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Uncertain Fiscal Policies: FDI Inflow To Remain Low

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Nigeria investment
  • Uncertain Fiscal Policies: FDI Inflow To Remain Low

Since Nigeria ordered International Oil Companies (IOC) to pay US$20 billion in back taxes last month, analysts home and abroad have questioned the Federal Government approach to boosting its fiscal revenue.

To some, the move will scare Foreign Direct Investors interested in the Nigerian economy after what happened to MTN Nigeria in 2018 when the Federal Government ordered the telecoms company to pay $2 billion in taxes and two weeks later, the Central Bank of Nigeria directed the same company to refund $8.1 billion in ‘illegal repatriation.’

Months later, MTN Nigeria was cleared of wrongdoing but not the fall in its share price and the uncertainty surrounding its future financial projections.

The company on Thursday announced its expected earnings per share for 2018, surprising it was below experts’ projections by almost 50 per cent. This didn’t go well with investors that subsequently reduced their holdings ahead of March 7, the scheduled date for the audited financial report. MTN shares dipped by 4.9 per cent on Friday.

Rob Shuter, MTN Group President and CEO, attributed the development to the challenges faced in Nigeria in 2018, its largest market.

While experts agreed that the Federal Government must increase tax revenue through increased participation of foreign and local investors in the country, “eliminating fiscal uncertainties and generally improving the ease of doing business in Nigeria is key,” expert at Anderson Tax said.

“It is essential that the government does not place undue reliance on the imposition of multiple taxes and levies on companies engaged in oil and gas activities, as the principal way of boosting its internally generated revenues,” Tolulope Adebowale of Anderson Tax said in its publication.

In recent years, Foreign Direct Investment has been falling year after year, when compared with the performance from previous years. In 2014, Nigeria earned $4.7 billion from FDI, that number quickly dropped to $3.1 billion in 2015. In 2016, the number surged to $4.4 billion but later declined by $900 million to $3.5 billion in 2017. The number has since dropped to $2.2 billion in 2018, the lowest in 13 years.

According to the CBN, Foreign Portfolio Investment accounted for over 70 per cent of the total foreign inflow in 2018, while Foreign Direct Investment accounted for less than 30 per cent.

Experts believed the uncertainties surrounding fiscal policies may further scare the few foreign investors interested in the economy in 2019 going by what is happening since the current administration decided to up tax revenue.

Analysts at Investors King Ltd said fixed income market will continue to attract investment since Federal Reserve won’t be raising interest rates any time soon and the Euro-area is experiencing economic slowdown even at zero interest rates. The focus would be on emerging economies.

The analysts expect FDI to remain weak as they do not anticipate a significant change in policies but agreed the CBN would have to maintain current monetary policy rate to sustain inflow.

“The economy was and is not really viable to encourage foreign investors to invest for a long term,” says Paul Aluko, a Research Analyst at MBC Securities Limited, Lagos.

Experts advised the Federal Government to create a business-friendly environment where foreign investors are not scared of sudden change in fiscal policies or business climate.

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.

Investment

Saudi Arabia Aims for $80 Billion Tourism Investment to Fuel Vision 2030 Goals

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tourism

Saudi Arabia is embarking on a bold venture to attract up to $80 billion in private investment into its burgeoning tourism industry, a move pivotal to realizing its ambitious Vision 2030 objectives.

Tourism Minister Ahmed Al Khateeb unveiled the kingdom’s aspiration during an interview in Riyadh, emphasizing the imperative role of the private sector in spearheading investment endeavors.

With plans to disburse approximately $800 billion on tourism over the next decade, Saudi Arabia is steadfast in its pursuit to diversify its economy and reduce dependency on oil revenues.

Vision 2030 outlines a trajectory for the kingdom to metamorphose into one of the world’s premier tourist destinations, targeting 150 million annual visitors by 2030, a significant portion originating from overseas.

While the government and sovereign wealth fund have historically fueled tourism development, securing substantial foreign direct investment, particularly from the private sector, emerges as paramount in expediting Vision 2030 initiatives.

The kingdom’s fiscal projections, forecasting deficits until 2026, underscore the urgency of engaging private investors to actualize the ambitious tourism blueprint.

Saudi Arabia, having welcomed 100 million tourists in 2023, predominantly domestic travelers, eyes international markets such as India, China, the UK, France, and Germany for tourist influx.

A new program launched by the Ministry of Tourism aims to streamline investment processes, potentially unlocking $11 billion in private investment, bolstering Saudi Arabia’s tourism trajectory and reshaping its economic landscape.

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CBN Unveils Plan to Settle N1.64 Trillion Treasury Bills in Q2 2024

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FG Borrows

The Central Bank of Nigeria (CBN) has announced its strategic approach to managing liquidity and meeting financial obligations by unveiling a comprehensive plan to settle Treasury Bills (TBs) worth N1.64 trillion during the second quarter of 2024.

This initiative, part of the CBN’s Nigeria Treasury Bills Issue programme, aims to regulate the money supply within the economy while effectively managing liquidity dynamics.

According to documents obtained by Investors King, the TBs settlement program is slated to commence on March 7th and conclude on May 23rd, 2024.

The CBN will focus on settling TBs with varying tenors, including N414.29 billion on 91 days, N43.74 billion on 182 days, and a substantial N1.18 trillion on 364 days.

The breakdown of the settlement plan reveals monthly settlements to address maturing TBs. In March, the CBN plans to settle N660.62 billion worth of TBs, followed by N292.17 billion in April and N688.3 billion in May.

Market analysts interpret this move as a testament to the CBN’s commitment to managing financial obligations and maintaining economic stability.

It provides investors with opportunities to engage in short-term financial instruments while contributing to overall liquidity dynamics.

The strategic settlement plan reflects the CBN’s proactive stance in navigating economic challenges and ensuring stability within the financial landscape.

As the apex bank implements these measures, stakeholders will closely monitor their impact on market dynamics and economic indicators, anticipating implications for investment decisions and monetary policy outlooks.

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Investment

China’s State-Owned Lenders Allocate $8 Billion to Revitalize Property Market

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General Images Of Residential Property

China’s state-owned lenders have committed a substantial $8 billion in loans to rejuvenate the country’s beleaguered property market, aligning with Beijing’s directives to bolster the sector.

Agricultural Bank of China Ltd. disclosed approving over 40 billion yuan of loans for real estate projects on predefined white lists, signaling a proactive approach towards supporting the housing market’s recovery.

China Construction Bank Corp. also joined the effort, extending 3 billion yuan to five property projects, with plans to greenlight over 20 billion yuan in loans soon.

Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. are among the institutions offering financing assistance, although the exact loan amounts remain undisclosed.

This initiative follows Beijing’s recent call for local authorities to enhance financing support for developers and curate lists of eligible projects.

In response, the big four state lenders pledged to meet reasonable financing demands from developers and projects identified under the coordination mechanism.

However, China’s property market faces challenges despite these measures. New home sales plummeted 34.2% year-on-year, underscoring the ongoing slowdown.

While existing home transactions surged during the Spring Festival holiday, new home sales remained subdued, prompting a cautious outlook among buyers.

The infusion of $8 billion aims to instill confidence and stimulate activity in the property sector, potentially heralding a gradual recovery amid persisting market uncertainties.

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