The Nigerian naira is grappling with mounting foreign exchange pressure as some traders have started quoting a bid price of N900 per dollar in an effort to meet lure sellers to sell to them.
The Economist Intelligence Unit (EIU) has painted a pessimistic picture of the situation, predicting that the local currency may hit N1000 against the United States Dollar if nothing is done to arrest the situation.
According to the latest report released by EIU, the average exchange rate is projected to be N815 to $1 in 2024.
However, this rate is expected to slide to N1,018 per $1 by the end of 2027, with a spread of 10-15 percent against the black-market rate over the same period.
The naira’s exchange rate has already experienced turbulence in recent times. On July 14, 2023, it crossed the 800/$ mark at the Investors’ and Exporters’ (I&E) forex window, Nigeria’s official foreign exchange market.
Simultaneously, at the parallel market, commonly referred to as the black market, the dollar traded around N870. These developments have further exacerbated the uncertainty surrounding the naira’s future value.
Currency traders at the FX auction on Friday witnessed bids as high as N799.50/$, indicating strong demand for the US dollar. This surpassed the rates of N869/$ on Thursday and N845/$1 on Wednesday. Conversely, there were also lower bids recorded at N465/$, indicating the unpredictable fluctuations in demand and supply.
The situation has prompted some customers, like one from a tier-one bank with a strong regional presence, to offer bids at N800/$. To their dismay, these bids were rejected on July 27, and they were advised by their bank to bid even higher at N900/$. Such drastic measures have left some customers frustrated, claiming that these moves are contributing to the soaring dollar rates.
Experts suggest that stabilizing the exchange rate will be challenging until there is enough supply to meet the FX demand. Yemi Kale, Partner and Chief Economist at KPMG Nigeria, pointed out that the current demand stems from both actual needs and speculative activities. He highlighted that while oil sales play a crucial role in the FX inflow, other sources like foreign portfolio investment, foreign direct investment, remittances, and export-oriented enterprises are equally vital.
FX inflow into Nigeria’s economy declined by 3 percent quarter-on-quarter (q/q) and 7 percent year-on-year, amounting to $17.2 billion in the first quarter of 2023, according to data from the Central Bank of Nigeria (CBN) compiled by FBN Quest.
The decrease in inflow is attributed to structural issues and restrictive FX policies that limited the free flow of foreign currency out of the country and deterred foreign portfolio investors from injecting capital into the Nigerian market.
As the nation grapples with these challenges, experts emphasize that restoring confidence in the economy and encouraging steady inflow of foreign currency are paramount to avoid further currency depreciation. Until then, the fate of the naira remains uncertain, and Nigeria must navigate a treacherous foreign exchange landscape.
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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