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Experts Fault CBN’s Cashless Policy

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  • 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.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Economy

Citigroup Sees $60 Per Barrel Crude Oil in the Next 12 Months

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Citigroup Says Crude Oil Will Reach $60 Per Barrel in a year

Despite the current economic downturn and the projected second phase of COVID-19, Citigroup, a New-York based financial service company, has said oil price could hit $60 per barrel in the next 12 months.

Citigroup disclosed this on Thursday during a virtual EMEA Media Summit titled – ‘Navigating the Future: What’s Next in a Post-COVID-19 World’.

“After a substantial underperformance in the last six months relative to several other commodities, crude will eventually bounce back to around $60 per barrel over the next 12 months,” Max Layton, European Head of Commodities Strategy, Citigroup said while giving a presentation on the outlook for commodities in the second half of 2020, and into 2021.

This means Brent crude oil would rise by at least 50 percent from the current level of $42 per barrel in the next 12 months.

“It’s going to be a function of the demand and supply but recently we have been seeing a spike in the demand for some of the commodities,” said Atiq Rehman, Head of EMEA Emerging Markets, Citigroup.

“A lot of these economies are heavily commodity-dependent, and perhaps, in the past have been guilty of not diversifying when they come under pressure. I think perhaps, this recent moves will push them to diversify away from simply commodities,” Grant Carson, Head of TRUK And Non-Presence Countries, Citigroup, stated citing Russian as one of the countries that have recorded success in diversifying away from crude oil.

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Economy

Oil Sustains $42 Price Level as OPEC Output Drops to Over Two-Decade Low

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OPEC Oil Output Drops to Over Two-Decade Low in June

Crude oil sustained $42 per barrel price level following a recent survey conducted by Reuters that showed the Organisation for the Petroleum Exporting Countries (OPEC) managed to cut oil production to over two-decade low in the month of June.

According to the survey, OPEC’s 13 members pumped 22.62 million barrels per day in June, 1.92 million barrels per day below May’s revised figure. The lowest since May 1991.

OPEC and allies, together referred to as OPEC plus, had agreed to cut oil production by 9.7 million barrels per day in the month of April to rebalance the global oil market and prop up prices amid COVID-19 pandemic.

OPEC’s share of the 9.7 million barrels per day production cut was 6.084 million bpd but OPEC delivered 6.523 million bpd cut in the month of June despite the inconsistencies from Nigeria, Angola and Iraq.

In June, Saudi Arabia reduced production by 1.13 million barrels per day to 7.53 million bpd. While Kuwait and the United Arab Emirates met their quota but struggle to fulfill the extra cuts.

Nigeria, Iraq and Angola continue to struggle in the month of June. However, their performance improved compared to May as Nigeria attained 77 percent compliance level, up from 19 percent in May.

While Iraq and Angola achieved 70 percent and 80 percent compliance level, respectively. Nigeria and Iraq have pledged to cut more in July despite their economic challenges. Angola, however, said it would not be able to cut extra oil production until October.

Brent crude oil, against which Nigerian oil is measured, rose to $42.48 per barrel on Friday as at 2:58 pm Nigerian time.

UKOilDaily

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Economy

Nigeria Labour Congress Says No Fuel Increase Amid COVID-19 Pandemic

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No Fuel Increase During COVID-19 Pandemic, Says Nigeria Labour Congress

The Nigeria Labour Congress (NLC) on Thursday rejected the new fuel price announced by the Petroleum Products Price Regulatory Agency (PPPRA) on Wednesday.

In a statement issued by Ayuba Wabba, the President, NLC, the labour demanded instant reversal to the old price, saying the move will kill businesses and worsen the nation’s poverty level at a time when nations are looking to ease economic burden of their citizens and mitigate negative impacts of COVID-19.

The PPPRA had raised the value band of Premium Motor Spirit, commonly referred to as Petrol, to between N140.80 and N143.80 per litre on Wednesday because of the recent increase in crude oil prices.

Nigeria Labour Congress argued that “PPPRA contradicted itself when it said that the latest price increase described as an “advisory” was meant to regulate a product that government claims had been de-regulated.

“That this new hike in the pump price of petrol was announced without the approval of the board of the PPPRA and the oversight ministry speaks volume of the arbitrariness and public contempt in the operations of PPPRA. We find this deeply disturbing.

“It is also very embarrassing that the PPPRA boss, while trying to defend the indefensible, appeared to be out of sorts and ready to clutch at any available straws to sell his ice block merchandise to Eskimos.

“Apart from contradicting himself that PPPRA is still trying to regulate a deregulated product through ‘advisories’, the PPPRA went on to exert more nails on the coffin of his polemics when he argued that PPPRA was just like the Central Bank of Nigeria, CBN, and the National Insurance Commission, NAICOM, that would always act to protect the public interest.

“That was how far the niceties went. The rest of the statement by the PPPRA boss was about how PPPRA plans to protect investors and increase their profit.”

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