- Experts Fault CBN’s Cashless Policy
Economic and financial experts have started telling the Central Bank of Nigeria (CBN) to ease charges being levied on consumers following the imposition of fees on cash deposits and withdrawals.
Prior to the implementation of processing fees on withdrawals and deposits on Wednesday, the Federal Executive Council had approved a 44 percent increase in Value Added Tax (VAT) to 7.2 percent.
A month earlier, the Federal Inland Revenue Service (FIRS) had announced 5 percent VAT on all online transactions starting from 2020.
The number of charges being levied on the average consumer in an economy barely growing is alarming and counterproductive to the CBN economic growth and financial inclusion plans.
The new circular mandated Deposit Money Banks to charge corporate account owners 5 percent processing fee on withdrawals more than N3 million and 3 percent on deposits of same. Meaning, each time network is down, Nigerian businesses would have to pay N300,000 to deposit N10 million or N500,000 to withdraw the same amount.
For individuals, they will have to pay 2 percent processing fee on deposits more than N500,000 and 3 percent withdrawal fee on the same amount.
Despite the central bank explaining that the directive is to develop Nigeria’s payment system in line with its vision 2020 goal of being among top 20 economies by next year, experts say to grow the Nigerian economy, the apex bank needs consumer spending and new investments.
But the new charges and the ones in the pipeline being pushed for approval would hurt consumer buying power, erode savings, weigh on new job creation and impede profitability of businesses.
Still, majority thinks the cashless policy is a good move as it would help CBN manage and regulate cash better. However, the economy is just recovering with numerous headwinds that has crippled both businesses and individuals in terms of earnings and growth.
Mr. Godwin Eohoi, the Registrar, Chartered Institute of Finance and Control of Nigeria, said: “The move by the CBN to promote cashless policy is commendable because it has some benefits such as reducing the amount spent by the apex bank in cash management.
“However, the Nigerian economy is still fragile and at a time when the CBN is promoting financial inclusion, it would not be fair to impose additional charges on bank customers that are already overburdened with different types of charges from banks.
“The cash deposit and withdrawal fee announced by the CBN is too high. They should reduce it to 0.5 per cent for transactions involving individuals and 1.5 per cent for corporate companies.”
Almost 70 percent of bankable adults are still unbanked, according to the CBN. Imposing additional fees on existing customers while campaigning for broad financial inclusion to grow the sector is counterproductive.
Mr. Timothy Olawale, the Director-General, Nigeria Employers Consultative Association (NECA), explained that the new charges will lead to unnecessary withdrawal burden as businesses and individuals will start working within stipulated limits to avoid charges.
He said, “Though the overall aim of reducing cash transactions is good, the policy will, however, increase the cost of doing business and force organisations and individuals to start multiple deposits and withdrawals in order to beat the charges.”
The Director-General, LCCI, Mr Muda Yusuf, who obviously thinks the cashless policy is good but the implementation needs adjustment, said the notice given by the CBN was just too short and could disrupt service in the banking sector.
He said, “The latest circular by the CBN should have given a much longer notice to economic players. The notice given for the effective date is extremely short. The circular was dated 17th of September while the effective date was 18th of September.
“This is just a notice of one day. This would have short-term disruptive effects. We implore the CBN to give at least two months to allow for players in the economy to adequately prepare themselves. This is particularly so for investors who are major players in the retail segment of the economy.”
A logistics expert and the CEO of Hermonfield, Mr Tunji Olaosun, said both the CBN and FIRS directives are contradictory.
According to him, while the CBN is pushing for a cashless policy, the FIRS is telling people it will impose 5 percent VAT on all online transactions.
He said, “It appears they don’t talk to themselves because of the conflicting signals coming from them.
“From the CBN’s instruction, it shows that the CBN wants to discourage cash transactions and encourage cashless transactions. But at the same time, the FIRS is saying it will impose tax on transactions done online.
“So in essence, if we carry cash, CBN penalises us; if we do cashless, FIRS taxes us. So, which one do they want us to do? Both are agencies of the Federal Government which means the ministry they are confusing Nigerians.”
Lagos Loses N1 Trillion to #EndSARS Protest, a Year Budget – Gov
Lagos Needs N1 Trillion to Fix Vandalised Infrastructure, a Year Budget – Gov
The Governor of Lagos State, Babajide Sanwo-Olu, has puts the total economic cost of past week destruction and vandalism in the state at about N1 trillion.
Sanwo-olu, who spoke with the speaker of the House of Representatives, Hon. Femi Gbajabiamila, that was on a fact-finding visit to Lagos on Sunday, said the state may spend up to N1 trillion to fix damages done to infrastructure.
Speaking on the situation, Femi Gbajabiamila, said “The House of Representatives will do all it can to compensate all those who suffered brutality including policemen that lost their lives in the process.
“Also whatever the house can do in rebuilding Lagos and other states it will do. We are now in a state of reconstruction. What must be done will be done.
“I learnt from the governor of Lagos State that it will take N1.0 trillion to rebuild what had been lost and I asked him what is the budget size of the state he said about N1.0 trillion. You can see we are moving backward.
Rotimi Akeredolu, Chairman of the South West Governors, who was part of the visit, stated, “We are indeed surprised at the extent of damage to lives and properties in Lagos. We will be right to say Lagos was turned into a war zone.
“We are deeply concerned with the ease with which public buildings, utilities, police stations and investments of our people have been burnt despite the proximity of security agencies to those areas. However, while responding to the total number of government’s buildings burnt among others,” Lagos State Commissioner for Information and Strategy, Mr Gbenga Omotoso, stated.
“We are still counting. The state is still taking inventories of all that happened and not until all that is concluded we can’t not ascertained for now the total number of burnt structures. But I can tell you it’s very huge.”
Experts Recount Nigeria Losses Ahead Possible Rebuilding, Recovery
Economic Experts Recount Losses Incurred from the #EndSARS Protest Ahead Possible Rebuilding, Recovery
Economic experts have started releasing reports on the size of the damage done to the nation’s economy following the #EndSARS protest that was hijacked by hoodlums and criminals.
The most affected state, Lagos State, will need about $1 trillion, an equivalent to its annual budget, to recoup the economic value of what was lost to the destruction and looting perpetrated by thieves masquerading as protesters.
A Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank, Ayodeji Ebu, said the unrest and the 24 hours curfew that was later imposed by Lagos State to restore order could cost the state at least N54 billion per day.
He explained that the protest would hurt the nation’s foreign direct investment in the remaining part of the year and as well as the first quarter of 2021.
His words: “While it may be difficult to estimate the exact loss so far, based on the significant contribution of Lagos State (approximately 30%) to Nigeria’s total Gross Domestic Product (GDP) and as over 50 percent of Nigeria’s non-oil industrial capacity is located in Lagos, the impact of the crisis will be enormous.
“This was further compounded with the 24hours curfew that lasted for about four days. Estimating using the Q2’2020 GDP data and assuming there was a total shut down, each day will cost Lagos alone about N54 billon.”
Speaking further, Ebu said: “With Lagos the centre of the civil unrest, which account for 70 percent or $1.1 billion of total capital importation in Q2’2020, we expect this to further impact on direct investment in Q4’2020 and Q1’2021.”
He expects that insurance claims to also rise in line with the damages done on lives and properties.
Similarly, analysts at Cordros Capital, a Lagos based investment banking firm, reacted to the negative impact of the unrest on the nation’s economy.
The analysts said the nation’s economy could contract by as much as 6.91 percent year-on-year in the final quarter of the year due to the unrest. Therefore, they projected a negative growth rate of 4.15 percent year-on-year for the 2020 fiscal year.
In their words, they said “The transportation, trade, and manufacturing sectors are expected to be the hardest hit.
“On transportation, we expect reduced domestic and international flight operations pending when normalcy is restored.
“Similarly, we expect compliance with curfew directives to hinder the free movement of people and goods across the country, further compounding the woes of the transport sector, which is yet to recover from the COVID-19 induced decline.
“While the manufacturing sector is currently being hampered by FX related issues and an unfriendly business environment, the imposition of curfews will further exacerbate the challenges of the sector.
“For the trade sector, the decline in household consumption brought about by higher food prices and shrinking consumers’ income will cascade into weak wholesale and retail trade in conjunction with the pre-existing supply chain constraints.”
Analysts at Fidelity Securities Limited also added their voices and said the protest may cost the nation more than the N700 billion estimation previously estimated by the Lagos Chamber of Commerce.
They said “The EndSARs protest and eventual escalation of the protest would cost the Nigerian economy way more than N700 billion initially estimated by the Lagos Chamber of Commerce. With the current level of destructions, it may take a while for business to run at full capacity as the government as well as the private sector will first have to channel funding into the destroyed infrastructure in a bid to restore things back to the way it was, before even thinking of further improving on the infrastructure.
“Given the level of destruction, more businesses have been affected, more jobs would be lost, and more families would further fall below the poverty line as a result of the looting and burning of business. This is expected to further worsen the economic situation of the country which was already suffering from the impact of Covid-19. The government at this point would need to think out of the box, if it aims to revitalise the economy in the shortest time, else our GDP growth rate may remain negative even into the new year.”
Accordingly, the Electricity Distribution Companies of Nigeria (DISCOs), on Sunday said the destruction of equipment it uses to deliver power and service operations will hurt its revenue generation and service delivery in October and the rest of the fourth quarter.
The DISCOs said “I tell you, assets are been destroyed, which is a significant impact on the industry. The DISCOs are expected to give power and how will it be achieved when our facilities including cables, poles, buildings are destroyed.
“That, however, transcends to money because the DISCOs cannot collect money for bills due to the unrest. Who would want to pay when everybody is angry.
“This means the remittance will be low to the Government on power we have collected. The protest has empowered Nigerians to fight back and the threat to lynch officials collecting bill are high. The properties and cables would have to be fixed on whose account?
“Seriously we are at a crossroad but we have signed an agreement to deliver power and that we would do.”
Nigeria Mulls Selling Electricity to Republic of Chad
Nigeria Considers Selling Electricity to the Republic of Chad
The Federal Government is presently considering selling electricity to the Republic of Chad after a request was made by the neigbouring nation.
The federal government-owned Transmission Company of Nigeria disclosed this on Sunday, adding that a meeting was held last week to discuss the possibilities of plugging the Republic of Chad to the nation’s grid.
Nigeria presently exports electricity to three neighbouring nations, Benin, Togo and the Republic of Niger despite struggling with power supply at home and failed to up its power generation more than the current level of 3,000 -4,500 megawatts in recent years.
On Sunday, the total power generated declined to 3,474.5MW as of 6am, down from 3,776.5MW on Saturday, according to the latest data from the Nigerian Electricity System Operator.
The total number of idle plants rose from 8 on Saturday to 11 on Sunday. These idle plants were Geregu II, Sapele II, Alaoji, Olorunsogo II, Omotosho II, Ihovbor, Gbarain, Ibom Power, AES, ASCO and Trans-Amadi.
A total of twenty-seven plants were presently connected to the national grid, which is being managed by the TCN.
“Meeting between Ministry of Power, TCN, and the Chadian Minister of Energy, Mrs Ramatou Mahamat Houtouin, to discuss the possibilities of connecting the Republic of Chad to the Nigerian national grid [was held] on Wednesday, October 21, 2020,” the TCN said on its Twitter handle on Sunday, alongside pictures of the meeting.
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