the interference of the measure with
reasonable and investment-backed expectations

Another criterion identified is
whether the governmental measure affects the investor’s reasonable
expectations. In these cases the investor has to prove that his/her investment
was based on a state of affairs that did not include the challenged regulatory
regime. The claim must be objectively reasonable and not based entirely upon
the investor’s subjective expectations.

However, international law also
sets circumstances for the legitimacy of expropriation of foreign
investors‘assets. Essentially, it would appear that under international law,
foreign investors should only be deprived of their property rights for a public
purpose, in a non-discriminatory way, on the condition that there is payment of
compensation and upon the basis of due process.

Adedunmade Onibokun Esq

Adedunmade Onibokun is a legal practitioner, publisher and blogger. He
holds an LLM in International Business Law from the University of
Bradford and publishes the Nigerian law blog Legalnaija.



“A penny saved
yesterday, a penny saved today becomes two pennies tomorrow”… Anonymous
We all have heard the quote
above at a certain time in our lives; I heard it like gazillion times while growing
up. A quote that says a lot about saving. There are other phrases that have the
word saving as a content; for example, “Saving for the raining day”; “Saving
for the future” etc.  We all know these
phrases and try to embed their meaning in our daily lives; but what exactly
does this saving mean. 

Saving is the act of setting aside amounts of money from your income for future
purposes; the future could be tomorrow, next week, next month, next year, even
a decade from today, all depending on the saving goal.Let’s plug in figures to
the definition; a given amount of our monthly income is saved every month; say N20,000
and over a year it adds up to N240,000. Easy isn’t it? We can call this the Addition

But what if we just don’t set money aside, we let this money work for us; i.e.
the money we set aside generates more money for us. Interesting yeah! Sure we
have also heard this quote; ‘Making money multiply”, we can call this 3 Ms of
investing. This quote forms the basis of investing.

A while back I heard this podcast from one of our very own life strategist were
he said, “A wealthy man uses his income to buy assets that pay for his
liabilities while a poor man uses his income to pay for liabilities”.
Funny quote isn’t it but what keeps ringing in my head from the quote is “………uses
his income to buy assets” as this totally relates to investing.

So what is investing? It is
the act of setting aside amounts of money from our income to buy assets that
would produce more income for future purposes. Comparing this definition with
the savings definition, setting aside amounts of money sticks out but what we
do with that money is what defers. Let’s plug in figures using the scenario from
above, we set aside N20,000 from your income in a month to invest in an
asset that produces say N1,000 every month, so using the additions rule,
you have N32,000 over a year i.e. your initial N20,000 plus the N1,000
earned monthly over the year. Now imagine this is done every month, then N20,000
each month spun over various months into future years, unimaginable yeah? Now
that is what I will call Multiplication Effect and what people call,“making
your money work for you.
Which would you prefer; a
life embedded in a saving culture or an investing culture? We should all be preparing
to move to the new culture of building baskets of wealth from little fruits of
money. I learnt about it pretty late or rather I thought investing was all
about having a huge amount of money piled up somewhere before making good use
of it. I thought wrongly because one of the wealthiest men in the world; Warren
Buffet, started small and grew his wealth over the years to what it is today.
It is all about adhering to that culture; the investing culture. Thinking
like the life strategist, you never know, someday we all would be wealthy
By: Ahmed Olaitan Banu 


Dear Valued Investor,
In the outgone week, the NSEASI maintained its positive steam although ended with a marginal loss of 0.03%. The marginal cool-off comes after 4 weeks of straight gains back-to-back. The benchmark index ended at 41, 228.65 points. At this level, the Nigerian bourse has delivered 0.24% negative return for the year-to-date. The current market mood clearly suggests strong profit taking sentiment amongst most market participants.Recall that positive sentiment following the inclusion of ETI and FO in the MSCI Emerging Market Index, stable monetary environment, mixed corporate earnings, impressive dividends and yields were key drivers of the market equities in May despite heightened security concerns.

We would expect the equities market to see some decent level of zigzag trading over the next three months as both profit takers and bargain hunters slug it out. Bargain hunters will be taking position for second quarter/first half corporate results while profit takers will linger to close existing positions in the market. Notwithstanding, we believe there is still value. The Nigerian basket of equities is valued at price-to-earnings (P/E) ratio of 13.37x which we find attractive relative to peers within the SSA basket priced at 25.13x P/E ratio. The recent inflation numbers which shows a pick-up in the consumer price index to 8.00% from 7.9% in April might be begin to be a source of concern for fixed income traders over the medium-term. This should be a positive catalyst for the equities market.
Our basket of recommended stocks reflect the current mood in the market. While there are currently no “Sell” recommendations in our coverage universe, 53.8% of the stocks within the basket commands “Hold” rating while 46.2% is rated “Buy”. This shift in our coverage universe is reflective of the tight range within which the overall market is currently valued. Within the banking sector, DIAMONDBNK, FIDELITYBK, and SKYEBANK enjoys “buy” rating. Traditionally, we favour names such as GUARANTY, ZENITHBANK, FBNH, ACCESS. However, we will recommend a “Hold” on this names pending when we see a modest correction in their share prices. These names already are trading at our target prices.

In the consumer goods sector, DANGSUGAR offers the highest potential at current market price, alongside FLOURMILL, NASCON, NESTLE and UNILEVER. Nigeria’s demography in terms of population size, purchasing power, cash economy, changing consumer taste are key drivers of the consumer goods sector. We continue to see sustained earnings and margins growth in the sector.

The growth potential in Nigeria’s industrial (cement and building) sector is captured by CCNN, WAPCO, and DANGCEM.
Warm Regards,
Research & Strategy
Elixir Investment Partners Limited
Eleganza Building,
9th Floor, 634 Adeyemo Alakija,
Victoria Island Lagos