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IMF urges Nigeria to expand tax base, streamline currency policy

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Nigeria should widen its tax revenue base to finance growth-enhancing upgrades to the nation’s infrastructure and social programs, said a senior International Monetary Fund official.

While the administration of Muhammadu Buhari has made progress in addressing issues such as corruption, the West African country needs to pick up its reform efforts if it wants to boost economic growth, said Abebe Aemro Selassie, director of the Africa department at the Washington-based fund.

“To address the education, health, road, electricity and other infrastructure needs they have, they have to have a much higher revenue base than they do now,” said Selassie. “There is tremendous scope to broaden tax bases,” he said, citing property tax as an example.

Nigeria should also move to a single unified foreign-exchange rate, Selassie said in an interview in Washington. In addition to the official exchange rate for the naira, Nigeria offers several different foreign-exchange windows, including one for investors and exporters.

‘Right Direction’
“They have reduced the gap between the parallel market and the official market significantly, so that’s a movement in the right direction, but there are still several foreign-exchange rates,” he said. “Even though the gap is narrower, the country would strongly benefit from having a unified and liquid single foreign-exchange market.”

Nigeria was one of several African oil exporters hit hard when crude prices crashed in 2014.

Now with oil prices rebounding, Nigeria’s recovery is helping drive a “modest” upswing in sub-Saharan Africa, the fund said Tuesday in its latest economic outlook for the region. But turning the recovery into a prolonged period of strong expansion requires bolder steps to support private investment and lift potential growth, the IMF said.

The fund projects Nigeria’s economy will grow 2.1 percent this year and 1.9 percent in 2019. The government has been battling an Islamic insurgency in the country’s northeast since 2009 that’s diverted resources to security from public programs.

Sub-Saharan Growth
The IMF predicts sub-Saharan African gross domestic product will expand 3.4 percent this year and 3.7 percent in 2019. While regional growth has picked up, it remains well below the pace of expansion before the global financial crisis.

About 40 percent of low-income countries in the region are “in debt distress or high risk of debt distress,” said the IMF. Delays by oil exporters in adjusting to the crude shock have left some with high debt levels, said the fund, which lends to nations with balance-of-payments shortfalls.

Selassie noted the region’s debt levels have recently risen from a relatively “low base.” But it’s still a cause for concern, because countries in the region don’t have ample capacity to service their debts, he said.

Fiscal and monetary policy in South Africa, another major economy in the region, is well calibrated, Selassie said. However, the government of President Cyril Ramaphosa should step up efforts to open markets such as telecommunications services and implement labor-market reforms to make it easier for young people to work, he said.

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NCC seals firm, bank in Uyo, Calabar, for violating regulations

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For failing to comply with the guidelines for the deployment of 5.4GHz frequency band, some companies in Uyo, Akwa Ibom, and Calabar, Cross River states have had their premises shut down by the Nigerian Communications Commission (NCC).It is a criminal offence to provide service in frequency band not validly assigned or licensed by the NCC, as provided under Section 121, and 122 of the Nigerian Communications Act, 2003.

The NCC Enforcement team took Compliance Monitoring to the states on April 26 and 27, respectively, to enforce compliance with its Guidelines for the Deployment of Service in the 5.4GHz Frequency Band.The Commission, based on the Guidelines issued a public notice dated April 3, warning unlicensed operators and the general public to vacate illegal transmission in the 5.4GHz frequency Band within 14 days.

The deadline for vacation ended on April 17, consequently the Enforcement team visited Hot Minet Services located on 80 MCC Road, Calabar, and United Bank for Africa (UBA), on Udo Udoma Banking Layout, Uyo, for failing to comply with the Guidelines and the public notice issued by the Commission.

Accordingly, the Enforcement team led by the Director, Compliance Monitoring and Enforcement Department, NCC, Efosa Idehen, shut down the operations of Hot Minet Services. The team also confiscated the non-type approved equipment used by the Company in providing the illegal services. The team also directed Hot Minet to ensure that it obtains the requisite licence before its premises can be unsealed.

Also, the Enforcement team also came hard on UBA for illegal deployment of service in the said 5.4GHz frequency band. Consequent upon the enforcement action, the equipment (radio) used in the provision of the service was removed and held in custody of the Commission. More so, the Enforcement team had to order the arrest of some officials of the Bank for their resistance.

The punishment for the offence is a fine for the initial fee for the relevant licence; a fine not exceeding 10 times the fee for the relevant licence; imprisonment for a term not exceeding one year; or both fine and imprisonment.The suspects have been handed over to the relevant security agency for discreet investigation and possible prosecution.

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‘Nigeria’s economic recovery poised to build momentum in Q2’

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Market optimism over the recovery of Africa’s largest economy has increased steadily throughout the first trading quarter of 2018.

The combination of appreciating oil prices, foreign exchange stability and easing inflationary pressure has boosted confidence in Nigeria’s economy. With the nation’s GDP hitting 0.82% in 2017 and predicted to register a positive trajectory amid strengthening domestic demand, the outlook continues to look highly encouraging.

The improving macroeconomic conditions and ongoing efforts to diversify away from oil reliance are likely to attract foreign investors, further fueling economic growth.

It is fair to suggest that Nigeria’s stabilizing fundamentals may encourage the Central Bank of Nigeria to cut interest rates sooner than anticipated. With oil prices appreciating, domestic production improving and foreign exchange reserves rising to $46 billion, most of the ingredients are in place for the CBN to act.

There is a strong suspicion that inflationary pressures need to ease further into the realm of single digits before the central bank loosens its monetary policy. An interest rate cut has the ability to stimulate the current recovery because it encourages consumer borrowing and businesses to increase investments.

While an interest rate cut in April may be slightly premature, the CBN could surprise markets near at the end of Q3 if inflation continues to decline.

Although domestic economic conditions continue to improve, investors must not overlook external risks that may impact Nigeria’s current recovery. Oil price volatility remains a key risk for Nigeria despite the nation’s ongoing efforts to diversifying to other sustainable sources of growth. With oil accounting for roughly 90 percent of exports and 80 percent of public revenues, a sharp depreciation in prices could easily spell trouble for Nigeria.

While WTI crude has followed a positive trajectory in recent months amid expectations of demand increasing and optimism over OPEC’s production cuts, the upside may face headwinds. It must be kept in mind that soaring production from US Shale remains a threat to higher oil prices and is likely to result in a selloff medium to longer term. While Nigeria could continue enjoying the benefits of oil trading around $64, the clock is ticking as oversupply remains a market theme.

In addition to oil prices, attention should also be focused towards the Dollar’s performance and US rate hike expectations. Higher US interest rates have the ability to trigger capital outflows from emerging markets and weaken EM currencies with the Naira falling into the category.

While the Naira may be slightly bruised by capital flight in the event of higher US interest rates, Nigeria’s rising foreign exchange reserves and rising oil prices could cushion the impact.

The Naira witnessed stability against the Dollar in March with prices trading around N360 on the parallel markets and N304 on the official market. While the local currency’s appreciation may be attributed to intervention by the CBN, the improving sentiment towards Nigeria has also played a leading role.

The ongoing trade drama between the United States and China is unlikely to have a direct impact on Nigeria’s economy. Indirectly, the uncertainty and anxiety over a potential global trade war could spark risk aversion consequently impacting emerging markets like Nigeria. A scenario where foreign investors remain guarded and maintain a safe distance from risk, could weigh on Nigeria in the recovery stages.

As we enter the second quarter of 2018, much focus will be directed towards domestic monetary policy, inflation and external risks that could impact Nigeria’s positive momentum. Easing inflationary pressures remain one of the most encouraging aspects for Nigeria as consumer prices hit $14.33 in February. Not only will falling inflation boost the rate of return for savers and increase disposable income in Nigeria, it creates an opportunity for the CBN to cut interest rates- ultimately stimulating economic growth.

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New CBN deputy govs, MPC members assume office

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The new Deputy Governors of the Central Bank of Nigeria (CBN), Mrs Aisha Ahmad, and Mr Edward Adamu have formally assumed office.

Their resumption is following the confirmation of their appointments on March 22 by the Senate.

According to a statement signed by the bank’s acting Director, Corporate Communications, Mr Isaac Okoroafor on Wednesday in Abuja, Prof Adeola Adenikinju, Dr Robert Asogwa and Dr Aliyu Sanusi also commenced their tenure as Members of the Monetary Policy Committee (MPC).

Okoroafor said CBN Governor, Mr Godwin Emefiele congratulated them on their respective appointments and subsequent confirmation by the Senate.

Emefiele expressed gladness that the bank now had a full complement of Deputy Governors to enable it operate optimally as well as the required quorum to enable the MPC hold its statutory meetings for formulating monetary and credit policy.

He, therefore, charged the Deputy Governors and MPC members to bring their experience to bear in the discharge of their new responsibilities, stressing that much was expected of them.

According to Okoroafor, the two Deputy Governors and the three new MPC members later took their Oaths of Office, administered by the acting Director, Corporate Secretariat at the CBN, Mrs Alice Karau.

Thereafter, the Director, Monetary Policy Department, Mr Moses Tule, read out the Charter of the MPC to new members and then they retired into their first MPC retreat.

The retreat is in preparation for the first MPC meeting for 2018 scheduled to hold on Tuesday, April 3 and Wednesday, April 4.

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AKS Youths Thrilled by Prospects of Re-emerging ALSCON

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Youths of Ikot Abasi Local Government Area, Akwa Ibom State, are excited at the projections of fresh job opportunities, following the plan by the Aluminium Smelter Company of Nigeria, (ALSCON), located in the area, to commence full operations after Russian Aluminium Company, RUSAL and BFIG settled their contentious bid controversy out of court.

NDV learned that the process to privatise ALSCON started since 2001, but the highest bidder, BFIG, in2004, dragged the Bureau of Public Enterprise, BPE and RUSAL to court. It was gathered that the Federal Government subsequently gave RUSAL, the second highest bidder, a go-ahead after BFIG failed to pay the money it offered to take over the company.

Immediate past president of Ukpum Ete Clan, who expressed confidence in RUSAL restoring ALSCON to its former glory, said: “When our people heard that the Federal Government had intervened in the lingering court matter between BFIG and RUSAL towards the ending of 2017, we were very excited.

Even foremost socio-cultural groups like Mboho Ikot Abasi were optimistic that once ALSCON commenced full operations, Ikot Abasi will come alive again.” Outstanding past “When ALSCON was functional, there were lots of job opportunities and our people, especially youths, benefitted a lot from the company. Apart from the constant and free electricity supply enjoyed by our communities, there were programmes for youths of the five clans in Ikot Abasi, including payment of certain amount of money to each clan for youth development. “The Americans that managed ALSCON then did a lot for us and that was responsible for the peaceful coexistence between the company and its host communities of Ikot Abasi,” he said. RUSAL wins hearts His words: “We have also observed that since RUSAL took over ALSCON before the court case, they have demonstrated that they would toe same path. For us, it is a good sign that once they start full operations, Ikot Abasi people will smile again. “And for convincing RUSAL and BFIG to settle out of court, we the youths cannot thank the Federal Government enough for that effort. We specially thank this administration for considering ALSCON among nonfunctional industries in the country,” he added.

Similarly, Chairman Ikot Abasi Clan Youth Leaders’ Forum, Akparawa Mfreke Usoro said: “For many years now, nothing had been happening in Ikot Abasi. No development, no job opportunities, the youths are idle because they have nothing to do and that is why there is rise in criminality. “And what Ikot Abasi youths want now is for RUSAL to start production immediately; no more court matter or anything that will bring problem or impede development of our communities. And I believe that RUSAL will accommodate our youths very well,” he said. No more litigation An activist, Innocent John, said: “I want to advise that RUSAL and BFIG resolve the matter once and for all because we do not need any more court case. We need progress and development in Ikot Abasi We value ALSCON so much because it is the only Federal Government presence in our communities.”

 

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