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$1.2bn Worth of Textile Materials Smuggled into Nigeria Annually

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  • $1.2bn Worth of Textile Materials Smuggled into Nigeria Annually

Despite the depreciation of the value of the naira and the anti-smuggling operation by the Nigeria Custom Service (NCS), checks revealed an influx of imported ready-to-wear garments taking the value of smuggled apparel to a whopping $1.2 billion annually.

Stakeholders have blamed Nigeria’s porous land borders for the menace while manufacturers insist government failure to tackle the problem was responsible.

Also, there are concerns around the recent signing of the pact forming the African Continental Free Trade Area (AfCFTA) in Kigali.

Stakeholders within Nigeria’s textile, apparel and footwear industry opine that if the Federal Government of Nigeria (FGN) signs this agreement, it would have an adverse effect as it could accelerate the importation of cheaper imported textiles and garments.

However, analysts at FBN Quest have noted that the textile, apparel and footwear sub-sector remains the second largest contributor to Nigeria’s manufacturing (after food, beverage and tobacco).

“The sub-sector posted total output of N383bn ($1.3 billion) in Q4 2017 or 23.3 per cent of manufacturing gross domestic (GDP). The segment grew by 1.6 per cent year-on-year (y/y) in the fourth quarter of2017, compared with 1.1 per cent recorded in the corresponding period of the previous year. Given Nigeria’s huge appetite for fashion and related industries, the segment is still performing well below its full potential.

“Industry sources suggest that the country’s annual import bill for textiles and ready-to-wear apparel is $4 billion. Meanwhile, trade statistics from the National Bureau of Statistics (NBS) tell a different story, with imports of textile and clothing items of N37 billion ($121 million) in the fourth quarter, “said FBN Quest.

On what the federal government should do to stop the menace, the analysts stated: “We understand that the FGN has kicked off the creation of special economic zones (SEZs), starting with a zone for garment manufacturing. On a macro level, this should attract investment within the sector, boost output and assist with easing pressure on the job market.”

However, the NCS have blamed ignorance on the part of residents of border communities across the country for increasing smuggling of arms and contrabands.

The Controller, Federal Operations Unit, Zone ‘A’ of the Nigeria Customs Service (NCS), Comptroller Mohammed Uba stated this in a chat with THISDAY

He said that residents see smuggling as legitimate business and this remains one of the major challenges faced by the Unit in its efforts to curtail illegal border trades and other forms of smuggling.

He said the lack of knowledge is the reason why people see customs officials as enemies and sometimes attack them while they are carrying out their legitimate duties.

He however vowed that this will not deter the unit from performing its statutory responsibility of curbing smuggling.

While making reference to section 147 of the Customs and Excise Management Act (CEMA), Uba said the law empowers Customs to search any warehouse where there is reasonable suspicion that prohibited goods are kept there.

He called on the media to support the Service in the fight against smuggling by educating and enlightening the public on the dangers of smuggling.

“It is because of ignorance people living in the border communities feel and believes smuggling is a legitimate business. Customs is a constituted authority by the government but to our surprise, the whole community will just come and be attacking us. Because we collect tax, people see us as enemies.

“It is the media and some individuals who understand that smuggling is dangerous. So we must continue to educate ourselves and that is why we are soliciting the support of the media to educate people that smuggling is injurious to the economy.

“I have also been talking to my colleagues at the borders by advising them on customs community relation activity. We advise them and they set up such communities and advise them on what to do.

“Smuggling is a war not only for customs but all of us. For example, look at the issue of rice. What is the point bringing in rice when we can locally produce this rice or bring them through the port, this are some of the issues we are facing but that will not deter us from doing our work,” he said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

South Africa’s Inflation Rate Holds Steady in May

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South Africa's economy - Investors King

South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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