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We Won’t Pay VAT Again from June 14 — Airline Operators

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Domestic Airlines
  • We Won’t Pay VAT Again from June 14 — Airline Operators

Airline Operators of Nigeria, the umbrella body of airlines in the country, has said its members will no longer pay Value Added Tax with effect from June 14.

The group said on Thursday that the decision was taken after deliberations by the chief executive officers of airlines in the country.

It said, “The AON has resolved that effective June 14, 2018, its members shall cease to make VAT remittances as doing so is unfair, as some airlines are paying, while some other airlines are not paying domestic VAT charges.

“Also, Nigerian domestic airline travel is the only mode of transportation paying VAT in the country today as road, rail, marine and international airlines do not pay.”

The group lamented that domestic airline travel was the only mode of transportation that was subjected to the payment of VAT, adding that its imposition was creating a suppression of domestic airline travel demand, resulting in the carriers not being able to optimally utilise their aircraft assets and more importantly, creating a market distortion.

It said, “The AON’s position is that the VAT on airline ticket sales for domestic carriers must be removed completely forthwith as road transportation, rail, marine and international air travel carriers are not subjected to VAT.

“Moreover, a situation whereby some airlines are paying VAT, while some other privileged airlines are not paying VAT, and the VAT which we pay is being used to subsidise our competitors against those that are making payment is unfair.”

The AON also stated that the Federal Government’s plan to float a national carrier was counterproductive and against the interest of private entrepreneurs.

The group added, “The AON is at a loss as to the relevance and need of a national carrier at this point in time in the history of the nation. While we are not averse to the government providing a conducive operating business environment and a level playing field for the establishment of a private sector driven flag carrier, the idea of using taxpayers’ money to float a ‘national carrier’ in 2018 is not only counterproductive, but inimical to the overall interests of the present crop of private entrepreneurs.

“In the overall scheme of things, the ‘national carrier’ can only result in a huge distortion to the current market and will be a huge drainpipe to the government’s treasury.

“In this regard, therefore, we urge the Federal Government to provide clarity on the agenda, whether it’s for job creation or for profit, as well as steps being taken in the establishment of this ‘national carrier’, especially when viewed against the background that the Minister of State Aviation has indicated that this airline will commence operations on December 24, 2018.”

The operators said the national carrier model was no longer practicable worldwide as it was in the 1970s, adding that 80 per cent of the airlines in Europe were government-owned airlines, and 98 per cent had been privatised.

They urged the Federal Government to review its policies on the matters and address the concerns raised in the position paper presented to the Presidential Task Force on Aviation by the group.

The AON added, “Over 50 indigenous scheduled airlines had existed in this country but only seven are flying today. The mortality rate of airlines in Nigeria is exceedingly high. The owners of these defunct airlines have all been success stories in other business endeavours but not in aviation.”

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

Investment

Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies

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Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies

Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.

According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.

The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.

It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.

“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”

Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.

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Economy

Crude Oil Rises to $43.1 Per Barrel on Production Cuts Extension

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  • Crude Oil Hits $43.1 Per Barrel Following OPEC’s Production Cuts Extension

Brent crude oil, against which Nigerian oil price is measured, rose by 1.25 percent on Monday during the Asian trading session following OPEC and allies’ agreement to extend crude oil cuts to the end of July.

OPEC and allies, known as OPEC plus, agreed to extend production cuts of 9.7 million barrels per day reached in April to July on Saturday.

In the virtual conference, delegates agreed that members, including Nigeria and Iraq presently struggling to attain a 100 percent compliance level must keep to the agreement or be forced to do so in subsequent months.

Nigeria, Iraq and others failed to keep to the cartel’s agreement in May after reports show that Nigeria only managed to attain a 19 percent compliance level during the month while Iraq struggled to attain just 38 percent in the same month.

Russia and Saudi Arabia, the two largest producers of the group, warned members to stick to the agreed quota if they want to rebalance the global oil market.

While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still think they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.

The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.

Earlier on Monday, Brent crude oil hits $43.1 per barrel, more than a month record-high, before pulling back slightly to $42.83 per barrel.

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Economy

Gold Dips by 2 Percent on Better Than Expected Job Report

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  • Gold Dips by 2 Percent on Better Than Expected Job Report

Gold prices declined by 2 percent on Friday following a better than expected US non-farm payroll report.

The report showed an increase of 2.5 million payroll numbers against a decline of 7.5 million predicted by many experts.

The surprise number boosted investors’ confidence in US recovery as many dumped their haven investment (gold) for the stock market.

“We had significantly stronger-than-expected U.S. payroll numbers – an increase of 2.5 million versus an expectation of a decline of 7.5 million – that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.

Spot gold immediately declined by 1.9 percent per ounce to $1,678.81 while the U.S. gold futures slid 2.6 percent to settle at $1,683.

Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.

The surprise didn’t stop there, US Dow Jones was up 614 points despite the protest going on the US and US-China tension.

Also, NASDAQ rose by 29 points while the S&P index added 50 points increase.

Note: Investors generally increase their investments in gold and other haven assets during a crisis to avert risk exposure and do the opposite once they sense a better economy.

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