The revised National Housing Fund Law, which was recently passed by the National Assembly, could lead to elevated costs for several businesses in the country.

Here are highlights of the law:

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

The penalty for noncompliance 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 contributors who have attained the age of 60 years or 35 years of service to be at an interest rate of 2% per annum

The Fund and any refund of contributions are exempted from payment of taxes.

Implications of the law
The law, if assented to by President Muhammadu Buhari, could have several negative effects on both businesses and investors in the country. Here are a few drawbacks of the law.

Businesses will be stifled
Section 6 of the law states that every commercial bank is mandated to invest a minimum of 10% profit before tax into the fund at an interest rate of 1% above the interest rate payable on current accounts.

The same applies to merchant banks, insurance companies, and pension fund administrators.

Some of these firms already pay a multiplicity of taxes. Corporate Income taxes, as well as Education Trust Fund deductions. They will thus be forced to either lower their profits through legal means.

Higher Building Costs
The imposition of a 2.5% levy on cement produced in the country will lead to more expensive building costs. An irony, since the very essence of the law, is to enhance affordable housing.
This cost will eventually be passed on to the final consumer since the dominant cement operator is essentially a price setter.

Draconian fines
The fines for non-compliance by both individuals and businesses are highly draconian. Few businesses can afford to pay a N100 million fine. This will force many enterprises to go under.

Investors are affected
The companies in the financial space are largely the most profitable in a struggling economy. The dominant owners may get away through a byzantine web of technical agreements and fees, but the retail investors will bear the brunt of the action.


https://nairametrics.com/2019/03/18/highlights-of-the-revised-national-housing-fund-nhf-law/