Recent data from the International Trade Center (ITC) has unveiled a disconcerting trend for Nigeria as the country’s expenditure on imported phones, generators, electrical transformers, and other electrical equipment skyrocketed to a staggering $10.26 billion over the past three years.
This surge in electrical imports comes at a time when Nigeria is grappling with falling foreign exchange reserves, further exacerbating economic challenges.
The data, obtained from the National Bureau of Statistics and the United Nations COMTRADE, reveals that Nigeria’s electrical importation bill experienced an 11.90 percent increase from $3.09 billion in 2021 to a whopping $3.47 billion in 2022 alone.
The persistent growth of this import bill paints a concerning picture for the country’s economy, particularly as foreign exchange reserves continue to dwindle.
Imports within the electrical machinery and equipment category, as detailed on the International Trade Center portal, encompass a wide range of products such as electric motors, generators, transformers, vacuum cleaners, electric shavers, hair clippers, and telephone sets, including smartphones and teleprinters.
Notably, China, India, Germany, Türkiye, Sweden, the United States of America, the United Kingdom, Austria, Italy, Vietnam, and France emerged as the primary sources of these imports.
While Nigeria boasts the seventh-highest number of phones in the world, the country remains heavily reliant on foreign players such as Tecno, Samsung, Apple, and Itel, with a minimal presence of local phone manufacturing. As a result, Nigeria’s domestic market fails to reap the economic benefits associated with a robust manufacturing industry. The absence of local manufacturing hampers job creation and technological innovation within the country.
Chief Operating Officer of the Association of Telecommunications Companies of Nigeria, Ajibola Olude, highlighted several obstacles impeding the development of a local phone manufacturing industry. He cited poor electricity supply, lack of regulatory enforcement, disdain for local content, and a scarcity of technical know-how as key factors contributing to Nigeria’s continued reliance on imports.
Associate Professor of Economics at the Pan Atlantic University, Olalekan Aworinde, expressed concerns about the consequences of this heavy dependence on imported electrical equipment.
“The implication of this is many. For instance, foreign exchange management, all those goods were paid for in dollars,” Aworinde lamented.
FG Pays N169.4 Billion for Subsidy in August to Keep Pump Price at N620/Litre
Amidst President Bola Ahmed Tinubu’s repeated assurances of subsidy removal, it has come to light that the Federal Government disbursed N169.4 billion as subsidy payments in August to maintain the pump price of petrol at N620 per litre.
This revelation has raised eyebrows and ignited discussions about the future of fuel subsidies in Nigeria.
Investigation, backed by a document from the Federal Account Allocation Committee (FAAC), reveals that the Nigerian Liquefied Natural Gas (NLNG) paid $275 million as dividends to Nigeria through NNPC Limited. Out of this, NNPC Limited allocated $220 million (equivalent to N169.4 billion at N770/$) to cover the Petroleum Motor Spirit (PMS) subsidy, keeping it artificially low.
This move effectively indicates a resurrection of the subsidy system, which the government had promised to eliminate.
Under former President Buhari’s administration, Nigeria saw record-high spending on petrol subsidies. Reports from the Nigeria Extractive Industries Transparency Initiative (NEITI) show that subsidies cost N1.99 trillion from 2015 to 2020.
In 2021 alone, NNPC reported a subsidy cost of N1.57 trillion, with an additional N1.27 trillion from January to May 2022. The government had allocated N3 trillion in the budget to cover subsidy costs from June 2022 to June 2023, amounting to N7.83 trillion spent on subsidies during Buhari’s tenure.
Global oil market dynamics are further complicating the subsidy issue. Brent crude prices exceeded $95 per barrel, while the naira depreciated against the US dollar, undermining Nigeria’s pledge to remove petrol subsidies.
Despite higher international crude prices and exchange rate pressures, the government has held the pump price at N620/litre.
The situation has also strained petroleum marketers, who face rising international prices, a weakening naira, and government-mandated price caps. International petrol prices, exchange rates, and additional costs have collectively driven up the landing cost of PMS to about N728.64 per litre.
The government’s strategy to sustain the N620 per litre price involved a $3 billion crude repayment loan with Afrexim Bank to bolster the naira. However, this loan has reportedly stalled due to the withdrawal of other lenders.
While the government claims the subsidy is a temporary measure to ease the economic burden on Nigerians, experts argue that it highlights the need for a functional refinery and currency stability.
Without these factors in place, petrol prices will remain susceptible to fluctuations in global oil markets and exchange rates, potentially impacting the masses.
The Federal Inland Revenue Service (FIRS) Reports Significant Growth in Nigeria’s Tax-to-GDP Ratio
The Federal Inland Revenue Service (FIRS) announced that it successfully increased Nigeria’s tax-to-Gross Domestic Product (GDP) ratio from 6.0 percent to 10.86 percent in 2022.
The revelation came during a sensitization program held yesterday in Lagos by the Director of Taxpayer Services at FIRS, Mrs. Saidatu Yero.
Mrs. Yero conveyed the agency’s commitment to further enhancing the nation’s tax-to-GDP ratio, with ambitious targets of 16.5 percent, aligning with the African average and subsequently aiming for 18 percent within the next three years.
Mrs. Yero proudly stated, “The FIRS Management has executed commendable reforms that have fundamentally transformed the landscape of tax administration in Nigeria, leading to a substantial increase in revenue collection for the government.”
The agency reported that its innovative measures have already culminated in the generation of N8.5 trillion as of September 14, 2023, demonstrating its unwavering commitment to achieving N12 trillion in revenue for the year 2023.
Elaborating further, Mrs. Yero said, “One of the primary objectives of the FIRS Management is to prioritize a ‘customer-centric’ approach, recognizing taxpayers as our key stakeholders within the tax ecosystem. To ensure that taxpayers comprehend their tax responsibilities and rights, it is imperative that we continuously inform, sensitize, engage, and educate them, facilitating their compliance without any hindrance.”
Addressing the event’s theme, “The Finance Act as an Innovation in the Nigerian Tax System,” Mr. Temitayo Orebajo, the Director of the Tax Policy and Advisory Department at FIRS, said that the 2023 Finance Act introduced substantial amendments to seven tax laws, four non-tax laws, and a total of 30 sections, signifying a significant leap forward in the country’s tax framework.
Euro-Area Inflation Eases, Fueling Debate on ECB’s Rate Hike Course
Revised Data Shows Modest Slowdown, But ECB Officials Divided on Further Hikes
In a surprising turn of events, revised data released today has revealed that inflation in the Eurozone moderated slightly in August, offering fresh fodder for the ongoing debate within the European Central Bank (ECB) on the necessity of further interest-rate hikes.
The latest figures show that consumer prices increased by 5.2% in August, down marginally from the initial reading of 5.3% while core inflation, excluding volatile elements like food and energy remained stable at 5.3%.
While the ECB recently raised the borrowing costs for the tenth consecutive time to 4%, the new data is reigniting discussions on whether this tightening cycle has concluded.
ECB Vice President Luis de Guindos, along with Madis Muller of Estonia and Peter Kazimir of Slovakia, have expressed their belief that the latest data supports the idea that no more interest-rate hikes are needed.
However, President Christine Lagarde has pushed back against such assumptions, and other hawkish officials from Austria, Latvia, and Slovenia argue that further moves may still be required to combat inflation effectively.
Economists, including Maeva Cousin of Bloomberg Economics, anticipate a marked deceleration in both headline and core inflation for September, potentially offering the ECB’s Governing Council the reassurance needed to assess whether the hiking cycle should indeed come to an end.
As Bank of France Governor Francois Villeroy de Galhau noted, the current rate is a “plateau,” and decisions will hinge on how inflation evolves as the economic “illness” diminishes.
In the face of these ongoing debates, patience remains key, with the ECB closely monitoring economic developments to determine the appropriate course of action for monetary policy.
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