The foreign exchange (FX) market kicked off Wednesday with the Nigerian naira experiencing a depreciation of 0.38 percent against the US dollar at the parallel market.
As the morning trading commenced, the dollar was trading at N778, the same rate at which it closed on Tuesday. However, this rate was lower than the intraday trading rate of N775 witnessed on the same day.
Traders in the market expressed uncertainty, emphasizing that the current rate might fluctuate later in the day depending on the demand pressure. Dollar demand pressure was palpable at the Investors and Exporters (I&E) forex window on Tuesday, with eager buyers and sellers bidding as high as N820/$ and as low as N700/$.
The volume of dollar transactions in the market saw a decline of 16.71 percent, amounting to $73.86 million on Tuesday compared to the $88.68 million recorded on Monday. As a result, the naira experienced a depreciation of 3.50 percent, with the dollar quoted at N768.44 on Tuesday, whereas it was quoted at N741.50 on Monday at the official FX market, according to data from the FMDQ.
These recent developments in the FX market can be attributed to the comprehensive reform initiated in mid-June, which aimed to address three critical distortions.
These distortions included the absence of a price discovery mechanism, the existence of multiple FX windows, and institutional weaknesses like a lack of transparency and predictability, as stated in a report by the World Bank.
The Central Bank of Nigeria (CBN) took significant steps toward reform by abolishing the segmentation of the FX market across multiple windows and consolidating them into the Investors & Exporters window, effective from June 14.
This move allowed the naira to trade freely by reintroducing the willing buyer, willing seller mechanism at the I&E window, aligning the exchange rate for government transactions closer to the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate, enhancing transparency of orders, and eliminating ineffective schemes such as the RT-200 and Naira 4 Dollar Remittance programs.
The impact of these reforms was evident, as the naira experienced its largest single-day depreciation of 27 percent, plunging from N463 to N632 per US dollar.
The World Bank report highlights that to further enhance the efficiency of the FX market, it is crucial to remove FX restrictions, clearly communicate the operational aspects of the new FX regime, and implement a supportive monetary framework where the primary objective of price stability guides monetary policy actions.
As market participants navigate these changes, both buyers and sellers will closely monitor the FX market’s movements, anticipating fluctuations that may impact the exchange rate dynamics throughout the day.
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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