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Fed: Rate Hike Appropriate in ‘Coming Months’

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Janet Yellen

Federal Reserve Chair Janet Yellen said the ongoing improvement in the U.S. economy would warrant another interest rate increase “in the coming months,” stopping short of giving an explicit hint that the central bank would act in June.

“It’s appropriate — and I’ve said this in the past — for the Fed to gradually and cautiously increase our overnight interest rate over time,” Yellen said Friday during remarks at Harvard University in Cambridge, Massachusetts. “Probably in the coming months such a move would be appropriate.”

Yellen will host her colleagues on the Federal Open Market Committee in Washington June 14-15, when they will contemplate a second interest-rate increase following seven years of near-zero borrowing costs that ended when they hiked in December. A series of speeches by Fed officials and the release of the minutes to their April policy meeting have heightened investor expectations for another tightening move either next month or in July.

“The economy is continuing to improve,” she said in a discussion with Harvard economics professor Gregory Mankiw. She added that she expects “inflation will move up over the next couple of years to our 2 percent objective,” provided headwinds holding down price pressures, including energy prices and a stronger dollar, stabilize alongside an improving labor market.

Several regional Fed presidents, ranging from Boston Fed President Eric Rosengren to San Francisco’s John Williams, have in recent weeks urged financial market participants to take more seriously the chances of a rate hike in the next two months, pointing to continued signs of steady if unspectacular growth in the U.S. economy and the waning of risks posed by global economic and financial conditions.

Left scale - hourly earnings; right scale - unemployment

Left scale – hourly earnings; right scale – unemployment

“It sounds like the committee is close to a rate hike, assuming the data hold up, but that no decisions have been made about the precise timing,” Laura Rosner, a senior U.S. economist at BNP Paribas in New York, said in an e-mail. “It will be a collective decision.”

The U.S. labor market has continued to expand even as the jobless rate has declined to 5 percent, which many economists consider to be close to or at full employment. Inflation and wages have also shown signs of edging up, a trend the Fed has longed for but is anxious to keep under control. The May employment report will be released on June 3, three days before Yellen is scheduled to speak publicly again, this time in Philadelphia.

More than incoming economic data, market sentiment over the June meeting has been shifted by FOMC member comments and by the April meeting minutes. Those records, released May 18, showed a majority on the committee favored a June rate increase if the economy continued to improve.

Odds of a June rate hike implied by pricing in federal funds futures contracts were 32 percent following her remarks compared to 28 percent earlier on Friday and about 4 percent two weeks ago.

The FOMC accompanied its December rate hike with projections showing officials expected to raise rates four more times in 2016. Amid renewed worries over global growth and a bout of turmoil in financial markets in January and February, the committee has since held rates steady and cut its median projection for the number of 2016 quarter-point rate increases to two.

Yellen, 69, accepted the Radcliffe Medal, an award given annually by Harvard’s Radcliffe Institute for Advanced Studies to “an individual who has had a transformative impact on society,” according to its website. Supreme Court Justice Ruth Bader Ginsburg received the award in 2015.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Finance

Tanzania: African Development Fund Approves $116 Million Loan to Upgrade Southern Road Corridor

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Afdb - Investors King

The Board of Directors of the African Development Fund on Wednesday approved a loan of around $116 million to the Tanzanian government to upgrade a 160-km Mnivata-Newala-Masasi road corridor in the southern part of the country.

The Bank’s loan represents 98.71% of the project cost; the government of Tanzania will provide the remaining 1.29% in funding.

The project will upgrade the roadway, including the 84-meter Mwiti bridge, to bituminous standard. The works also have social components, including the provision of potable water, education and medical infrastructure, the establishment of cashew nut processing units, and extension of entrepreneurial training to women and youth.

The upgrade is expected to open up rural areas in the region and enhance the Mtwara Development Corridor, which links Mtwara Port and Mbamba Bay port on Lake Nyasa. Exporters, importers, small-scale cross-border traders, farmers, transporters are all expected to benefit.

“The periodic isolation of such a significant population worsens vulnerability and undermines social inclusion. Improved road connectivity would therefore build the resilience of the people and widen livelihood opportunities within the Mtwara Development Corridor and the surrounding districts,” Bank Director General for East Africa Nnenna Nwabufo said.

Overall, the five-year project will improve mobility and accessibility for about 1.1 million people in Mtwara, Tandahimba, Newala and Masasi districts and facilitate integration with neighbouring Mozambique, Malawi and Zambia.

Currently, the districts of Tandahimba and Newala, with an estimated combined population of 509,000 people, are mostly cut off, while connection with the Mtwara port area for essential supplies is severely constrained during rainy seasons due to the state of the road.

The project will advance Tanzania’s current five-year Development Plan (2021-2026) and aligns with the Bank Group’s Country Strategy Paper (2021-2025) which emphasizes sustainable infrastructure for a competitive economy and an improved private sector business environment for job creation, as well as two High-5 strategic priorities: Integrate Africa and Improve the quality of life for the people of Africa.

At 30 June 2021, the Bank Group’s active portfolio in Tanzania comprised 22 operations (19 public and 3 private) with a total commitment of about $2.4 billion.

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Banking Sector

FirstBank Expands Its International Money Transfer Network, Reinforces its Commitment to Customer Service

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FirstBank Headquarter - Investors King

In furtherance of the need to expand diaspora remittance inflow into the country, First Bank of Nigeria Limited has increased its network of International Money Transfer Operators (IMTOs), targeted at easing the accessibility of its customers to receive money from close to 100 countries across the world in a safe and secured manner. With over 750 branches across the country, customers can receive money from the nearest FirstBank branch closest to them.

Over the years, FirstBank has been in partnership with Western UnionMoneyGram, Ria, Transfast, and WorldRemit. The bank is also in partnership with other IMTOs which include Wari, Smallworld, Sendwave, Flutherwave, Funtech, Thunes and Venture Garden Group to promote remittance inflow into the country, thereby putting Nigerians and residents at an advantage in receiving money from their families, friends and loved ones across the world.

Beneficiaries can receive remittance in US dollars in any of our over 750 branches spread across the country. Customers without an existing domiciliary account can have dollar account automatically created for their remittances. You can also receive inflow directly into your account through Western Union.

In addition, FirstBank has launched its wholly owned remittance platform named First Global Transfer product to promote the international transfer of funds across its subsidiaries in sub-Saharan Africa. These subsidiaries include FBNBank DRC, FBNBank Ghana, FBNBank Gambia, FBNBank Guinea, FBNBank Sierra-Leone, FBNBank Senegal.

Reiterating the Bank’s resolve in promoting diaspora remittances, regardless of where one is across the globe, the Deputy Managing Director, Mr Gbenga Shobo said “at FirstBank, expanding our network of International Money Transfer Operators is in recognition of the significant roles diaspora remittances play in driving economic growth such as helping recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses and debt servicing.

We are excited about these partnerships, as it is essential to ensure our customers are at an advantage to receive money from their loved ones and business associates, anywhere they are, across the world.”

FirstBank pioneered international funds transfer and remittances over 25 years ago and has been at the forefront of promoting cross border payments in the country, having started the journey with Western Union Money Transfer. The Bank’s wealth of experience and operation in over 750 locations nationwide gives it the edge in the market.

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Finance

Private Sector Seeks FG’s Directive on VAT Payment

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Value added tax - Investors King

The Organised Private Sector of Nigeria (OPSN) on Sunday in Lagos called on the Federal Government to urgently make a pronouncement on the ongoing controversy over VAT payment so that businesses will know what to do.

OPSN chairman, Mr Taiwo Adeniyi, made the call at a news conference and said delays in addressing the issue could cause negative effects on businesses, most especially in the collection and remittances of VAT.

“We are aware that by Sept. 21 we get penalised if we do not pay or remit the VAT for the month of August.

“We are also aware that laws are not made in retrospect. It then means that even if those laws have been enacted, particularly the Lagos State law which came into effect in September, it will not affect the payment by businesses in the state.

“Due to our remittances, we have issues with the fact that the law for Rivers was made in August and the majority of the businesses in Lagos usually will have a relationship with the Rivers State Inland Revenue too.

“The confusion in the public space is the reason we are calling on the government to come to our aid as we want to pay.

“It is for the government at the center to make a pronouncement as to what becomes of us,’’ he said.

Adeniyi, who is also the President of, Nigeria’s Employers Consultative Association (NECA), said that the ongoing challenge had the potential to make businesses pay double VAT in view of demands by the FIRS and state governments.

He said that businesses, as the collecting agents, were practically unclear on the authority to remit to and without a clear path, this would further aggravate the pain on businesses.

“It is a popular saying that where two elephants fight, it is the grass that suffers.

“It is no longer news that Nigerian businesses have been battling with myriads of challenges, making the survival of enterprises and ease of doing business in the country among the worst in this part of the world,’’ he said.

There has been controversy over the collection of VAT after a Federal High Court ruled that it was not the duty of the Federal Government to collect the tax.

VAT is normally collected by the Federal Government since the military era and the money is shared by the three tiers of government.

Following the court ruling, however, Lagos and Rivers states passed laws that allowed them to collect VAT.

FIRS, which used to collect the VAT on behalf of the Federal Government, has challenged the court ruling at the appellate court.

OPSN comprises the Manufacturers Association of Nigeria, the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NECA, Nigeria Association of Small Scale Industries and the Nigeria Association of Small and Medium Enterprises.

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