Forex

Zimbabwe Mandates Partial Tax Payments in New Bullion-Backed Currency

Published

4 months ago

June 20, 2024

In a strategic move to reinforce its new bullion-backed currency, Zimbabwe will require businesses to pay a portion of their taxes in Zimbabwe Gold (ZiG), Finance Minister Mthuli Ncube announced on Wednesday.

The regulations, aimed at enhancing the stability and acceptance of the ZiG, are part of broader efforts to strengthen the nation’s fiscal and monetary framework.

“The Treasury is stepping up to complement the fiscal and monetary policy framework aimed at further anchoring the currency, exchange rate, and price stability,” Ncube stated in an emailed announcement.

Since 2020, Zimbabwe has allowed taxes to be settled in the currency businesses predominantly use. However, under the new system, specific ratios will dictate the portions of taxes that must be paid in ZiG and other foreign currencies, alongside those that can solely be settled in the new unit.

The ZiG, introduced on April 5, 2024, replaced the Zimbabwean dollar, which had depreciated by 80% against the US dollar in the official market earlier this year.

Backed by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank, the ZiG is part of Zimbabwe’s broader strategy to avoid the pitfalls that led to the collapse of its previous six currencies.

“The changes will add to a raft of measures aimed at ensuring the ZiG doesn’t suffer the fate of its predecessors,” Ncube stated.

The finance minister highlighted that the new tax policy is designed to foster greater stability in the ZiG’s value and ensure it becomes a cornerstone of Zimbabwe’s economy. The government hopes that by requiring businesses to transact in ZiG, it will boost demand for the currency, thereby strengthening its position in the market.

Additional measures to bolster the ZiG include urging miners to increase gold production and extending the currency crackdown to include more stringent regulations on companies. These efforts are geared toward ensuring a steady influx of gold to back the currency, thus reinforcing its value and credibility.

Economists have noted that the success of the ZiG will depend heavily on these regulatory measures and the government’s ability to maintain a stable economic environment. The ZiG’s introduction has already shown a “positive impact” on the economy, but sustained confidence in the currency will be crucial.

“Zimbabwe’s new tax policy is a bold step towards economic stability,” said John Mangudya, Governor of the Reserve Bank of Zimbabwe. “By ensuring that a portion of taxes are paid in ZiG, we are creating a consistent demand for the currency, which will help maintain its value and prevent the hyperinflation that plagued our previous currencies.”

The move has received a mixed reaction from the business community. While some see it as a necessary step towards stabilizing the economy, others are concerned about the immediate impact on cash flow and the complexities of adapting to the new system.

“We understand the government’s need to stabilize the currency,” said Takura Mugaga, CEO of the Zimbabwe National Chamber of Commerce. “However, we urge the authorities to consider the implementation challenges businesses might face and provide adequate support during the transition period.”

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Samed Olukoya

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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Naira

Naira Weakens to N1,706 Per Dollar in Black Market, Sells N1,654 Officially

Published

11 hours ago

October 24, 2024

Iyanuoluwa Martins

The Naira weakened to N1,700 against the United States Dollar on the black market on Wednesday and extended this outcome further in the official foreign exchange (FX) market.

In the black market, the Naira lost N12.63 or 0.75 percent against the greenback to close at N1,706.43 to the US Dollar compared to N1,693.80/$1 it closed on Tuesday.

The Naira also fell by 0.06 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) extending the weakening of the local currency which started earlier in the week

The local currency exchanged for the US Dollar at N1,654.09/$1, sliding by N1.07 versus N1,653.02/$1 that it closed at the previous session on Tuesday.

The FX market has been volatile as recent efforts to bring some stability to the market through a series of auctions held by the Central Bank of Nigeria (CBN) for official dealers and Bureau de Change (BDCs) have not been able to tackle high seasonal demand.

With the year entering into the last two months, high demand has returned to the market and all eyes will be on what the CBN will do in that regard.

Data showed that there was a decrease in daily supply as the midweek turnover published on the FMDQ Group website stood at $136.68 million indicating that the session’s turnover made a 22.4 percent slide, indicating that there was a drop of $39.47 million compared to $176.15 million that was published in the last trading session.

The Naira also witnessed drops against the Pound Sterling and the Euro. It declined N9.86 on the British currency to wrap the session at N2,147.22/£1 from N2,137.36/£1 that it sold at the previous session.

In the same trend, against the Euro, the Nigerian currency dropped N9.67 and closed at N1,789.93/€1 versus N1,780.26/€1.

The Naira also dropped in its value against the British currency in the black market as it fell by N8.86 to sell at N2,212.37/£1 compared with the preceding session’s N2,203.51/£1 and followed the same pattern against the Euro as it depreciated N5.71 to quote at N1,844.79/€1 versus the previous day’s rate of N1,839.08/€1.

Meanwhile, the local currency further depreciated N3.54 to close at N1,233.01 per Canadian Dollar, compared to Monday’s N1,226.55 per CAD.

Naira

Naira Strengthens in Parallel Market Amid Official FX Depreciation

Published

1 day ago

October 23, 2024

Iyanuoluwa Martins

The Naira closed strong in the parallel market but weakened further in the official foreign exchange (FX) market as seasonal demand continued to affect the currency despite the fresh sale of FX by the Central Bank of Nigeria (CBN).

In the parallel market, the Naira gained N5.17 against the greenback to close at N1,693.80 to the US Dollar compared to N1,698.97/$1 it closed on Monday.

However, the Nigerian Autonomous Foreign Exchange Market (NAFEX), which serves as the official foreign exchange market, showed the Naira recorded a 3.1 percent depreciation against the US Dollar to N1,653.02.

At the previous session on Monday, the Naira closed lower at N1,603.16/$1, indicating a further decrease of N49.86 at the approved market.

A turnover of $176.15 million was on record at the market, according to data from the FMDQ Securities Exchange Limited. This indicated a $183.07 million or 50.9 percent decline versus the $359.22 million quoted recently.

The Naira also gained in its value against the British Pound Sterling in the official market by N9.73 to sell at N2,203.51/£1 compared with the preceding session’s N2,213.24/£1 and followed the same pattern against the Euro as it appreciated N6.21 to quote at N1,839.08/€1 versus the previous day’s rate of N1,845.29/€1.

Meanwhile, the local currency depreciated 74 Kobo to close at N1,226.56 per Canadian Dollar, compared to Monday’s N1,225.82 per CAD.

At the official market, the Naira witnessed gains against the British Currency and the Euro in the Tuesday session.

On the Pound Sterling, the local currency made a gain of N16.54 to wrap the session at N2,137.36/£1 from N2,153.90/£1 that it sold at the previous session and against the Euro, the Nigerian currency closed at N1,780.26/€1 versus N1,791.06/€1, indicating an N10.80 appreciation.

The CBN has not injected fresh FX sales into the market for yet another week after it promised to always prop the market.

Speaking in the US on Tuesday at the ongoing International Monetary Fund (IMF)/World Bank summit, the Nigerian Minister of Finance, Mr Wale Edun noted that Nigeria needed to boost its oil production to fix its FX issues.

“The key about the foreign exchange market really is supply and as you know we are an oil-producing country, we just need to get our oil production up and that will deal with that issue of foreign exchange supply and pressure on foreign exchange anytime there are large flows.”

Naira

Naira Weakens Against Dollar at Official, Parallel FX Markets

Published

2 days ago

October 22, 2024

Iyanuoluwa Martins

The Naira depreciated at the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market on Monday, signifying more worries for the local currency.

At the official market – NAFEM – the local currency sold for the US Dollar at N1,603.16/$1 as it recorded a 0.15 percent or N2.38 drop versus N1,600.78/$1 it was valued at the previous session on Friday.

This occurred as supply rose at the opening session as turnover published on the FMDQ Group website stood at $359.22 million indicating that the session’s turnover went higher by 2.4 percent or $8.50 million compared to $350.72 million that was published the day before.

At the unofficial market, the domestic currency closed at N1,698.97 to the US Dollar, a drop of N8.15 compared to N1,690.82/$1 it closed during the Friday trading session.

The weakening of the Naira is happening as the nation’s external reserves continue to swell due to lower US Dollar volume sales to boost liquidity in the official FX market.

Latest data showed the balance in Nigeria’s foreign reserves inched to about $39 billion as CBN data revealed that Nigeria now has $38.992 billion as gross balance in the nation’s external reserves.

The CBN has not made do with its promise to prop up the market as it appears to have halted its weekly FX sales

In a different trend, the domestic currency witnessed a flat outcome against the British currency and the Euro in the week’s opening session.

On the Pound Sterling, the local currency closed at N2,153.90/£1 and N1,800.79/€1 on the Euro.

In the parallel market, the local currency depreciated in its value against the British Pound Sterling by N11.69 to sell at N2,213.25/£1 compared with the preceding session’s N2,201.56/£1 and followed the same pattern against the Euro as it lost N10 to quote at N1,845.29/€1 versus the previous day’s rate of N1,835.29/€1.

The local currency also depreciated further by N8.64 to close at N1,225.82 per Canadian Dollar, compared to Friday’s N1,217.18 per CAD.