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More Nigerians Embrace Alternate Transaction Channels as Paucity of Cash Worsens

Other alternative transaction methods Nigerians have been adopting included USSD, internet banking, mobile app banking, Point of Sales (POS), e-wallet among other electronic channels of transactions.

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The dream of Nigeria moving into a full cashless economy appears to be gaining momentum as more citizens have been embracing alternative transaction channels following the worsening paucity of the naira.

At various trading outlets and industries, merchants and buyers are seen using other means of transferring money.

Findings by Investors King revealed that other alternative transaction methods Nigerians have been adopting included USSD, internet banking, mobile app banking, Point of Sales (POS), e-wallet among other electronic channels of transactions.

The federal government, through the Central Bank of Nigeria (CBN), had informed Nigerians of the need to mop out huge cash in circulation, lamenting that many Nigerians have hoarded the naira notes and that it was affecting the economy. For this reason, in 2022, the CBN announced a Naira redesign policy, withdrawal limits, and encouraged Nigerians to adopt electronic forms of transactions.

The apex bank had said that the maximum weekly limit for cash withdrawals across all channels by individuals and corporate organisations shall be N500,000 and N5 million respectively and advised customers to use alternative channels to conduct their banking transactions.

The CBN had said that the use of cash payments would reduce in the country by 2025 and noted that this dream is already contained in its Payments Vision 2025 document.

It explained that by 2025, the country will have a cashless and efficient electronic payment system infrastructure to service all the sectors of the economy.

The bank had asked Nigerians to start adjusting, adding that the use of cash will naturally slow with the ‘mobile first generation’, which will be economically active by 2025. Thus, the bank document explained that one of the focuses of the PSV 2025 is enhancing the cashless policy of the CBN.

The bank assured that the full implementation of the PSV 2025 agenda would contribute to the overall national economic growth and development of the country.

As banks witness huge crowds, especially at the Automated Teller Machines (ATMs) nationwide, people have been going digital for their transactions while others still depend on cash.

This was confirmed by the National President, Association of Mobile Money and Bank Agents in Nigeria, Victor Olojo. He said many residents now seraph vigorously for POS operators and other alternative channels of transactions.

He said some POS agents could not get cash for business and so, have shut down operations while adding that the development further forced people to go digital in their transactions.

Though, this policy has brought untold hardship and frustration on Nigerians, many are surviving it and adjusting to the cashless mode that the nation wants to fully implement.

Nigeria Inter-Bank Settlement System (NIBSS) recently conducted a survey on how Nigerians are adapting to the new order and found out that electronic and cashless transactions are gaining ground.

It said the scarcity of the naira has made POS transactions increase from N573.72 billion recorded in January 2022 to N807.16 billion in January 2023.

The increment, according to NIBSS, is 40.69 percent. It said the total cashless transactions in Nigeria rose by 45.41 percent year in year out to N39.58tn in January 2023.

It said it monitors cashless transactions through the Nigeria Instant Payment System and Point of Sales terminals adding that the total NIP transactions for the period increased by 45.52 percent y-o-y from N26.65tn as of January 2022 to N38.77tn as of January 2023.

According to the inter-bank system, the usage of electronic channels for transactions grew by 45.50 percent y-o-y from 438.48 million times to 638 million times in the period under review, saying that there were 955,234 deployed PoS terminals in the country as of January 2022.

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Economic Woes Slash Nigerian Manufacturing Tax Revenue by 70%

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In a striking indication of the challenges facing Nigeria’s manufacturing sector, tax payments from manufacturers have plummeted to their lowest level in three years.

According to the latest Company Income Tax (CIT) report by the National Bureau of Statistics (NBS), the tax revenue from both local and foreign manufacturing firms fell by a staggering 70.4 percent in the first quarter of 2024.

The revenue dropped to N43.2 billion from N145.1 billion in the same period last year, indicating the severe impact of the country’s tough operating environment on manufacturers’ financial performance.

This decline also reflects a year-on-year decrease of 31.4 percent from N62.9 billion, highlighting the ongoing difficulties manufacturers face.

The report points to increased borrowing costs, driven by rising interest rates and the devaluation of the naira, as key factors squeezing the sector.

“Manufacturers are not finding it easy with the high cost of production,” said Abiodun Kayode-Alli, a senior tax manager at PwC.

He explained that the harsh economic climate has significantly reduced the amount companies contribute to the government in taxes.

“Apart from the tough business environment, collection in Q1 is usually not much because most companies have until June 30 to complete filing and payments.”

Company Income Tax, a levy imposed on the income of corporations, varies based on company size.

Small firms with gross turnovers of N25 million or less are exempt, medium-sized firms (turnover between N25 million and N100 million) pay 20 percent, and large companies (turnover above N100 million) are taxed at 30 percent.

Despite these gradations, the manufacturing sector, which used to be a major contributor, recorded the lowest growth rate among 21 sectors.

The aggregate CIT collection fell by 12.9 percent to N984.61 billion in Q1 from N1.13 trillion in the previous quarter.

This downturn is particularly concerning given that the Federal Inland Revenue Service recently disclosed a shortfall in tax revenue, generating N3.94 trillion against a target of N4.8 trillion.

Muda Yusuf, Chief Officer of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the severe losses incurred by major players due to the foreign exchange reforms.

“The economy has not been favorable to most manufacturers, who are significant contributors to tax revenue,” Yusuf said.

BusinessDay’s research reveals that seven out of 13 listed consumer goods firms reported combined losses of N388.6 billion in Q1.

These firms include industry giants like International Breweries Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, and Nestlé Nigeria Plc.

Also, companies such as BUA Cement, Lafarge Africa Plc, and Nascon Allied Industries Plc saw their earnings decline significantly.

“A lot of consumer firms had higher finance costs because of FX losses and higher interest rates,” noted Ayorinde Akinloye, a Lagos-based investor relations analyst. “Despite some having good operating performance, their profits declined, while others recorded huge losses.”

The Central Bank of Nigeria’s aggressive monetary policy, raising the rate to 26.25 percent in May to combat inflation and support the naira, has exacerbated these financial pressures.

The liberalization of the foreign exchange regime also resulted in a near 30 percent devaluation of the naira this year, further complicating the economic landscape for manufacturers.

This challenging environment has prompted several multinationals to exit the Nigerian market. In the past ten months, companies like Kimberly-Clark, Procter & Gamble, GlaxoSmithKline Consumer Nigeria, Equinor, Sanofi, and Bolt Food have ceased operations in the country.

“Many companies that seem to be alive today are sick and most are not making profits. Many will still shut down because they cannot plan. About 10 million businesses have closed shop,” said Femi Egbesola, national president of the Association of Small Business Owners of Nigeria.

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Fidelity Bank Leads Trading as Equities Gain N324b

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Fidelity Bank Plc was the most active stock on Monday, 10 June 2024 at the Nigerian stock market as a strong positive sentiment led Nigerian equities to a net capital gain of N324 billion in the first trading session of the week.

The market opened with widespread positive sentiment as investors sought to lock into value stocks in the high-end sectors of oil and gas, construction and manufacturing.

With three gainers for every loser, the market closed with average return of 0.58 per cent, equivalent to net capital gain of N324 billion.

The momentum of activities also improved considerably as total turnover rose by 148.33 per cent to 963.541 million shares valued at N13.498 billion in 8,657 deals. Fidelity Bank topped the activity chart with 605.257 million shares valued at N6.025 billion.

Fidelity Bank’s activities appeared to be driven by buy sentiment as the stock closed within the top 15 gainers with a gain of 6.52 per cent to close at N9.80 per share.

The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Exchange (NGX), rose by 0.58 per cent to close at 99,793.71 points as against its opening index of 99,221.14 points.

Aggregate market value of all quoted equities also increased simultaneously from its opening value of N56.128 trillion to close at N56.452 trillion.

Other most active stocks included Access Holdings, which recorded turnover of 93.067 million shares worth N1.744 billion. United Bank for Africa (UBA) traded 58.726 million shares valued at N1.261 billion. Nigerian Breweries traded 45.256 million shares valued at N1.267 billion while Zenith Bank traded 16.079 million shares worth N539.552 million.

Analysts at Futureview Financial Services said they anticipated a mixed sentiment in the equities market, primarily due to the enduring allure of the fixed income market among investors.

“This interest is fueled by expectations of increased rates in the Nigerian Treasury Bill (NTB) auction and the impending release of the inflation rate. However, amidst these factors, there remains an opportunity for sustainable growth, particularly in fundamentally strong stocks that currently find themselves in the oversold region. We foresee a selective pursuit of bargains, particularly in dividend-paying stocks, driven by the nearing corporate qualification and payment,” Futureview stated.

 

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Banking Sector

Sterling Bank Implements Blockchain Solution for SPPG

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Sterling Bank, a leading financial institution committed to driving innovation and progress, has partnered with the School of Politics, Policy, and Governance (SPPG) to revolutionize credential verification through blockchain technology.

This collaboration marks a significant milestone in enhancing the efficiency, security, and accessibility of academic credentials in Nigeria.

Acknowledging the pressing need for an effective solution, Sterling Bank has taken the initiative to back the implementation of VX Technologies’ innovative blockchain-based digital certification program. This initiative arose from the necessity for a transformative solution to address the difficulties faced by SPPG in managing and verifying academic credentials through paper-based systems.

“We are thrilled to partner with VX Technologies and SPPG to introduce this game-changing initiative,” said Obinna Ukachukwu, Chief Growth Officer Sterling Bank.

“We believe in the power of innovation to drive progress and transform lives at Sterling Bank. By supporting the adoption of blockchain technology in education, we are not only revolutionizing credential verification but also advancing our H.E.A.R.T strategy for Education, which prioritizes Access and Equity.”

Sterling Bank’s investment in this pioneering project underscores its commitment to fostering innovation and driving positive change in Nigeria’s education sector. By leveraging blockchain technology, graduates from SPPG will now have access to secure, tamper-proof digital certificates, ensuring the integrity and authenticity of their academic achievements.

As VX Technologies maintains its leadership position in integrating blockchain technology across diverse sectors, their collaboration with SPPG and Sterling Bank underscores the significant impact of blockchain technology on education and beyond.

“We are pleased to acknowledge the impactful generosity of Sterling Bank, who has provided the funding necessary for the initial phase of this project. “ said Ryan Hawkos, Director of Operations, VX Technologies. “This support ensures that thousands of SPPG alumni can access their digital certificates, with the first one thousand certificates being provided at no cost.”

As Nigeria’s education landscape continues to evolve in the digital age, Sterling Bank remains committed to driving innovation and empowering the next generation of leaders. Through strategic partnerships and groundbreaking initiatives like the blockchain-based digital certification project, Sterling Bank is leading the charge towards a future where access to education is seamless, secure, and equitable.

According to the Chief Executive Officer of SPPG, Alero Ayida-Otobo, “Sterling Bank’s commitment to quality and positive educational experiences for people is yet again demonstrated here in their commitment to supporting the adoption of innovative technology across the educational ecosystem.”

“We are one of the first institutions in Nigeria to embrace blockchain for academic credential management, and we look forward to a near future where this is the norm across Nigeria,” he added.

Renowned for its now famous HEART of Sterling strategy; which focuses investments in the Health, Education, Agriculture, Renewable Energy and Transportation; its irreverent brand voice and enviable talent management practices, Sterling has been awarded the Most Innovative Bank of The Year for by BusinessDay, been named the Overall Best Place To Work In Nigeria by the Great Place To Work Institute, and has featured on the prestigious top 100 fastest growing companies in Africa, as published by the globally recognized Financial Times, all in 2023.

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