Financial Doping: When Money Creates an Illusion of Competitive Strength

 In sport, doping refers to the use of prohibited substances or methods to enhance performance beyond what would ordinarily be achieved through training and natural ability. But what happens when the performance-enhancing substance is money?

That is the idea behind financial doping.

The term is most commonly used in sports economics, particularly football, to describe situations where clubs use unusually large injections of external finance – often from wealthy owners, lenders or related parties – to spend beyond what their underlying operating revenues would ordinarily support. Academic research has explicitly examined the concept in the English Premier League and its relationship with competitive advantage. (Taylor & Francis Online)

However, the underlying economic phenomenon extends beyond football. In broader financial and corporate contexts, similar dynamics can arise when cheap credit, government subsidies, guarantees or continuing financial support allow economically weak organisations to survive and compete against organisations operating without comparable assistance.

The fundamental question is therefore:

When does financial support become a legitimate investment, and when does it become an artificial performance enhancer?

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1. What Exactly Is Financial Doping?

Financial doping can be understood as the use of exceptional, subsidised, external or artificially structured financial resources to enhance competitive performance beyond what an organisation's underlying operating capacity would normally permit.

Consider two football clubs.

Club A generates £300 million of sustainable annual revenue and spends £250 million on players and wages.

Club B generates only £100 million but receives substantial owner funding and loans, allowing it to spend £250 million as well.

On the surface, both clubs may be spending £250 million. Economically, however, they are not operating from the same financial base. Club B has effectively obtained an additional source of competitive capacity. This does not automatically mean that Club B has done anything illegal. Investment is not the same as doping. An owner investing capital in a business may be entirely legitimate.

The concern arises when financial resources:

• circumvent applicable financial restrictions;
• conceal the true economic position of the organisation;
• allow persistent spending unrelated to sustainable revenue;
• keep fundamentally unviable businesses alive;
• distort competition;
• or create advantages unavailable to competitors operating under normal market constraints.

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2. Financial Doping Is Not Simply “Having More Money”

This distinction is important. A company with £10 billion in revenue is not necessarily financially doping simply because it can spend more than a company with £100 million in revenue. Similarly, an entrepreneur investing personal capital into a start-up is not automatically engaging in financial doping.

Competitive advantage arising from genuine productivity, innovation, investment or superior business performance is a normal feature of capitalism. Financial doping becomes problematic when the source or structure of finance artificially disconnects competitive spending from sustainable economic capacity or regulatory constraints. This distinction is particularly important in professional sport.

Research on the English Premier League found evidence that money and investment can translate into sporting performance, raising questions about the competitive consequences of large financial injections. The researchers examined the relationship between financial investment and sporting success and argued that regulation is necessary to address potential distortions. (Taylor & Francis Online)

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3. The Football Laboratory: Financial Doping in the Premier League

Football provides perhaps the clearest real-world laboratory for understanding financial doping.

Before UEFA and domestic financial regulations became more restrictive, some clubs could use loans from owners and banks to finance player acquisitions and wage expenditure at levels that their operating revenues could not independently support.

A 2024 empirical study of English Premier League clubs found that, before Financial Fair Play restrictions, the amount clubs spent on player acquisitions could exceed what their revenues could fund, with the difference being covered through bank and owner financing. The authors explicitly describe this phenomenon as “financial doping.” (DOI)

This creates an important economic mechanism: External finance → greater spending capacity → stronger squad → improved sporting performance → potentially higher revenues.

And this can become self-reinforcing.

·       A club spends heavily.

·       It attracts better players.

·       It performs better.

·       It qualifies for lucrative competitions.

·       It attracts more supporters and sponsors.

·       Its revenues increase.

·       It then has even greater capacity to spend.

This creates what economists might describe as a feedback loop between financial capacity and competitive performance.

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4. Manchester City: A Contemporary Case Study

The debate over Manchester City illustrates why financial doping remains such a controversial concept.

In September 2026, an independent Premier League commission found Manchester City guilty of breaching financial regulations, following allegations concerning commercial revenues and related-party funding. Reuters reported that the commission found that sham commercial contracts had been used to disguise £831 million of equity funding as sponsorship income over a nine-year period ending in 2018. Manchester City has denied the findings and said it intends to appeal. (Reuters)

The case is particularly important because the alleged mechanism is not simply: “A wealthy owner spent money.” The much more fundamental issue is whether money was presented as something economically different from what it actually was. That distinction goes to the heart of financial regulation.

If equity funding is presented as commercial revenue, the reported financial capacity of the organisation can appear stronger than its underlying economics.

That can potentially affect:

• expenditure limits;
• player recruitment;
• wage commitments;
• regulatory compliance;
• competitive balance.

It is therefore useful to distinguish between financial capacity and financial presentation. A club may have substantial financial backing. That is one thing. But if the source or nature of that backing is misrepresented to circumvent financial controls, that is an entirely different issue.

Manchester City has disputed the commission's findings, so the case should be understood as a contested regulatory matter subject to appeal rather than as an uncontested factual account of wrongdoing. (Reuters)

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5. Financial Doping Does Not Belong Only to Football

The concept becomes even more interesting when we move from football to the wider economy. Imagine a manufacturing company that consistently makes losses. It cannot generate enough operating cash to service its debt. Yet banks continue lending to it at unusually favourable rates. Government subsidies keep arriving. Its creditors continue rolling over existing loans. Instead of restructuring or exiting the market, the company continues operating. This company may become what economists call a zombie firm.

The World Bank defines non-viable zombie firms as firms generating enough income to service interest but not enough to repay their outstanding debt. Such firms can absorb resources that could otherwise be deployed by more productive businesses. (World Bank)

This is not necessarily fraud. It is a different economic problem:

Financial support can sometimes keep an economically weak organisation alive long after the market would otherwise have forced restructuring or exit.

That is one of the broader economic parallels with financial doping.

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6. Empirical Evidence: Zombie Firms Around the World

This is not merely theoretical. A large international study covering firms across 79 countries between 2005 and 2016 found that zombie firms represented roughly 10% of the observations in its dataset. The research also found that stronger debt-enforcement environments were associated with fewer zombie firms. (ScienceDirect)

This matters because capital is not unlimited. If £1 million is committed to an inefficient company that is being kept alive artificially, that £1 million cannot simultaneously be used by another company with a potentially higher return. The issue is therefore not simply: “Is the weak company receiving money?” And the deeper question is:

“What is the opportunity cost of keeping that company alive?”

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7. China Provides Another Empirical Example

Research using firm-level manufacturing data in China provides further evidence.

A 2025 study published in Economica examined zombie firms and state subsidies. The researchers found that zombie firms were, on average, larger and less productive than non-zombie firms and received higher subsidy rates. Their modelling suggested that reducing subsidy dispersion and facilitating the exit of zombie firms could reduce zombie activity and improve aggregate productivity. (Wiley Online Library)

This is a fascinating finding. A subsidy can have a perfectly legitimate economic purpose. Governments may subsidise businesses to:

• encourage innovation;
• protect employment;
• develop strategic industries;
• support investment;
• address market failures;
• stimulate regional development.

The problem arises when financial support becomes disconnected from productivity. At that point, the subsidy may stop being a bridge to competitiveness and become a life-support mechanism for inefficiency.

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8. The Moral Hazard Problem

Financial doping creates an important concept in economics: Moral hazard. If an organisation knows that someone else will continually absorb the consequences of its financial decisions, its incentives can change. Consider two businesses.

Business A

The owner knows: “If I make a bad investment, I bear the loss.” The owner therefore has a strong incentive to assess:

• return on investment;
• cash flow;
• risk;
• productivity;
• cost control.

Business B

Management believes: “If things go wrong, the owner will inject more money.”

Or: “The government will subsidise us.”

Or: “The bank will simply roll over the debt.”

The incentive to impose financial discipline may weaken.

Research on Chinese industrial firms found that moral hazard associated with financial instability made subsidies less effective in improving efficiency and profitability among zombie firms. (ScienceDirect)

This is why financial doping can create a dangerous cycle:

Poor performance → financial support → reduced pressure to restructure → continued poor performance → further financial support.

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9. Financial Doping Can Punish Efficient Competitors

This may be the most important economic consequence. Imagine two companies competing in the same market.

Company A

• controls costs;
• invests carefully;
• manages working capital;
• pays market interest rates;
• restructures when necessary;
• exits unprofitable markets.

Company B

• receives subsidised finance;
• enjoys government support;
• has access to cheap related-party funding;
• continues loss-making operations.

Company B may now sell products at prices that Company A cannot sustainably match.

The result can be resource misallocation. Research on zombie firms has found evidence that zombie firms can negatively affect the operating efficiency of normal firms and increase their debt-financing costs. (DOI)

In other words: Financial support for one inefficient organisation can impose costs on organisations that are financially healthy. This is why financial doping is ultimately a competition issue.

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10. Financial Doping Can Create the Illusion of Success

There is another dimension that deserves attention. Money can sometimes conceal underlying weaknesses. A company can appear successful because it has:

• abundant funding;
• aggressive acquisition programmes;
• rapid expansion;
• expensive marketing;
• large offices;
• high employee numbers;
• impressive technology;
• substantial assets.

But these indicators do not necessarily mean the business model is economically sustainable.

The critical questions are:

·       Is the organisation generating sustainable operating cash flow?

·       Is capital being allocated efficiently?

·       Can it survive without exceptional external support?

·       Are returns on capital adequate?

·       Is growth being financed by genuine earnings or by continually increasing leverage?

These questions move the discussion from appearance to economic substance.

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11. Financial Doping Is Different from Financial Engineering

This distinction is particularly important for finance professionals. Not every sophisticated financial structure constitutes financial doping.

Businesses legitimately use:

• debt financing;
• equity financing;
• leasing;
• securitisation;
• derivatives;
• tax planning;
• working-capital facilities;
• project finance;
• private equity;
• venture capital.

These are ordinary instruments of modern finance. The concern begins when financial engineering is used to misrepresent economic reality, circumvent legitimate restrictions, or sustain an otherwise unviable competitive position. Therefore: Financial innovation creates value when it improves the allocation of capital. Financial doping creates distortion when it obscures or artificially enhances economic capacity.

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12. The Procurement and Supply-Chain Dimension

Financial doping also has implications for procurement and supply-chain management.

Suppose Supplier A has:

• strong cash flow;
• healthy working capital;
• sustainable margins;
• efficient production.

Supplier B has:

• weak cash flow;
• high debt;
• recurring losses;
• but substantial external financial support.

Supplier B may offer extraordinarily low prices simply because its financial backers are effectively subsidising its operations. A procurement team focusing only on purchase price might select Supplier B. But a robust procurement process should consider Total Cost of Ownership (TCO) and supplier financial resilience. Why?

Because the apparent saving may disappear if the supplier subsequently:

• fails to deliver;
• enters insolvency;
• reduces quality;
• cannot fund inventory;
• suffers production disruption;
• requests price increases;
• or defaults on contractual obligations.

Thus, financial doping can become a supplier-risk issue. The cheapest supplier is not necessarily the lowest-cost supplier.

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13. The Hidden Cost of Artificially Cheap Capital

One of the most dangerous aspects of financial doping is that the immediate benefit is visible while the eventual cost may be hidden.

Immediate benefit:

More money → more spending → more growth → more market share.

Long-term consequences:

Debt accumulation → resource misallocation → weaker competitors → distorted prices → financial instability → eventual restructuring.

The World Bank has highlighted how non-viable firms can absorb resources that would otherwise be allocated to healthier businesses, delaying the redeployment of capital to more productive sectors. (World Bank)

This is why financial doping should not be assessed solely by asking: “Did the funding create growth?” A better question is: “Did the funding create sustainable economic value?”

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14. Financial Doping Can Be Self-Reinforcing

One of the most fascinating characteristics of financial doping is its potential to become a cycle.

Consider this:

Financial support

↓

Greater spending capacity

↓

Better assets / players / technology / market presence

↓

Improved performance

↓

Higher revenues or market valuation

↓

Greater borrowing capacity

↓

More financial support

↓

Further expansion

The organisation can therefore move further and further away from the financial position that its original operating economics would have produced. This is why financial regulators often focus not simply on whether money is available, but on where the money comes from, how it is recognised and whether the resulting economic position is sustainable.

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15. Does Financial Doping Always Produce Success?

No. This is another important qualification. Money can buy resources, but resources must still be converted into performance. An organisation can receive enormous amounts of funding and still fail because of:

• poor leadership;
• weak governance;
• inefficient procurement;
• bad investment decisions;
• poor talent management;
• corruption;
• weak strategy;
• excessive bureaucracy.

Financial capital is therefore an enabler, not a guarantee. The empirical football literature nevertheless finds a relationship between financial investment and sporting performance, which explains why financial regulation has become such an important issue in elite sport. (Taylor & Francis Online)

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16. Financial Fair Play: Can Regulation Stop Financial Doping?

UEFA introduced Financial Fair Play partly in response to concerns about the financial sustainability of European football.

Interestingly, empirical research into the English Premier League found that Financial Fair Play improved clubs' profitability by encouraging better management of the relationship between relevant income and expenditure. However, the study did not find evidence that this improvement necessarily translated into better financial sustainability, with debt remaining an issue. (DOI)

This illustrates a fundamental regulatory challenge: Stopping excessive spending is not the same as creating financial health. A club can comply with one financial metric while still having:

• significant debt;
• weak cash flow;
• deferred obligations;
• high transfer liabilities;
• structural financial risk.

Regulation therefore has to look beyond a single ratio.

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17. The Bigger Economic Lesson

Financial doping raises a profound question about capitalism: Should every organisation compete with whatever financial resources it can obtain, or should markets impose some boundaries on the way those resources can be used?

There is no simple answer. Investment is essential to economic development. External finance can:

• create jobs;
• finance innovation;
• accelerate growth;
• build infrastructure;
• rescue strategically important businesses;
• fund new technologies.

But poorly structured financial support can also:

• preserve inefficiency;
• distort competition;
• encourage excessive risk-taking;
• misallocate capital;
• increase systemic risk.

The objective should therefore not be to eliminate external finance. It should be to ensure that finance supports productivity rather than permanently replacing it.

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18. Three Questions Every Business Leader Should Ask

Whether you are running a football club, manufacturing company, SME or multinational organisation, three questions are particularly useful.

Question 1: Where is the money coming from?

Is growth being funded by:

• operating cash flow?
• genuine investment?
• debt?
• subsidies?
• related parties?
• shareholder support?

Question 2: What is the money producing?

Is additional capital creating:

• productivity?
• innovation?
• sustainable revenue?
• competitive advantage?
• positive cash flow?

Or is it simply covering recurring losses?

Question 3: What happens when the money stops?

This may be the most revealing question of all. If the organisation cannot survive when exceptional funding disappears, perhaps the funding has been masking rather than solving the underlying problem.

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Conclusion: Money Should Fund Performance, Not Manufacture It

Financial doping is ultimately about the relationship between capital and performance.

Money matters. Capital matters. Investment matters. But sustainable performance requires more than money. It requires productivity, innovation, governance, discipline, strategy and value creation.

The football evidence demonstrates how financial resources can influence competitive performance. Research on zombie firms demonstrates how continued financial support can preserve inefficient organisations and distort resource allocation. And contemporary regulatory cases demonstrate the difficulty of determining whether financial support represents legitimate investment or an attempt to circumvent financial constraints. (DOI)

The ultimate lesson for business leaders, investors, regulators and procurement professionals is simple: Capital should be the fuel for sustainable performance – not a substitute for it. An organisation that needs exceptional financial oxygen every year may not have solved its underlying problem. It may simply have become better at buying time. And that is perhaps the most dangerous form of financial doping: When money does not make an organisation stronger – it merely makes its weakness harder to see.

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Key empirical evidence at a glance

Area	Empirical evidence	What it illustrates
English Premier League	Research found pre-FFP player expenditure could be funded through owner and bank loans beyond operating revenues	External finance can increase competitive spending capacity (DOI)
Premier League financial regulation	FFP was associated with improved profitability, although debt/sustainability problems remained	Profitability and financial sustainability are not identical (DOI)
Global firms	Study covering 79 countries found zombie firms represented roughly 10% of observations	Zombie firms are a widespread international phenomenon (ScienceDirect)
Chinese manufacturing	Zombie firms were found to be larger, less productive and to receive higher subsidy rates on average	Subsidies can sometimes sustain inefficient firms (Wiley Online Library)
Chinese industrial firms	Research found moral hazard made subsidies less effective for zombie firms	Repeated financial support can weaken incentives for improvement (ScienceDirect)
Manchester City	2026 independent commission found financial-rule breaches involving alleged misrepresentation of equity funding as sponsorship; City denies the findings and plans to appeal	The regulatory challenge of distinguishing genuine commercial revenue from disguised funding (Reuters)

On a final note, “Financial doping” is not a universally defined accounting or economic offence. In academic literature it is most established as a concept in sports economics. Its use in the wider corporate/economic context is best understood as an analytical extension describing situations where exceptional or subsidised finance artificially sustains or enhances competitive performance. (Taylor & Francis Online)

'Segun-Martins Ogunyemi, FCA

...creating & adding values with ICE (Integrity, Contentment & Excellence)

 

Buying Money with Money: The Hidden Cost of a Cash-Driven Economy

There is a phrase that captures a peculiar reality in many developing economies: “We are buying money with money.” At first, it sounds contradictory. How can we buy money with money? Yet anyone who has operated a business, managed an office, paid suppliers, or moved funds in a cash-dependent economy understands exactly what this means. It describes an environment where accessing, moving, withdrawing, depositing, transferring, or even confirming money often requires additional money, time, effort, and risk. The irony is that money - created to facilitate exchange - can itself become an expensive commodity to access.

When Cash Becomes the Infrastructure

In an ideal financial ecosystem, money should move efficiently. A customer pays a supplier electronically. The supplier receives confirmation. The transaction is recorded. Goods or services are delivered. The business continues. But where electronic banking infrastructure is unreliable, internet connectivity is unstable, point-of-sale systems frequently fail, and digital transactions are sometimes delayed, cash becomes the dependable alternative.

The problem is that cash is not free. Someone has to withdraw it. Someone has to transport it. Someone has to count it. Someone has to secure it. Someone has to reconcile it. And someone bears the risk of theft, loss, fraud or error.

Consequently, what should have been a simple ₦100,000 (NGN) transaction can become a chain of additional costs.

You may pay:

• A withdrawal or transaction charge.
• Transport costs to access cash.
• Banking or agent fees.
• Staff time spent collecting or depositing cash.
• Security costs.
• Reconciliation and administrative costs.
• The opportunity cost of time spent waiting in queues.

The money may not have changed in value, but the cost of accessing it has increased. That is buying money with money.

The Paradox of Financial Inclusion

There has been significant progress in digital financial inclusion across developing economies. The World Bank reports that digital payments among adults in developing economies increased from 35% in 2014 to 57% in 2021. Yet millions of adults continue to make or receive everyday payments in cash. (World Bank)

This creates an important distinction: Having a bank account is not the same as having a reliable banking system. A person may have a bank account, debit card and mobile banking application, but if the network is unavailable when payment is needed, the practical value of those tools is immediately reduced. This is particularly important for small businesses.

A trader cannot tell a supplier, “Please wait until the network comes back.”

A customer cannot always tell a transport operator, “The payment is pending.”

A supplier cannot always accept “I have initiated the transfer” as payment.

Commerce requires certainty. And when digital systems cannot consistently provide that certainty, people revert to cash.

The Cost Is Bigger Than the Transaction Fee

One of the biggest mistakes we make is measuring the cost of cash only by visible charges. Suppose a business needs ₦500,000 (NGN) in cash. The obvious question is: “How much did the bank charge me?” The better question is: “What was the total cost of obtaining and managing that cash?”

Consider:

Cost                                Possible Impact

Bank/agent charges       Direct financial cost

Transport                       Additional expense

Staff time                       Lost productive hours

Queuing                         Lost opportunity

Security                         Increased operational risk

Cash handling              Administrative burden

Errors                            Reconciliation and financial losses

Theft                              Potentially significant loss

Delayed payments        Supplier/customer disruption

The transaction fee might be only a few hundred naira (NGN). But the economic cost could be thousands of naira (NGN) or considerably more.

This is why an economy can appear to have inexpensive banking transactions while businesses and households are actually paying a substantial hidden cash tax.

Cash Creates a Productivity Problem

Cash does not merely create financial costs; it consumes time. Imagine a business owner spending two hours travelling to withdraw money, another hour waiting, and additional time transporting and reconciling the cash. Those three or four hours could have been spent:

• Meeting customers.
• Negotiating contracts.
• Managing employees.
• Developing the business.
• Finding new markets.
• Improving operations.

Therefore, unreliable financial infrastructure imposes a productivity penalty on society. The issue is not simply: “Can I transfer the money?” It is: “Can I move money reliably, securely, quickly and affordably?” That is the standard a modern economy should aspire to.

The SME Suffers the Most

Large corporations often have multiple banking relationships, treasury departments, alternative payment channels and sophisticated financial systems. Small businesses usually do not. The informal trader, small retailer, contractor, farmer, artisan and emerging entrepreneur are much more exposed to the weaknesses of a cash-driven system.

This is particularly significant because digital payments can do more than simply replace cash. They can create transaction records that help businesses demonstrate cash flow and potentially improve access to credit.

Recent World Bank research involving firms across 101 economies found that firms receiving electronic payments were significantly less likely to be credit constrained, particularly in environments where information and financial infrastructure are weak. (World Bank Blogs)

This means that moving away from cash can potentially create a virtuous cycle:

Digital payments → transaction records → greater financial visibility → better access to finance → business growth.

But We Must Not Blame the Consumer

It is tempting to ask: “Why don't people simply use digital payments?” The answer is more complicated. People use what works. If a merchant has experienced failed transfers, delayed confirmations, reversed transactions or network outages, cash becomes rational.

Interestingly, the World Bank's 2025 Global Findex data for Nigeria found that among surveyed respondents who used cash only for in-store merchant payments, 44.9% cited being accustomed to cash, while 21.3% said merchants only accepted cash and 12.6% cited lack of trust in card or phone payments. (Microdata World Bank)

So the transition to a digital economy cannot simply be achieved by telling people: “Stop using cash.” The digital alternative must first become more reliable, accessible, trusted and convenient than cash.

We Need to Move From Cashless Ambition to Reliable Digital Infrastructure

The objective should not be to eliminate cash overnight. Cash remains important, particularly where digital infrastructure is weak. The real objective should be to build an ecosystem where people choose digital payments because they work, rather than because they are being forced to use them.

That requires investment in:

1. Reliable Internet Infrastructure

Digital banking cannot function reliably without dependable connectivity.

2. Resilient Banking Platforms

Banks and FINTECH companies need systems capable of handling high transaction volumes with minimal downtime.

3. Interoperability

Customers should be able to move money easily between banks, FINTECH platforms and payment systems.

4. Consumer Confidence

When transactions fail, customers need rapid resolution and transparent communication.

5. Affordable Digital Transactions

Digital payments should not become so expensive that cash remains economically attractive.

6. Digital Literacy

People need to understand how to use digital financial services safely and effectively.

7. Merchant Adoption

Digital payment acceptance must extend beyond major businesses into markets, small shops, transport, agriculture and informal commerce.

The Bigger Economic Question

The real question is not whether cash is good or bad. Cash has legitimate uses. The bigger question is:

How much economic value is a country losing because money cannot move efficiently?

• When a supplier waits for payment because the network is down, production may stop.
• When a business cannot access working capital, employees may remain unpaid.
• When a farmer receives cash instead of a secure digital payment, financial records may remain invisible.
• When a customer spends hours trying to access money, productivity is lost.
• When businesses hold large amounts of cash because they do not trust digital channels, capital becomes less efficient.

These are not merely banking problems. They are economic development problems.

From Buying Money to Making Money Work

A mature financial system should make money move, not make people struggle to move money. The purpose of financial technology is ultimately not to make banking look modern. It is to reduce friction in economic activity. The World Bank's Global Findex 2025 emphasises the relationship between financial inclusion, digital connectivity and the ability of people to make payments, save, borrow and manage financial risks. (World Bank)

That is the transformation developing economies should pursue. We should move from an environment where Money requires money to move to one where Money moves efficiently so that people can create more money, value and opportunity.

Conclusion: The Cost of Friction

“Buying money with money” is ultimately a story about friction. Every unnecessary journey, queue, withdrawal fee, failed transaction, delayed transfer, security risk and manual reconciliation represents friction in the economy. Individually, these costs may appear insignificant. Collectively, they are enormous.

A developing economy cannot afford to spend its scarce resources merely moving money around. The ultimate goal should be an economy where financial infrastructure is sufficiently reliable that entrepreneurs can concentrate on what they do best: creating products, providing services, employing people, investing capital and generating wealth.

Because the real measure of a financial system is not simply how much money exists. It is how efficiently that money can work. When we spend money to access money, we are paying the price of financial friction. When we build systems that allow money to move efficiently, we release capital, time and human productivity for economic growth.

That is the journey from buying money with money to making money work for the economy.

'Segun-Martins Ogunyemi, FCA

...creating & adding values with ICE (Integrity, Contentment & Excellence)

The Danger of Supermarket Economies without Manufacturing

A nation that experiences an explosion of supermarkets, hypermarkets, and massive shopping malls without a corresponding rise in manufacturing is heading toward a dangerous economic imbalance. It creates a society that consumes heavily but produces very little - a recipe for long‑term hardship.

Supermarkets and malls are not the problem by themselves.

The real problem is what fills their shelves.

When 80–90% of the goods sold in these retail giants are imported, the nation faces:

• Too much import pressure
• Very low export activity
• A widening trade deficit
• A weakening currency
• A shrinking industrial base
• A rising unemployment rate

This imbalance becomes even worse when citizens develop an overblown appetite for imported goods - food, clothing, electronics, household items, even basic consumables. When a nation prefers foreign goods over local products, its economy slowly suffocates.

Why this is dangerous

1. Imports drain national wealth: Money leaves the country faster than it enters. The nation becomes a marketplace for other countries’ factories.
2. Local industries collapse: Domestic manufacturers cannot compete with cheap imports. Factories close. Jobs disappear. Skills vanish.
3. Exports remain low: Without strong manufacturing, the nation has nothing significant to sell to the world. No exports means no foreign exchange earnings.
4. Currency becomes unstable: High import demand puts pressure on the national currency. Prices rise. Inflation increases. Hardship deepens.
5. Retail expansion becomes deceptive: Malls give the illusion of prosperity, but they are only distribution centres for foreign economies.

The result? A fragile economy.

An economy built on consumption rather than production is like a house built on sand. It looks impressive from the outside, but it cannot withstand pressure. When global supply chains shake, the nation collapses.

The cultural impact is equally severe

When everything we buy is imported, people begin to believe that foreign is better and local is inferior. This mindset destroys national pride, weakens cultural identity, and erodes heritage.

A nation that does not produce cannot preserve its heritage.

A nation that only consumes cannot secure its future.

This is why the influx of supermarkets and malls - without manufacturing - is not development. It is economic dependency disguised as progress.

'Segun-Martins Ogunyemi, FCA

...creating & adding values with ICE (Integrity, Contentment & Excellence)

The Market of Hope

Hope, as the Oxford Dictionary defines it, is a feeling of expectation and desire for a particular thing to happen. The archaic definition goes even deeper - a feeling of trust. Hope is not just an emotion; it is a currency. It is something people invest in, something they cling to, something they buy into when everything else around them seems to be failing.

Michelle Obama captures the power of hope beautifully when she writes:

“You may not always have a comfortable life and you will not always be able to solve all of the world’s problems at once, but don’t ever underestimate the importance you can have because history has shown us that courage can be contagious and hope can take on a life of its own.”  

Her words remind us that hope is not passive. It is active, contagious, and capable of shaping destinies.

In Nigeria today, hope has become a national commodity - something leaders sell and citizens desperately buy. The current Federal Government of Nigeria came into power on the mantra of “Renewed Hope.” This slogan was not accidental; it was strategic. It tapped into the deep longing of millions of Nigerians who have endured decades of economic decline, insecurity, unemployment, and hardship.

It is therefore safe to say that the political class presented Nigerians with a market of hope - a marketplace where promises were displayed like goods on a shelf, and citizens, weary from years of disappointment, reached out eagerly to purchase them. The President Bola Ahmed Tinubu (BAT) administration understood that Nigerians were standing at a crossroads of desperation and expectation. The people were ready to buy hope because the reality they were living in was already unbearable.

In other words, hope became the product, and the citizens became the customers.

But hope is not enough on its own.

Hope must translate into policy.

Policy must translate into action.

Action must translate into relief.

Relief must translate into progress.

When hope is sold without delivery, it becomes deception.

When hope is promised without structural change, it becomes noise.

When hope is offered without economic revival, it becomes frustration.

Nigeria today stands in a delicate place. The air is filled with expectations - stern, heavy, urgent expectations. People are watching. People are waiting. People are measuring every policy, every decision, every outcome against the promise of renewed hope.

The question now is simple:

Will this hope become reality, or will it become another chapter in the long history of unfulfilled promises?

Hope can take on a life of its own - but only when leaders breathe life into it through integrity, competence, and courage.

'Segun-Martins Ogunyemi, FCA

...creating & adding values with ICE (Integrity, Contentment & Excellence)

Timing: Crucial to Business Success

There is no one-size-fits-all formula for ensuring a startup's survival, but it is critical to understand which aspects are most significant in predicting a company's success. I saw a video on TED where an entrepreneur named Bill Gross gave a fantastic presentation about why firms survive, which he presented as the outcomes of his research.

According to him, the most important aspect in forecasting start-up success is timing; it is critical that a company enters the market at the correct time. Team and Execution is the second most critical component, because a brilliant business idea is worthless if it isn't carried out by the right people. The next consideration is the originality and uniqueness of the business idea – while having a brilliant company idea is advantageous, it is not the only consideration. Because a business model can be built later in the start-up phase if necessary, it is the fourth most influential aspect. Bill says that it is not difficult for a business to secure finance after it has gotten enough traction, hence funding, also known as capital, is the least crucial aspect.

We typically devote a significant amount of time to worrying about capital (i.e. money), but the truth is that if you have the right timing, team, idea, and business model, you can simply obtain funding.

The bottom line is that if you want your startup or business idea to succeed, you must do the following. When your idea takes off, look for perfect timing, a wonderful team, and everything else will fall into place.

Highlights of Nigeria's 2022 Budget

Highlights

The 2022 budget has a deficit of about N6.25tn, approximately 3.39% of GDP. This is slightly above the 3% ceiling set by the Fiscal responsibility Act 2007 (FRA). However, the president alluded that the expenditure level was necessary to assist with overcoming current security challenges and accelerate post-recession growth. The President insists that Nigeria only has a revenue challenge and not a debt sustainability problem.

The deficit is expected to be financed by new borrowings, privatisation proceeds and drawdown on loans secured for specific projects.

Non-debt recurrent expenditure of N6.83tn is the largest expense item, with 60% relating to personnel costs at N4.11tn.

The capital expenditure budget of N4.89tn represents an increase of 18% compared to 2021, and about 30% of total 2022 expenditure.

Debt service expenditure is estimated at N3.61tn, representing about 35.6% of the projected revenue for the year.

The President highlighted that the loans would be directed at financing critical development projects and programmes, and highlighted plans to grow the revenue-to-GDP ratio from currently about 8%, to 15% by 2025.

The President has indicated intentions to strengthen frameworks for concessions and Public-Private Partnerships (PPP). He also made reference to exploring innovative approaches for sustainably raising infrastructure financing, such as implementing the Sovereign Green Bond Programme and debt-for-climate swap mechanisms.

Revenue mobilisation

The President underscored 4 strategies to improve revenues, including:

enhancing tax and excise revenues;

reviewing the effectiveness of policies for tax waivers and concessions;

increasing customs revenue through technology; and

preserving the revenue derived from the oil and gas sector.

Petroleum Industry Act

The President commended the National Assembly for the passage of the Petroleum Industry Act (PIA), highlighting his hopes of attracting investments in the sector.

2021 Finance Bill

The 2021 Finance Bill would subsequently be forwarded to the National Assembly after completion of consultations. The Bill is intended to support the realisation of the 2022 fiscal projections. Below are some of the changes.

A. Capital Gains Tax Act (CGTA)

1.     Section 30 of CGTA - Capital gains from the disposal of shares and stocks in Nigerian companies, for aggregate proceeds amounting to N100 million or more in any 12 consecutive periods is subject to CGT at 10%, provided that the proceed is not reinvested within 12 months.

B. Companies Income Tax Act (CITA)

2.     Profits of companies engaged in educational activities are no longer exempt from tax under Section 23(1)(c)of CITA 

3.     The profits of companies from the exports of goods produced in Upstream, Midstream and Downstream Petroleum operations are no longer exempt from tax under section 23(1) (q) of CITA;

4.     Section 30 of CITA is amended to empower FIRS to assess a non-resident company liable under the Significant Economic Presence (SEP) rule to income tax on a percentage of the profits it earns from providing digital services to Nigerian customers.

5.     Section 31 of CITA now provides that Capital allowance on qualifying capital expenditure incurred in generating exempt income is no longer deductible from the assessable profit of non-exempt income under CITA, provided that joint QCE shall be pro-rated where the exempt income constitutes more than 20% of the total income of the company.

6. Section 31(1C) - QCE incurred by small companies shall be regarded to have been fully utilised.

7. Any company that claims the reduced 0 25% rate under the minimum tax rule in section 33 of CITA but filed a late tax return under section 55, will be liable to a penalty which shall be an equivalent to the benefits or reduction claimed;

8. Further to the amendment to Section 33 of CITA by Finance Act 2020, granting a reduced minimum tax rate from 0.5% to 0.25% to companies for two years, taxpayers may now elect to apply the reduced rate in any two accounting periods falling within 1 January 2019 to 31 December 2020 or 1 January 2020 to 31 December 2021.

9.    Taxpayers now have absolute discretion, under section 77 of CITA, to pay their taxes in instalment, provided that the final instalment shall be paid on or before the due date. 

10.     Section 78 of CITA is also amended to provide that WHT deducted from payments to a unit trust shall be the final tax on such income.

C. Customs Excise Tariff Etc. Consolidation Act.

11.     Section 21 of the CETCA is amended to introduce a N10 tax on a litre of non-alcoholic, carbonated and sweetened drinks.

D. Federal Inland Revenue Service (Establishment) Act (FIRSEA)

12.     Section 25 of FIRSEA now makes it a punishable offence for any person who fails to grant FIRS access to its systems to deploy its automated tax administration technology after a 30 days’ notice or such extension granted by the Service.

13.  Every bank that fails to prepare and submit returns or submit incorrect returns as required by section 28 of FIRSEA shall now be liable to a penalty of N1m for each return or information not provided or incorrect returns or information provided.

14. Section 68 of FIRSEA – the supremacy of the extant tax laws in the first schedule of the FIRSEA over any other law; and the role of the FIRS over any other agency in respect of tax administration is emphasised under the law and enforceable;   

It is also an offence, punishable by a fine of N10m, imprisonment or both, for any agency of government (other than FIRS) or any of their staff or consultant, to demand books or returns for the purposes of tax, or carry out the function of assessment, collection or enforcement of tax, or pay any portion of tax revenue to any person or into any account, other than the relevant accounts designated by the constitution or relevant laws of the NASS. 

15.    Section 68(5) now mandates other Agencies of the Federal Government to report cases requiring tax investigation, enforcement or compliance, encountered in the course of performing their function, to the Service for necessary action.

16.    Section 50 of FIRSEA places a strict legal obligation on any person employed by the FIRS or otherwise who has access to taxpayer information to keep such information confidential. Leakages of taxpayer information by such a person may lead to criminal prosecution.

E. Tertiary Education Trust Fund Act (TETFA)

17.  The rate of tax under Section 1(2) of the Tertiary Education Trust Fund Act has been increased from 2% of assessable profits to 2.5% of the assessable profit.

F. National Agency for Science and Engineering Infrastructure (NASENI)

18.  Section 20 of the NASENI Act imposes a tax of 0.25% of profits before tax of companies engaged in the business of banking, mobile telecommunication, ICT, aviation, maritime and oil and gas, with a turnover of N100 million and above.

G. Nigeria Police Trust Fund (Establishment) Act

19.  Section 4 of the PTFEA empowers the FIRS to assess, collect, account and enforce the payment of a levy of 0.005% of the net profit of companies operating a business in Nigeria.

H. Value Added Tax Act (VATA)

20.  Section 15 - Companies engaged in Upstream Petroleum operations will continue to have obligation to withhold VAT, even when they have not commenced commercial operations or have a turnover of less than N25 million.

Minimum Tax vs Finance Act 2020

Overview

Income tax is payable on taxable income or profits generated by companies from their activities. There are situations where a company’s tax computation results in no tax liability. In such a situation, the company will be liable to tax based on minimum tax. Section 33 (1) of Companies Income Act, Cap C21, LFN 2004 states that “Notwithstanding any other provisions in this Act where in any year of assessment, the ascertainment of total assessable profits from all sources of a company results in a loss, or where a company's ascertained total profit results in no tax payable or tax payable which is less than the minimum tax, there shall be levied and paid by the company the minimum tax as prescribed by subsection (2) of this section.” By implication, Minimum tax applies to all companies in Nigeria, especially the small and medium enterprises (SMEs), who in any year of assessment have no taxable profit or whose tax payable is lower than minimum tax computed.

There have been many misconceptions and controversies trailing the introduction of the minimum tax in Nigeria in the recent past. Taxpayers and authorities have differed on the concept and application in practice. These include the use of various and different parameters applied in the determination of minimum tax payable by companies which include turnover of the company, gross profit, paid-up capital and net assets of the company. This approach was cumbersome and in most cases, time-consuming. Arguments stressed that this tax is paid from the equity (paid-up capital) and net assets of the company even when the company is running at a loss; the exemption granted to companies with imported equity of 25% and above did not allow for a level playground when compared with companies with locally sourced equity and more. 

Before the amendments introduced by Finance Acts 2019 and 2020, subsection 2 of Section 33 of CITA Cap C21, LFN 2004 defined the basis for the computation of minimum tax in Nigeria as:

(2) For the purposes of subsection (1) of this section the minimum tax to be levied and paid shall- (a) if the turnover of the company is N500,000 or below and the company has been in   business for at least four calendar years be‐

(i)   0.5 per cent of gross profit; or      

(ii)   0.5 per cent of net assets; or      

(iii)   0.25 per cent of paid‐up capital; or      

(iv)   0.25 per cent of the turnover of the company for the year, whichever is higher; or  

(b)   if the turnover is higher than N500,000, be whatever is payable in paragraph (a) of this subsection plus such additional tax on the amount by which the turn‐over is more than N500,000 at a rate which shall be 50 per cent of the rate used in paragraph (a) (iv) of this subsection. 

The federal government in light of these controversies have amended the minimum tax regulation in the Finance Acts 2019 and 2020. Section 14 of the Finance Act 2019 amended Section 33 of CITA to introduce a new basis for computing minimum tax, moving away from a combination of equity, net assets and revenue-based approach to a complete revenue based-model. In the amendment, the minimum tax is to be computed at a flat rate of 0.5% of gross turnover less franked investment income. The amendment also deleted the exemptions granted to companies with imported equity of 25% and above and introduced a minimum tax exemption for small companies with a gross turnover of less than N25,000,000.

Section 13 of Finance Act 2020 introduced a further amendment to Section 33 of CIT by providing a 50% reduction in minimum tax rate from 0.5% of gross turnover less franked investment income to 0.25%. This amendment is effective for the Years of Assessment (YOA) commencing from 1 January 2020 to 31 December 2021.

Professional View

Companies that have no taxable profits for the 2020 year of assessment or whose tax on profits is below the minimum tax are expected to compute their minimum tax based on the amendments of the Finance Act 2020. This implies that companies that have filed their returns for the 2020 assessment year based on the 2019 financial accounting year may be expected to file an amended tax return where their minimum tax for this period is based on 0.5% of turnover. Also, companies that are in their first four calendar years of operation as well as companies engaged in agriculture business, or small companies are exempt from minimum tax. This is equally applicable to non-life insurance companies at 0.25% of the gross premium and to life insurance companies at 0.25% of gross income. Also exempted from the payment of minimum tax are small companies with annual turnover of below NGN25 million (twenty-five million naira),

However, it is pertinent to note that foreign equity is no more a basis for exemption. Businesses with at least 25% foreign equity and indigenous companies have the same exposure to Minimum Tax.

Note that dormant companies are not exonerated from payment of minimum tax in Nigeria. Usually, it is assumed that dormant companies are exempted from the payment of taxes because they are not yet involved in any money-making activity. However, this assumption is not supported by any provision in the tax laws and the tax authorities are making every possible effort to ensure that every registered company in Nigeria is made to comply with tax legislation. It is highly recommended that owners of dormant companies in Nigeria should seek the assistance of registered tax practitioners to ascertain their tax exposures. This is because a company is only exempted from paying taxes in Nigeria in the event of cessation of business.