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Nigeria in Focus

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The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade as N13.28trn in Q3 ‘21, representing an increase of 10% on the preceding quarter and a y/y increase of 59%. Compared with Q2 ‘21, the total export value rose by just 1% to N5.13trn, and the import value rose by 17% to N8.15trn.

The net result was a deficit of N3.02trn, which followed a deficit of N1.87trn the previous quarter. This makes eight consecutive trade deficits. The data were drawn primarily from the Nigeria Customs Service.

• Total trade in 2020 declined primarily due to lower exports. The implementation of lockdowns and restrictions had an adverse effect on export activity last year. The total trade value as a percentage of GDP stood at 21% in 2020. In Q3 ’21, total trade as a percentage of GDP stood at 8.7%.

• For Nigeria, the NBS notes that the majority of imports in Q3 ’21 originated from East Asia (China, especially). The value of imported agricultural goods. Manufactured products as well as oil-related products rose by 21% q/q, 14% q/q and 35% q/q respectively.

• Regarding export destination, India remained the top exporting partner for Nigeria in Q3 ‘21. The five top exports partners were India, (14.8%) Spain (12.2%), Italy (8.7%), France (7.1%), and the Netherlands (4.7%). These five
countries accounted for 47.5% of the total exports in Q3 ’21.

• As usual, crude oil accounted for the largest share (78%) of total exports in Q3. However, the value of crude oil exports declined by 1.3% q/q but rose by 66% y/y. The crude oil price (Bonny Light) averaged USD73.8/b in Q3.

• We note that raw cocoa beans, sesame seeds, cigarettes, natural rubber and aluminium featured as non-oil export products in Q3 ’21.

• Nigeria exported goods valued at N347bn to fellow members of the Economic Community of West African States (ECOWAS), compared with N363bn the previous quarter. This represented 52% of total exports within Africa.
Meanwhile, imports from ECOWAS accounted for 11% of the value of total imports.

• The leading port of operation during the quarter under review was the Apapa Port. Goods worth N4.7trn exited the country through this port. The next leading port of operation was Port Harcourt, through which goods worth N308bn were shipped to partner countries. Tin can Island was also very active and goods worth N104bn exited Nigeria through this port.

• The African Continental Free Trade Area (AfCFTA) agreement is expected to contribute significantly towards the development of regional value chains. To maximise the benefits of the agreement, Nigeria’s manufacturing sector needs to be strengthened. Furthermore, local manufacturers need to significantly improve their service delivery and product standards if they are to be competitive in a burgeoning intra-continental marketplace.

• The UN Economic Commission for Africa estimates that tariff reductions under the AfCFTA agreement will boost intra-African trade by over 51% by 2022 (or by as much as 100% if non-tariff barriers are reduced). The Federal Executive Council has ratified Nigeria’s membership of the AfCFTA.

Global/Regional in focus

The COVID-19 pandemic generated an unprecedented global shock, with a devastating effect on global trade largely due to the lockdown measures that were put in place across countries as a strategy to mitigate the pandemic’s spread. The impact on international trade was evident in the decline in commodity prices in the first quarter of 2020 (e.g. crude oil, copper, among others) as well as reduced manufacturing output and disrupted operations across global value chains. Based on data from the World Trade Organisation (WTO), the initial COVID-19 shock led to a -13.3% or USD569.9bn decline in global merchandise trade from USD4.3trn in Q1 ’20 to USD3.7trn in Q2 ’20.

However, due to increase in vaccination as well as reopening of economies, merchandise trade recovered to USD5.6trn in Q3 ’21 compared with USD4.9trn recorded in the corresponding period in 2020. This is also 16.4% above the average recorded over the past eight quarters (USD4.8trn).

Turning to the African landscape, the pandemic also adversely impacted the continent’s trade, particularly in 2020. For instance, in Q2 ’20 when the pandemic was at its peak, and the associated lockdown measures affected a large share of the global population, merchandise trade declined by 15.1% in Q2 ’20 to USD89.7bn compared with USD105.6bn recorded in the preceding quarter. However, there have been notable improvements in African trade in 2021 with global economies reopening and increase in vaccine uptake (African vaccination rate currently stands at 8.6%).

Intra-African trade is currently low as it accounts for less than 15% of total African exports, suggesting higher potential benefits from greater regional trade. However, when informal cross-border trade is taken into account, Africa records higher intraregional trade, particularly in agriculture. In some African countries, informal cross-border trade accounts for c.90% of official trade flow and contributes c.40% to total trade within regional economic communities.

The African Continental Free Trade Area (AfCFTA) agreement has the potential to alleviate the effects of COVID-19 in Africa and intra-African trade. The agreement has several benefits including the potential to boost economies and bolster trade diversity, encourage industrialisation, eliminate tariffs and non-tariff barriers as well as contribute to sustainable growth, among others.

At the last CIBN Banking and Finance conference held in September ‘21, a special session on AfCFTA was taken by Dr. Hippolyte Fofack, Chief Economist and Director of Research and International Cooperation Department at the African Export-Import Bank. He noted the numerous benefits of the AfCFTA agreement ranging from the deepening and acceleration of industrialisation to mutually reinforcing the relationship between regional integration and intra-African trade.

The question, therefore, is “what are the top sectors with high potential within AfCFTA markets?”. From our vantage point, top merchandise trade sectors include vehicles and transport equipment, agro-food products, energy, metals and machinery, as well as chemical products. As for the services sectors, we highlight; ICT, infrastructure and logistics, finance, banking and insurance, education as well as health.

The successful implementation of the AfCFTA to boost both extra- and intra-African trade hinges upon successfully tackling supply-side constraints, closing the trade financing gaps, excessive reliance on foreign currencies, among others. Industry sources suggest that Africa’s current untapped export potential amounts to USD21.9bn, equivalent to 43% of intra-African exports. The AfCFTA agreement can potentially add USD9.2bn worth of exports through partial tariff liberalisation over the next five years. Additionally, the agreement could boost employment and earning capacities among marginalised groups (i.e. women and youth).

Economy

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

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pipleline vandalisation

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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Value added tax - Investors King

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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Solid Minerals Sector Adds Over N1 Trillion to Nigerian Treasury in 16 Years – NEITI

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mining sector

The Nigerian Extractive Industries Transparency Initiative (NEITI) said the solid minerals sector has contributed around N1.137 trillion in direct payments to various government levels over 16 years.

This was disclosed in the 2023 Solid Minerals Audit Report, the 16th audit cycle, which provided a comprehensive overview of the sector’s contributions from 2007 to 2023 published on Wednesday.

The report was conducted by indigenous firm Haruna Yahaya and Co., and covered the solid minerals industry’s economic contributions, revenue streams, and exports, providing recommendations for sector reforms.

The report showed a substantial increase in government receipts from N7.59 billion in 2007 to N341.27 billion in 2022, a 44-fold rise, indicating solid sector growth.

The 2023 report underscored the sector’s evolution into a vital revenue contributor for Nigeria, with cumulative contributions now exceeding N1 trillion. It disclosed that in 2022, the sector generated N345.41 billion, with a reconciled final revenue of N329.92 billion.

Meanwhile, the report also identified the solid minerals sector’s Gross Domestic Product (GDP) contribution at 0.83 percent in 2022, with incremental growth to 0.75 per cent in 2023, underscoring untapped potential.

The initiative reiterated the policy measures and reforms needed to unlock the sector’s capacity to significantly contribute to Nigeria’s economic diversification

“Company payments analysis indicated that total government revenue, including reconciled and unilaterally disclosed figures, reached N401.87 billion in 2023.

“Key revenue streams included VAT (N128.32 billion), FIRS taxes (N370.09 billion), Education Tax (38.64 percent), Company Income Tax (10.64 percent), and royalties (N9.06 billion).

The report also showed that discrepancies initially amounted to N301.6 billion but were reconciled down to N100 million, demonstrating NEITI’s transparency commitment.

The production and export data showed 95.07 million tonnes of minerals produced in 2023, with a significant export volume of 4.32 million metric tonnes, valued at N117.29 billion.

The report highlighted top mineral-producing states, including Ogun, Kogi, and Rivers, with Ogun leading production. Revenue contributions were led by Osun, Ogun, and Kogi states

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