- Why CBN May Not Raise Rates in 2019
The uncertainty surrounding global growth is forcing central banks to make monetary adjustments in order to stimulate and sustain growth.
On Tuesday, the Federal Reserve Chair, Jerome Powell, said the central bank will do anything possible to sustain U.S economic productivity.
The comment was after previously signaling zero rate hike earlier this year, however, the inability of President Trump to reach an agreement with the Chinese has changed the dynamics of global trade in recent months and expected to further erode productivity in developed economies if nothing is done.
According to the U.S central bank, weak global growth amid efforts to maintain 2 percent inflation rate will necessitate monetary adjustments.
This has led to many experts projecting that the Federal Reserve will cut rates by 50 basis points this year, with the odds of that happening jumping to 70 percent this week.
In Australia, the story is not different, the Reserve Bank of Australia cut rates by 25 basis points for the first time in over three years on Tuesday, citing weak growth amid record low unemployment rate and sluggish wage increase.
The European Central Bank and the Bank of Japan are expected to increase economic stimulus, especially after the Fed’s comment and Australia move.
While the Central Bank of Nigeria lowered interest rate by 50 basis points to 13.5 percent in the first quarter, citing improved macro factors. The truth is the CBN led Monetary Policy Committee lowered interest rate after enough evidence showed the U.S., the European Central Bank, Bank of England, the People’s Bank of China and Bank of Japan won’t be raising rates in 2019 given the fragile state of global economy and the uncertainty surrounding the U.S-China trade talks.
The apex bank anticipated that the disruption in crude oil exports from Venezuela and Libya, Iranian sanctions and OPEC+ production cuts will sustain crude oil at about $70 a barrel, while expecting foreign investors to continue to invest in Nigeria considering 13.5 percent is still high and knowing developed economies are not raising rates in 2019.
But with the crude oil now trading at about $61 a barrel, down from $73 following the fallout between the U.S and China, Nigeria’s foreign reserves would benefit from the likely capital inflows into emerging economies.
This coupled with the foreign reserves currently standing at a record high of $45.2 billion, moderating inflation rate of 11.37 percent and the implementation of the signed N8.91 trillion 2019 budget will give the CBN enough room to adjust to global happenings and still manage the economy effectively without necessarily raising the interest rate.
A situation that would sustain the CBN’s ability to regulate the foreign exchange market through its intermittent intervention.
Still, a clear economic policy is needed to encourage capital inflow given the surged in the risks associated with emerging assets –U.S experts/analysts are already predicting economic recession for 2020.
Therefore, Nigeria’s economy needs to be positioned with a strong economic team and a clear policy path to attract investors ahead of South Africa and other emerging markets with better economic policies.
Nigeria’s Tax Revolution: Shifting Burden to the Wealthy and Streamlining the System
President Bola Tinubu’s administration is set to revolutionize the nation’s tax system.
The ambitious plan seeks to redistribute the tax burden, making the wealthy pay their fair share while stimulating business growth through corporate tax cuts.
The cornerstone of this tax reform initiative is a push to increase Nigeria’s tax revenue from 11% to 18% of Gross Domestic Product (GDP) within three years.
Spearheading this transformation is Taiwo Oyedele, who leads a panel appointed by President Tinubu.
Oyedele articulated the primary objectives of the reform, saying “We aim to make the rich pay what is fair and protect those in poverty.”
This move is crucial in a country where extreme wealth disparities persist, with only a small fraction of the population enjoying immense riches.
Notably, the plan also includes a reduction in the corporate income tax rate, which currently stands at an effective rate of over 40%.
The aim is to benchmark this rate against Nigeria’s international peers, fostering a more business-friendly environment.
Nigeria’s tax system has long been plagued by complexity, with nearly 70 different taxes and overlapping jurisdictions.
The reform initiative seeks to simplify this by streamlining tax structures and drastically reducing the number of taxes to single digits.
Also, a tax amnesty is under consideration, aimed at encouraging tax compliance and offering relief for past debts. The hope is that by fostering transparency and accountability, more Nigerians will willingly contribute to the country’s fiscal health.
In a nation where government debt has surged dramatically in recent years, this tax revolution is seen as a pivotal step towards reducing the deficit and ensuring sustainable economic growth.
Federal Government’s $3 Billion Rescue Plan to Bolster Naira Stability
The National Economic Council (NEC) has confirmed the deployment of the $3 billion emergency loan-for-crude oil, secured by the Federal Government in August, for the stabilization of the national currency.
The naira’s value has been under siege, with fluctuations in the Investors & Exporters’ window and a parallel market rate that briefly hit N1000/$ this month.
Addressing reporters following the 136th NEC meeting at the Aso Rock Presidential Villa, Nasarawa State Governor Abdullahi Sule expressed confidence in the plan.
He stated, “With the plan that will come out and with all these items that have been listed on the improvement of revenue, the $3 billion shall be useful to us down the line.”
The emergency loan, secured from Afrexim Bank, was initially intended to relieve pressure on the naira, facilitate the settlement of taxes and royalties in advance, and provide the Federal Government with vital dollar liquidity for naira stabilization.
The recent nomination of Olayemi Cardoso as the new Central Bank of Nigeria (CBN) governor by President Bola Tinubu has already shown promise.
The naira experienced a boost in the black market, strengthening by N10 against the dollar, closing at N990/$1.
Governor Sule indicated that the implementation of the intervention would require careful planning and time.
He emphasized the need for the new CBN team to devise effective strategies. In response to inquiries about a supplementary budget, Sule stated that there is no immediate need for one, as the situation does not warrant it.
As Nigeria’s economic landscape faces evolving challenges, the NEC’s decision to harness the $3 billion loan offers a glimmer of hope for a more stable naira in the near future.
Former FIRS Chairman Muhammad Nami Accused of Controversial N6 Billion Payments After Sudden Exit
Documents reveal questionable approvals and alleged backdating, raising concerns over financial misconduct
Muhammad Nami, the former chairman of the Federal Inland Revenue Service (FIRS), is under scrutiny for approving payments totaling N6 billion to contractors and consultants just days after his abrupt removal from office.
Documents obtained by TheCable shed light on these controversial transactions.
Nami, who was succeeded by Zacchaeus Adedeji, greenlit the payments on September 16, two days after his removal on September 14.
Sources privy to the situation, although not authorized to speak publicly, claim that Nami directed staff to work over the weekend to finalize these transactions.
Additionally, files were allegedly moved from the FIRS headquarters to his residence, where they were purportedly “backdated and signed.”
Perhaps the most eyebrow-raising revelation is that Nami transferred approximately N5 billion from the FIRS account to the Joint Tax Board (JTB) without apparent justification.
It is reported that the FIRS director of finance and accounts reluctantly approved these payments after warning Nami about potential repercussions.
Nami allegedly reassured his subordinates that the incoming FIRS chairman would remain oblivious to these approvals.
Also, documents indicate that Nami approved significant payments, including N1.4 billion for a ‘Business Case for Strategic Leadership’ retreat, N250 million for FIRS Data Mining Management and Analytics in Taxation Course, and N221 million for a ‘Skill Development and Management Improvement Workshop Training.’
Curiously, Nami also appropriated over N81 million for a study visit to the Inland Revenue of Malaysia.
The FIRS, when contacted for comment, remained tight-lipped about the situation. Spokesperson Abdullahi Ismaila stated that he had no knowledge of the payments, while Tobi Johannes, Nami’s former media aide, distanced himself from the matter, emphasizing that his role ceased when Nami’s tenure ended.
These revelations have ignited concerns about financial misconduct within the FIRS and have raised questions about the oversight and accountability of government agencies. The full extent of these allegations is yet to be determined as investigations into the payments and their legitimacy continue.
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