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Divergent Outlook Over inflation in Q3

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  • Divergent Outlook Over inflation in Q3

Businesses and consumers have differed in the expectations of the direction of the inflation rate in the third quarter of the year.

Meanwhile there was consensus of optimism about further naira appreciation and improved macro-economic performance in the third quarter.

These were highlights of the Business Expectations and Consumer Expectation surveys conducted by the Central Bank of Nigeria (CBN) in the just concluded second quarter.

The inflation rate has been on the downward trend since February falling from 18.72 per cent in January to 16.25 per cent in May

The CBN survey, however, revealed that while firms expect the inflation rate to moderate, consumers expect it to rise in the third quarter.

The CBN stated: “The outlook of businesses for the next quarter (Q3) however indicated greater confidence on the macro economy at 47.5 points. The drivers for this optimism were services (19.2 points), wholesale/retail trade (12.2 points, industrial (11.6 points and construction (5.3 points) sectors. Majority of the respondent firms expect the naira to appreciate in both the current and next quarters. Respondent firms expect inflation to rise in the current quarter but moderate in the next quarter.”

The apex bank also added: “The consumer outlook for the next quarter (Q3) and that of the next 12 months were however positive at 21.3 and 34.2 points respectively. The outlook could be attributed to the anticipated improvement in Nigeria’s economic conditions, expected increase in net household income, and expectations to save a bit and/or have plenty over savings in the next 12 months. Most respondents expected that borrowing rate will fall and naira will appreciate in the next 12 months, while inflation and unemployment will rise.

June PMI indicates increased economic expansion

Meanwhile, the CBN’s Purchasing Managers Index (PMI) report for the manufacturing and non-manufacturing sectors show that more sub-sectors recorded growth during the month of June 2017. The report showed that 27 out of the 34 subsectors surveyed during the month recorded growth, up from 20 subsectors that recorded growth in May. In the manufacturing sector, 12 subsectors recorded growth while four subsectors contracted. In the non-manufacturing sector, 15 subsectors recorded growth while three subsectors contracted.

The report stated: “The Manufacturing PMI stood at 52.9 index points in June 2017, indicating expansion in the manufacturing sector for the third consecutive month.

Expansion in the manufacturing sector

Twelve of the 16 sub-sectors reported growth in the review month in the following order: computer & electronic products; paper products; plastics & rubber products; primary metal; transportation equipment; petroleum & coal products; appliances & components; textile, apparel, leather & footwear; furniture & related products; electrical equipment; food, beverage & tobacco products and fabricated metal products. The remaining 4 sub-sectors declined in the order: nonmetallic mineral products; cement; chemical & pharmaceutical products and printing & related support activities.

“The composite PMI for the non-manufacturing sector grew to 54.2 in June 2017 indicating growth in Non-manufacturing PMI for the second consecutive month. Of the 18 non-manufacturing sub-sectors, 15 recorded growth in the following order: utilities; water supply, sewage & waste management; finance & insurance; educational services; repair, maintenance/ washing of motor vehicles; agriculture; health care & social assistance; information & communication; electricity, gas, steam & air conditioning supply; real estate, rental & leasing; wholesale trade; professional, scientific, & technical services; transportation & warehousing; accommodation & food services and arts, entertainment & recreation. The public administration, management of companies and construction sub sectors recorded contraction in the Non –manufacturing PMI in June 2017”.

Cost of funds to stabilise this week

Cost of funds in the interbank money market is expected to stabilise this week due to anticipation of improved system liquidity. Last week short term cost of funds fell by average of 359 basis points due to liquidity inflow of N276 billion from matured treasury bills, which cancelled out the effect of N86 billion outflow through purchase of secondary market bills on Friday. This coupled with reduction in outflow for dollar purchase caused interest rates on Collateralised Lending and Overnight lending to fall by 342 bases points and 375 basis points respectively. While interest rate on Collateralised Lending fell to 5.33 per cent on Friday from 8.75 per cent the previous week, interest rate on Overnight lending dropped to 5.75 per cent from 9.5 per cent the previous week.

Investigation showed that the market will experience N187 billion inflow from payment of matured treasury bills, which the apex bank will mop-up by selling equal amount of bills during the week. Notwithstanding, analysts were optimistic that cost of funds will be stable during the week. According to analysts at Cowry Assets Management Limited, “We expect financial system liquidity ease and resultant stability in interbank rates.

Similarly, analysts at Vetiva Capital Management Limited stated: We expect the improvement in system liquidity to continue to spur demand in the fixed income market in the coming week. Also, with the CBN signalling its intention to reduce T-bills rates (with the lower rates seen in recent OMO auctions), we see further room for increased buying activity in the T-bills market particularly.”

Naira records mixed performance

In spite of the $195 million injected into the interbank foreign exchange market and $130 million injected into the Bureau de change segment, the naira recorded mixed performance in the foreign exchange market last week.

While the naira appreciated by N1.5 in the parallel market, it depreciated by N4.28 at the Nigeria Autonomous Foreign Exchange (NAFEX) segment. While the parallel market exchange rate dropped to N366 per dollar last week from N367.5 per dollar the previous week, the NAFEX rate rose to N366.44 per dollar from N362.16 per dollar within the same period.

During the week, the CBN continued its intervention by selling $195 million in the interbank market on Wednesday. A breakdown of the intervention showed that authorized dealers in the wholesale window segment received a $100 million, while the Small and Medium Enterprises (SMEs) and invisibles windows were allocated the $50 million and $45 million, respectively. In addition to this, the CBN sold $40,000 to each of the 3,145 bureaux de change (BDCs) across the country.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

Economy

Gov Aiyedatiwa Signs ₦96 Billion Supplementary Budget Into Law, Hails Ondo House of Assembly For Swift Passage

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Lucky Aiyedatiwa

The Governor of Ondo State, Lucky Aiyedatiwa, has expressed gratitude to the State House of Assembly for the swift passage of the Supplementary Budget as he signs the ₦96 billion budget into law.

Governor Aiyedatiwa spoke on Tuesday, November 15, during the signing of the supplementary budget in Akure.

The governor explained that the supplementary budget is necessary to help his administration address the economic challenges in the state.

According to him, the new budget signed into law is also essential for the state government to implement the new ₦73,000 minimum wage for civil servants and new employees, as well as for the recruitment of workers in the state.

Aiyedatiwa said, “The supplementary budget is necessary because of the time we are in and the trends of what is happening in the state and country in general; the new minimum wage, subsidy removal, and the recent recruitment of workers.”

Aiyedatiwa stated that his administration was grateful to the leadership and members of the House of Assembly for passing the bill.

He highlighted the harmonious relations between the two arms of the state and reaffirmed that his administration will continue to work with the House of Assembly for the betterment of the Ondo people.

The Speaker of the House of Assembly, Olamide Oladiji, thanked the Governor, stating that the steps taken by his administration have not only transformed the state but also proven the governor’s ability and capacity to deliver on the job ahead.

He expressed optimism that the bill signed into law would positively impact the lives of the citizens.

“These giant strides have not only transformed the state in all facets but have clearly demonstrated your vision, capacity, intellectual ability, zeal, passion, direction, and a clear understanding of the enormous job ahead.

“It is therefore hoped that the implementation of these laws will meaningfully impact the lives of the good people of the state.”

Oladiji pledged the continuous support of the House to Aiyedatiwa’s administration, saying, “I want to, on behalf of my colleagues, assure you, Mr. Governor, of our continuous support and cooperation to ensure the success of this administration.”

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MEND Tackles Ex-Agitators For Threatening To Bomb Oil Installations In Rivers 

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A war of words has ensued between a militant group, the Movement for the Emancipation of the Niger Delta (MEND) and a coalition of ex-agitators over alleged plan to attack oil installations in the region by the latter group.

Following the political crisis rocking Rivers State, a coalition of ex-agitators and fighters in the region under the aegis of Niger Delta Development Force had last week threatened to blow-up oil facilities in the region over what it termed a plot to seize financial allocations meant for local government areas in Rivers State through the courts.

The former warlords dared the Federal Government and the Central Bank of Nigeria, saying if they proceeded in withholding the funds for the state, it would have grave consequences.

Kicking against the threat, MEND’s spokesman, Jomo Gbomo, in a statement on Friday, said it will support security operatives in safeguarding crude oil installations from any attack.

Gbomo also said MEND is not in support of the violence that Rivers State has been experiencing due to the lingering feud between the Minister of the Federal Capital Territory, Nyesom Wike, and his successor and estranged political godson, Siminalayi Fubara.

Describing the attack plan as threat to the economy of the country, Gbomo said it would be most unfortunate for a political dispute between two politicians to cost the state and Nigeria assets that are pivotal to nation’s survival.

Noting that the both feuding political gladiators are sons of the Niger Delta, the spokesman asked those making the threats not to allow themselves be tricked using the present circumstance into carrying arms against the Nigerian state on behalf of any of them, not even for any price.

He said as an Ijaw son, he knows the gains of having an Ijaw man as governor in Rivers, adding that it is an achievement which would not have been possible but for the collaboration of other ethnic groups.

According to him, the current healthy collaboration from the various ethnic groups which produced an Ijaw son as governor was spearheaded by the FCT Minister.

The statement said not only would MEND back the Federal Government in protecting oil facilities, but it would also ensure that the masterminds of the threats to attack oil installations are fished out and meant to face justice.

The MEND spokesman, however, urged the elders and traditional institutions in the region to intervene in the face-off between Governor Fubara and the FCT Minister.

He also urged parties in the festering political crisis to seek judicial redress if peaceful dialogue fails.

 

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Northern Governors Oppose New VAT Model as FG Defends Tax Reform Bills

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The Federal Government has addressed concerns raised by the Northern Governors’ Forum regarding the proposed tax reform bills before the National Assembly.

Investors King gathered that Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors’ Forum met with the traditional rulers from the region to agree to disagree with the Federal Government’s new value-added tax model.

In a communiqué read by the chairman of the forum, Governor Muhammed Yahaya of Gombe State, the governors strongly opposed the new derivation-based model for Value-Added Tax (VAT) distribution in the new tax reform bills proposed by President Tinubu’s government.

Addressing the governors’ concern, the FG in a statement on Thursday by the President’s Special Adviser on Information and Strategy, Bayo Onanuga stated that the proposed bills will streamline Nigeria’s tax administration processes, enhance efficiency and eliminate redundancies across the country’s tax operations.

According to Onanuga, the bills which is currently before the National Assembly for consideration emerged after extensive review of existing tax laws.

The statement reads, “While we commend the Governors and traditional rulers for supporting President Bola Tinubu over the success recorded in addressing the country’s security challenges, we consider it necessary to address the misunderstandings and misgivings around the tax reform already embarked upon by the administration.

“President Tinubu and the Federal Executive Council recently endorsed new policy initiatives aimed at streamlining Nigeria’s tax administration processes, enhancing efficiency and eliminating redundancies across the nation’s tax operations.

“These reforms emerged after an extensive review of existing tax laws. The National Assembly is considering four executive bills designed to transform and modernise Nigeria’s tax landscape.

“First is the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide.

“Second, the Nigeria Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions for ease of compliance for taxpayers in all parts of the country.

“Third, the Nigeria Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government.

“Fourth, the Joint Revenue Board Establishment Bill proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities.

“The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Revenue Board, which would serve as a complaint resolution body for taxpayers.

“It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are designed to optimise and simplify existing tax frameworks.

“The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.

“The reforms will not lead to job losses. On the contrary, they are structured to stimulate new avenues for job creation by supporting a dynamic, growth-oriented economy.

“Importantly, these laws will not absorb or eliminate the duties of any existing department, agency, or ministry. Instead, they aim to harmonise revenue collection and administration across the federation to ensure efficiency and cooperation.

“At the moment, tax administration lacks coordination among federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reform, this inefficiency will persist.

“The proposed laws aim to coordinate efforts between different tiers of government, resulting in better tax resource management and greater clarity for taxpayers.

“Under existing laws, taxes like Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Tertiary Education Tax (TET), Value-Added Tax (VAT), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.

“The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation.

“On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, it must be stressed that the new proposal, as enunciated in the Bill, is designed to create a fairer system.

“The current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.

“The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services. This means that states in the Northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states.

“These reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country. There is no better time than now for the National Assembly to give due consideration to these bills that will overhaul our tax systems and create the revenue all the tiers of government require to fund the development our country and people urgently need.”

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