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Stock market transaction cost up 0.17 % as operators decry imposition of VAT

Stock market transaction cost up 0.17 % as operators decry imposition of VAT

By Peter Egwuatu

TRANSACTION cost on shares traded on the Nigerian Stock Exchange, NSE, has risen by 0.17 percent for both the buy and sell side after the five percent Value added Tax, VAT, was reintroduced into the stock market previous week.

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Financial Vanguard gathered from dealing members of the Exchange that the commissions payable to stockbrokers have increased to 1.41 percent from 1.35 percent per transaction; commission payable to the NSE also increased to 0.31 percent from 0.3 percent while the commission payable to Central Securities Clearing System, CSCS Limited rose to 0.38 percent from 0.36 percent.

Consequently, the total cost per transaction on the buy side increased from 1.72 percent to 1.79 percent while total costs on the sell side rose from 2.02 percent to 2.12 percent, making the total transaction cost in both buy and sell side to rise by 0.17 percent

It was also gathered that investors pay stamp duty of 0.075 percent on each transaction.

It will be recalled that the then Minister of Finance, Dr. Ngozi Okonjo-Iweala, had in 2014 exempted VAT deductions from commissions earned on the traded value of shares, commissions payable to the Securities and Exchange Commission, SEC and commissions payable to the CSCS and commission payable to the NSE. The exemption expired on July 24, 2019 and the NSE resumed charges on July 25, 2019.

Hence, the commissions that attracted VAT include the ones earned by Dealing Members on traded values of shares and the ones payable to the NSE and the CSCS.

Dealers further revealed that investors may be losing close to N2.47 billion annually from trading their shares on the Exchange considering the average volume of shares been recorded in the last three years.

Reacting to this development, Managing Director, APT Securities & Funds Limited, Mallam Kasimu Kurfi said: “Since the extension of the exemption on VAT has not been extended    it has definitely increased the cost of transactions in the capital market and therefore continue to affect the bearish situation of the market. The increase of the cost of production is one of the causes of less participation of foreign investors.”

In his reaction, Head of Research and Investments, FSL Securities Limited, Victor Chiazor said: “Given the reintroduction of VAT charges on stokc market transaction, we estimate that investors would lose about N2.47 billion annually especially with the listing of high cap stocks like MTN Communications and Airtel Africa both of which has increased the market capitalisation of the stock market.”

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