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IMF Trims Global Growth and Raises Nigeria’s Growth Outlook

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In its latest World Economic Outlook (WEO), the IMF has trimmed its global forecast for 2022 to 3.6% y/y from 4.4% y/y. For 2023, the growth projection was revised downwards from 3.8% y/y to 3.6% y/y.

Since the last WEO released in January, risks to economic prospects have risen sharply and policy trade-offs have become more challenging largely because of the Russia-Ukraine crisis which has had visible trickledown effects. Furthermore, frequent, and wider-ranging lockdowns in China have slowed manufacturing activities and are creating additional supply-chain bottlenecks.

Both Russia and Ukraine are projected to experience GDP contractions of -8.5% y/y and – 35% y/y respectively in 2022. The severe downturn in Ukraine is a direct result of the invasion. In Russia, the sharp decline reflects the impact of the sanctions with a severing of trade ties and greatly impaired domestic financial intermediation.

The 2022 forecasts for two of the largest economies, US, and China were reduced. The US global growth was revised downwards from 4.0% y/y to 3.7% y/y in 2022, driven by assumptions such as faster withdrawal of monetary support than in the previous projection given expected policy tightening in an attempt to rein in inflation and the impact of trade disruptions due to the ongoing Russia-Ukraine crisis.

China’s global growth was revised downwards from 4.8% to 4.4% in 2022. The combination of more transmissible coronavirus variants and the strict zero-COVID strategy in China has led to repeated mobility restrictions and localized lockdowns (including in key manufacturing and trading hubs). In addition to slow recovery in employment, these are causing strain on private consumption.

Crude oil prices increased sinceAugust 2021, driven by a strong recovery in oil demand, and then followed by geopolitical tensions (Russia-Ukraine crisis). The oil supply gap was wide before the ongoing crisis, as OPEC+ continued to ease supply curbs at a measured pace.

Global demand for oil is projected to increase to 99.7 million barrels a day (mb/d) in 2022. Meanwhile, oil price assumptions based on the futures markets for the Fund’s basket of three crude blends (UK Brent, Dubai Fateh, and West Texas Intermediate crude oil), shows an increase of 54.7% this year to USD106.8/b and a decline of -13.3% in 2023 to USD92.6/b.

Prior to the Russia-Ukraine crisis, headline inflation had surged across economies due to pandemic-induced supply-demand imbalances. Elevated inflation will affect trade-offs central banks face between combating price pressures and safeguarding growth. Inflation is expected to remain elevated across economies, driven by the war-induced commodity price increases. For 2022, the IMF projects average inflation at 5.7% in advanced economies and
8.7% in emerging and developing economies.

Regarding monetary policy, prior to the ongoing Russia-Ukraine crisis some central banks were tilting towards monetary policy tightening. This contributed to increases in nominal interest rates across advanced economy sovereign borrowers.

The general expectation is that policy rates are set to rise further in coming months. Furthermore, balance sheets for select central banks are also expected to begin to unwind, especially in advanced economies. Although some central banks across emerging and developing economies have raised their policy rate, China seems to be an outlier. China’s headline inflation remains low and its central bank trimmed policy rates in January ‘22 to support economic recovery.

On a broader note, expectations of tighter policy and concerns around the residual effects from the Russia-Ukraine crisis have contributed to financial market volatility and risk repricing. Interestingly, the Fund revised its forecast for sub-Saharan Africa to 3.8% (from 3.7%) for 2022. Higher food prices would adversely affect consumer pockets. In our view, given that wheat is an essential ingredient in the production of bread, pastries, pasta, biscuits, noodles among others, reduced supplier access and higher prices will weigh heavy on wheat-based producers within the region.

For Nigeria, the IMF raised its GDP growth projection for 2022 from 2.7% y/y to 3.4% y/y. This was largely due to the increase in oil prices. Bonny Light has increased from USD80.1/b at the start of the year and has remained above USD100/b. We have a relatively cautious view. Indeed, higher oil prices bode well for Nigeria.

However, the presence of the fuel subsidy regime undermine expected benefits. Furthermore, production volumes have been relatively low. Based on the latest OPEC data, Nigeria’s production volume stood at 1.35mb/d compared to its OPEC approved quota of 1.74mb/d.

There are other downside risks to consider such as the trickledown effect from the Russia-Ukraine crisis which has an impact on supply-chain dynamics and by extension, affects inflation and consumption patterns. On a brighter note, we expect a small fiscal boost with increased capital expenditure which should support GDP growth. We currently see GDP growth for Nigeria at 2.8% y/y in 2022.

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.

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

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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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