The Lagos Chamber of Commerce and Industry said private operators have lost about N1.46tn as a result of the foreign exchange constraints being experienced in the country over the last six months.
This is coming just as the Federal Inland Revenue Service has hinted the citizens will pay higher taxes from next year as a means of shoring up the nation’s revenue.
The LCCI, in its 2015 economic review, said its third quarter 2015 business environment survey showed that a forex restriction by the Central Bank of Nigeria was one of the costliest policies in Nigeria in recent years.
The Director-General, LCCI, Mr. Muda Yusuf, in a statement on Sunday, said, “The private operators across several sectors (fast-moving consumer goods, steel, furniture, pharmaceuticals and manufacturing) lost about N1.46tn in stalled business activities resulting from paucity of forex over the last six months.”
Citing data from the National Bureau of Statistics, he noted that the country’s real Gross Domestic Product fell to 2.84 per cent in the third quarter of 2015, compared to 6.23 per cent in the same period in 2014.
Sectors such as manufacturing and the services slipped into recession after recording successive declines over the last three quarters in 2015, the LCCI said.
The group noted that the CBN had, in response to dwindling receipts from oil export, adopted several measures such as the closure of Retail Dutch Auction System window, restriction of cash payment into domiciliary accounts and prohibition of 41 items from accessing the interbank foreign exchange market.
It expressed concern about the state of the economy and the effects of the CBN’s policies on the operations of manufacturing firms and other private businesses.
It said, “The CBN’s administrative allocation of foreign exchange signposted much deeper challenges for investors and the economy. As of December 18, 2015, premium at the parallel market reached a record level of 35 per cent against the official exchange rate as the naira crashed further to 270/$ in the parallel market.
“The LCCI and the business community are very concerned about the current state of the economy and the consequences of the CBN’s approach to the management of foreign exchange market over the last few months. We have previously engaged the CBN and other authorities through several forums to draw attention to the implications of forex policies on businesses and the economy.”
In its macroeconomic outlook for 2016, the LCCI said it expected the GDP growth to rebound slowly to about 3.5 per cent, which would be driven by the increase in government expenditure.
The group also stressed “the right mix of fiscal and monetary policies to stimulate the economy and attract domestic and foreign investments.”
It also expected the exchange rate volatility to persist, fuelling high inflation of about 10-11 per cent.
“However, correction towards real effective exchange rate in the form of exchange rate adjustment is likely in Q1 2016. This will reduce the pressure on external reserves,” it stated.
The LCCI said with the declining trend of global oil price and its attendant impact on government revenue and foreign reserves, general business outlook would remain tense.
It said, “Implications on cost of and access to credit will be undesirable. Businesses, especially those with high forex exposure, will continue to face challenges of meeting foreign obligations to suppliers and partners. This will also impact contractual trust and integrity.
“Risk of default in financial obligations in both public and private sectors will be high as macro-economic conditions and cash flow remain tight.”
The group noted that the CBN through its Monetary Policy Committee on November 24, 2015 resolved to reduce the monetary policy rate from 13 per cent to 11 per cent (the lowest since 2009) and the cash requirement ratio from 25 per cent to 20 per cent, in a bid to stimulate the economy.
The LCCI said the cost and access to fund remained a major challenge for businesses, especially Micro, Small and Medium Enterprises, adding that through the year, lending rate of commercial banks, including fees and charges, ranged between 22 per cent and 34 per cent, depending on the customer profile, tenor and collateral quality.
Meanwhile, the FIRS has urged Nigerians and others doing business in the country to be prepared to pay higher taxes next year.
The service spoke in Ibadan through one of its accountants, Anuoluwapo Ijaduola, at a lecture on the dwindling crude oil prices and its effect on taxation organised by Excel Assembly Foundation as part of its annual general meeting.
He said, “We’ve all been talking about diversifying our economy; yes, it is good, but it is not the only way out. It will not happen overnight. Corporate organisations, other companies and individuals should be ready to pay more in terms of taxes. If we want the country to move forward, we must be ready to pay our taxes, even more than what we have been doing before. Borrowing money can only be a short-term remedy.”
CBN Raises Customs Forex from N381/US$1 to N404.97/US$
The Central Bank of Nigeria has raised the Naira exchange rate for cargo clearance from N381/US$1 to N404.97/US$1.
This was confirmed by Uche Ejesieme, the Public Relations Officer (PRO), Tin Can Island Customs Command.
The PRO explained that it was not the customs job description to raise the foreign exchange rate but that of the central bank.
The N24 difference has been implemented on the customs system managed by Web Fontaine.
Commenting on the situation, Kayode Farinto, the Vice President of the Association of Nigerian Licensed Customs Agents, said the increase would further escalate inflation on import goods and hurt consumers’ buying power given the present economic situation.
An importer, Gboyega Adebari, who was shocked at the decision said stakeholders will be greatly affected by the decision.
According to him, “When we went to assess a job this morning, we were told that the exchange rate has been increased, though we have been expecting it, but we don’t expect that it would be so sudden. The implication of this on cargo clearance is that cost of clearance would increase by N24 difference.
“The cargoes that already enroute Nigeria would also be affected, the jobs that we want to clear this morning were affected.
“When you go back to the importer and request for money, they will tell you there is no notification of increase from customs, so the freight forwarders are the ones that would bear the additional cost.”
Naira plunged to N502 against the United States Dollar at the parallel market on Wednesday and traded at N715 to a British Pound and N605 against the European common currency, Euro.
Naira Hits N502 Against U.S Dollar at the Black Market
Persistent dollar scarcity amid devaluation and economic uncertainties plunged the Nigerian Naira to N502 per U.S Dollar at the parallel market, popularly known as the black market.
The local currency traded at N715 to a British Pound and N605 to a Euro on Wednesday morning.
At the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology (NAFEX), the Naira opened at N411.15 to a United States Dollar before dropping to as low as N421.96 and eventually closing at N411.5.
The Central Bank of Nigeria had adopted the NAFEX rate as the nation’s official rate when it became clear that the apex can no long sustain Naira’s fixed-rate amid dwindling foreign reserves and weak revenue generation.
The NAFEX rate, popularly known as the Investors and Exporters Forex Window, was quoted as N410.15 to a United States Dollar on Tuesday, June 8, 2021 on the central bank’s official website.
The apex bank decision to devalue the Naira despite the ongoing economic challenges in Africa’s largest economy was because of the pressure from the World Bank and the International Monetary Fund, demanding the federal government to allow forces of demand and supply to determine the naira exchange rate against pegged Naira-USD rate.
However, with the Federal Government looking for approval from the two multilateral institutions for fresh loans, it became necessary to enforce those demands before new loan applications could be approved.
The World Bank raised Nigeria’s growth rate from 1.1 percent to 1.8 percent in 2021, saying a series of structural reforms and market-determined exchange rates will help boost economic activities.
Also, oil prices were projected to remain high in the near term.
South African Reserve Bank Imposes Administrative Sanctions on Authorised Dealer in Foreign Exchange with Limited Authority
The South African Reserve Bank (SARB) has imposed administrative sanctions on Master Currency (Pty) Limited, an Authorised Dealer in foreign exchange with limited authority (ADLA).
Authorised Dealers in foreign exchange (commercial banks) and ADLAs are persons authorised by the SARB to deal in foreign exchange transactions and are regulated accordingly. ADLAs include bureaux de change and are authorised to deal only in certain limited, designated foreign exchange transactions, including travel-related transactions.
The Financial Intelligence Centre Act 38 of 2001 (FIC Act) mandates the SARB to ensure that ADLAs have adequate controls in place to combat acts of money laundering and the financing of terrorism. Flowing from these responsibilities, the SARB inspects ADLAs to assess whether they have appropriate measures in place,as required by the FIC Act.
The administrative sanctions were imposed after the SARB conducted inspections at Master Currency (Pty) Limited, in terms of the FIC Act. The inspections found weaknesses in the control measures the ADLA, Master Currency (Pty) Limited, had in place to control anti-money laundering and combating the financing of terrorism.
It should be noted that the administrative sanctions were imposed because of certain weaknesses that were detected in the ADLA’s control measures which inhibited the ADLA from proactively detecting financial crime, and not because it was found to have facilitated transactions involving money laundering or the financing of terrorism.
The administrative sanctions imposed are as follows:
- a financial penalty of R100 000 in terms of section 45C(3)(e) of the FIC Act, for failing to provide ongoing training to employees to comply with the provisions of such Act in terms of section 43 thereof; and
- a directive in terms of section 45C(3)(c) of the FIC Act, to provide the requisite refresher training at all branches, and to submit confirmation and evidence that such training has been conducted and will continue to be conducted on an annual basis.
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