Nigeria raises interest on unpaid taxes to try to discourage evaders – Reuters

ABUJA May 22 (Reuters) – Nigeria will increase the interest rate on unpaid taxes to discourage companies and individuals from paying late and racking up a larger debt, the finance ministry said on Monday.

The ministry said the measure will take effect on July 1 and that the rate would be five percent over a central bank rate known as the Minimum Rediscount Rate, a benchmark lending rate.

“The review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimize tax evasion and deter late payments,” the finance ministry said in a statement.

Economists have long criticised the low levels of tax in Africa’s largest economy and in March the Abuja government laid out plans to increase its overall tax to GDP ratio to 15 percent by 2020 from 6 percent now.

Among plans, the OPEC member seeks to improve tax collection, targeting an annual tax revenue of 350 billion naira ($1.15 billion) a year and proposes hiking a luxury goods tax to 15 percent from 5 percent. ($1 = 305.4000 naira) (Reporting by Camillus Eboh; Writing by Paul Carsten; editing by Richard Lough)


FG’s Revenue Rises by 20.4% in February – Thisday

Obinna Chima

Nigeria’s gross federally-collected revenue rose by 20.4 per cent in February 2017 to N545.05 billion, as against the N433.86 billion recorded in January 2017, the Central Bank of Nigeria’s (CBN) economic report for February 2017 has shown.

The increase relative to the preceding month level was attributed to the rise in receipts from both oil and non-oil components.

But, the revenue receipt recorded in February, fell short of the 2017 provisional monthly budget estimate of N792.71 billion by 31.2 per cent, according to the report.

Gross oil receipts, at N292.82 billion or 53.7 per cent of total revenue, fell below the provisional monthly budget estimate by 0.6, but was 37.9 per cent higher than the receipts in January 2017. The increase in oil revenue relative to the preceding month reflected the significant rise in receipts from domestic crude oil/gas sales and PPT/Royalties.

According to the report, at N252.24 billion or 46.3 per cent of the total revenue, gross non-oil revenue was below the 2017 provisional monthly budget estimate of N498.14 billion by 49.4 per cent. It, however, exceeded the receipts in January 2017 by 4.9 per cent.

The poor performance relative to the provisional budget reflected the shortfall in most of the components due to the low economic activities in the country during the review period. The estimated federal government retained revenue for the month of February 2017, at N194.38 billion, was below the 2017 provisional monthly budget estimate of N337.48 billion and the receipts in January 2017 by 42.4 per cent and 5.9 per cent, respectively.

Of the total receipt, federation account accounted for 68.5 per cent, while Exchange Gain, FGN Independent Revenue, VAT, Excess Crude, and NNPC refund accounted for 11.6, 6.5, 5.4, 4.7, and 3.3 per cent, respectively.

Similarly, the estimated total expenditure of the federal government, at N599.30 billion, exceeded both the 2017 provisional monthly budget estimate of N522.64 billion and January 2017 level of N552.74 billion by 14.7 and 8.4 per cent, respectively.

Recurrent and capital expenditure, accounted for 64.9, and 30.5 per cent, respectively, while transfers accounted for the balance of 4.6 per cent of the total expenditure.

A breakdown of the recurrent expenditure showed that non- debt obligation was 79.3 per cent of the total, while debt service payments accounted for the balance of 20.7 per cent.

“Increased domestic crude oil production recorded in the last two months continued in the review month as government and other stakeholders sustained effort at curtailing vandalism in the Niger-Delta region.

Consequently, Nigeria’s crude oil production, including condensates and natural gas liquids stood at an average of 1.65 mbd or 46.2 million barrels in February 2017.

“This represented an increase of 0.08 mbd or 5.10 per cent over the average of 1.57 mbd or 48.67 million barrels (mb) recorded in January 2017.

Crude oil export was estimated at 1.20 mbd or 33.60 mb, representing an increase of 7.14 per cent, compared with 1.12 mbd or 34.72 mb recorded in the preceding month.

Allocation of crude oil for domestic consumption remained at 0.45 mbdor 12.60 mb during the review period,” it added.

Furthermore, the report showed that the external sector marginally strengthened in February 2017 following the increase in domestic oil production and international crude oil prices as well as improved inflow through autonomous sources.

Increase in crude oil prices followed the deal reached by the Organisation of Petroleum Exporting Countries (OPEC) members to cut production. However, foreign exchange supply shortages continued to constrain import of raw materials which suppressed domestic production. Consequently, non-oil export receipts declined in the review period.

Also, Foreign exchange inflow through the CBN, at US$2.37 billion, fell by 8.9 per cent, relative to the level in the preceding month, but was 94.4 per cent above the level in the corresponding period of 2016.

The development reflected the significant decline in non-oil receipts due to lack of interbank swap transactions and fall in Treasury Single Account and third party receipts during the review month.

On the other hand, aggregate outflow through the CBN, at US$0.98 billion, declined by 7.3 per cent and 4.6 per cent below the levels in the preceding month and the corresponding period of 2016, respectively.

The development was attributed to the decline in drawings on Letters of Credits (L/Cs), external debt service, foreign exchange special payment (NSA), other official payments and 3rd party MDA transfers.

Overall, a net inflow of US$1.40 billion was recorded, compared with US$1.55 and US$0.20 in January 2017 and the corresponding period of 2016, respectively.

“Total non-oil export earnings, at US$0.31 billion, fell by 7.0 per cent, below the level in January 2017.

This resulted from the 50.0 per cent, 41.6 per cent, 36.4 per cent and 32.3 per cent decline in receipts from transport, food products, agricultural and industrial subsectors, respectively.

The manufactured product and minerals sub-sector, however, grew by 209.8 per cent and 5.0 per cent, respectively, above the levels in the preceding month to US$60.28 million and US$135.13 million,” it added.

Nigeria to auction 110 bln naira in treasury bill – Reuters

LAGOS May 12 (Reuters) – Nigeria plans to auction 110 billion naira ($350 million) of treasury bills on May 17, the central bank said on Friday.

The bank plans to sell 32.43 billion naira of three-month debt, 22.82 billion naira of six-month bills and 55.68 billion naira of one-year notes, using a Dutch auction system. Settlement will be the day after.

The government issues treasury bills twice a month to finance its budget deficit, help lenders manage liquidity and control inflation.

The bank has increased the frequency of treasury bill sales recently to soak up excess liquidity, a move to curb pressure on the local naira currency.

($1 = 314.50 naira) (Reporting by Oludare Mayowa; Editing by Chijioke Ohuocha


Nigeria bond auction raises less than hoped as foreign investors stay away – Reuters

LAGOS May 11 (Reuters) – Nigeria sold fewer bonds at auction than expected as the yields on offer failed to attract foreign investors worried about currency risk, traders said.

The Debt Management Office (DMO) raised 110 billion naira ($318 million) of the 140 billion naira it had targeted.

The auction took place on Wednesday and the results were announced on Thursday.

Traders said subscriptions were low because yields were priced lower than the inflation rate, noting the debt office had pushed to sell more of its 20-year note.

“The low demand for the bonds reflect liquidity in the market and investors seeking higher returns,” one bond trader told Reuters.

Foreign investors have welcomed moves by Nigerian authorities to loosen their grip on the naira but will steer clear of a market they once favoured until they are convinced of currency flexibility.

The debt office sold the 20- and 10-year bonds at 16.29 percent but increased the amount it wanted to raise on the longer maturity.

It raised a total of 100 billion naira, 65 billion from the 20-year bonds. The 5-year bond was sold at 16.30 percent.

The government has been selling bonds below inflation in recent months to curb borrowing costs as it intends to fund half of this year’s forecast budget deficit of 2.36 trillion naira ($7.50 bln) through the local market.

Nigeria issues domestic bonds every month to raise money for government and help the banking system manage its liquidity.

($1 = 314.50 naira) (Reporting by Oludare Mayowa; Editing by Chijioke Ohuocha and Ed Osmond)


Sub-Saharan Africa economic growth to recover slightly in 2017 -IMF – Reuters

DAKAR May 9 (Reuters) – Economic growth in sub-Saharan Africa should recover slightly to 2.6 percent this year after a more than two-decade low in 2016 as commodity exporters faced lower prices, the International Monetary Fund said on Tuesday.

The slight rebound will be driven by a recovery in oil production in Nigeria, higher public spending ahead of elections in Angola, and the fading of drought effects in South Africa, the IMF said in its regional economic outlook.

However, resource-rich Nigeria, Angola and Central Africa’s six-nation CEMAC bloc are still struggling to deal with the losses caused by low oil prices, the IMF said.

“The overall weak outlook partly reflects insufficient policy adjustment,” said Abebe Aemro Selassie, Director of the IMF’s African Department, adding that this was holding back investment.

In non-oil producers such as Ivory Coast, Kenya, and Senegal, growth is expected to remain strong at over 5 percent but vulnerabilities such as rising public debt are starting to emerge, it said.

For a decade, sub-Saharan African economic growth of around 5 percent drew in foreign investment but that is drying up with economic growth now barely keeping up with population growth.

The World Bank also expects growth of 2.6 percent this year, expanding to 3.2 percent in 2018 and 3.5 percent a year later. (Reporting by Nellie Peyton and Emma Farge; Editing by Tom Heneghan)


Sign of Stress: Black Market Is Cheaper Than Official Naira Rate – Bloomberg

Nigeria’s new currency market is showing just how severe the country’s dollar shortage is.

The naira is falling to levels weaker than the black-market rate in a foreign-exchange window set up for international investors and hedge funds last month. It’s a signal of how dysfunctional currency markets have become in Africa’s largest economy amid multiple exchange rates and a host of trading and import restrictions.

Funds including Chicago-based Frontaura Capital, South Africa’s Allan Gray Ltd. and Duet Asset Management Ltd. of London have bought and sold the currency at levels as much as 6 percent weaker than where it trades in back-alley shops.

The exchange window for portfolio investors was set up by the central bank April 24 to ease a crippling scarcity of hard currency by allowing the naira’s value to drop beyond its official rate. While investors welcomed the move, there’s still a shortage of dollars amid persistent concerns that the monetary authority, which backtracked on a pledge to float the currency last year, will manipulate the rate within the window.

“Dollar liquidity is still very tight,” said Ayodele Salami, who manages about $450 million of African stocks as Duet’s chief investment officer. “The central bank has not provided that much foreign exchange in the window. People won’t come in to Nigeria until they know they can get out. It’s a chicken-and-egg situation. The market’s not yet that functional.”

He managed to sell less than $1 million of naira last week at 396 per dollar, which compares with the black-market rate of 391 and the official interbank rate of 315. The black market is typically used by individuals and small businesses for transactions of less than a few thousand dollars in cash. Access to the interbank market is tightly controlled as part of the government’s efforts to keep a lid on inflation, which accelerated this year to 19 percent, the highest level in at least a decade.

‘Some Kinks’

Frontaura, a hedge fund with $120 million of assets, was able to buy a few hundred thousand dollars last week at rates of between 414 and 399 as it sought to repatriate dividends.

The new market “has some kinks to work out,” said Tom Egbert, an analyst at Frontaura. “But at least you can trade naira for dollars. There’s a chance in the coming months that this new FX window leads to a properly functioning FX market.”

Cape Town-based Allan Gray, the largest manager of non-government investment funds in Africa, got a rate of around 405 for dollars it sold to buy Nigerian T-bills yielding as much as 22 percent.

“We’ve been pleasantly surprised at the levels we’ve managed to get,” said Nick Ndiritu, a money manager who helps oversee the $276 million Allan Gray Africa ex-SA Bond Fund.

Tempting Aberdeen

The introduction of the window has tempted Aberdeen Asset Management Plc, which manages about $11 billion of emerging-market assets from London, to buy naira bonds for the first time in about two years. It sold all its local-currency debt in 2015 when Nigeria tried to prevent the naira from weakening amid the crash in the price of oil, its main export.

“We’re talking to banks to re-initiate a small position in the local market,” Kevin Daly, a money manager at Aberdeen, said May 5. “I’m confident we could get something around 400. It seems there is some semblance of a two-way market returning, albeit a small one.”

The new window has a fixing rate, known as NAFEX, which is published once a day. It fell to 378.87 per dollar on Monday, its lowest yet.

BlackRock Inc. switched to using NAFEX on April 24 for valuing naira holdings in its iShares exchange-traded fund that tracks the MSCI Frontier Markets Index, while Allan Gray did the same for its $254 million Africa ex-SA Equity Fund at the end of the month, signaling that investors increasingly view the main interbank rate as irrelevant.

“The new central bank policy’s made it clear that foreign investors now have to go to the NAFEX market,” Salami said. “You’re never going to get the interbank rate.”

Improving economy and contentious Naira value – Guardian

Nigeria has displayed some resilience against the ongoing recessionary headwinds in 2017, with domestic data currently suggesting early signs of a potential recovery in economic growth.

An appreciation in oil prices at the start of the year and increased oil production domestically have positively impacted the nation, while interventions by Central Bank of Nigeria created some form of economic stability.

With the solid Sales Manager Index for April suggesting that the Nigerian economy is slowly creeping out of recessionary territories, the overall outlook could start to appear encouraging. Sentiment may be in the process of turning bullish and the projections of growth hitting 0.8 per cent by the International Monetary Fund should compound to the positivity over a recovery in economic momentum.

The Naira clawed back some losses against the dollar this year, with prices trading around N391 on the black market as of writing. The sharp acceleration of external reserves allowed the Central Bank to increase the supply of foreign exchange in the interbank markets, which consequently narrowed the gap between the official and black market exchange.

Although the Naira has the ability to appreciate further if the CBN continues to supply foreign exchange, questions may be repeatedly asked over the sustainability of this method and the impact it will have on the nation’s external reserves. A situation where oil prices start to depreciate sharply and Nigeria’s reserve diminishes could expose the Nigerian Naira to downside risks.

As the largest economy in Africa embarks on a quest to regain economic stability, the Central Bank of Nigeria should strive to allow market forces to decide the true value of the Nigerian Naira.

While currency devaluation could weaken the Naira considerably in the short to medium term, the long term benefits, which include a potential increase in foreign investor confidence may be advantageous for economic growth.

With the multiple exchange rate system still a grey area that needs to be rectified, speculation could heighten further over the CBN taking some form of action in the future. On the foreign exchange front, repeated Dollar weakness from the receding U.S. rate hike expectations may support the Naira further on the black market exchange.

Taking a deeper look into Nigeria’s macro fundamentals, inflation in March displayed early signs of cooling with consumer prices reaching 17.26 per cent. Expectations have heightened over the nation’s inflation trending downwards this year if the Naira stabilises and such may improve the purchasing power of Nigerians.

An increase in purchasing power may boost the demand for consumer and industrial goods ultimately feeding back to economic growth. Although the Central Bank of Nigeria continues to maintain a passive approach as the nation slowly recovers, a hawkish monetary stance could be adopted by year-end if the upside momentum gains further traction.

External risks such as oil market volatility and the actions of the Federal Reserve may impact Nigeria this year, with much attention directed towards the ongoing OPEC developments.

Oil markets remain gripped by the oversupply concerns with the resurgence of US Shale obstructing OPEC’s efforts to stabilizing the oil markets. Although OPEC has shown optimism over a potential extension of the supply cut agreement reviving the oil markets, price action states otherwise.

From a technical standpoint, WTI Crude has found itself pressured on the daily charts with repeated weakness below $50 opening a path towards $45 in the medium to longer term.

While diversification still remains a dominant theme when focusing on Nigeria, investors have started to direct some attention towards the nation’s inflation, foreign exchange market and other forms of hard economic data.

With expectations mounting of lower inflation, and speculations heightened over the CNB stabilising the foreign exchange market, sentiment towards the largest economy in Africa could receive a further boost.

As the second quarter of 2017 gets underway, markets will continue to observe how the Central Bank deals with the multiple exchange situation and if the CBN officially allows the forces of supply and demand to determine the equilibrium value of the Naira.

• Otunuga is the Research Analyst at FXTM

Nigeria’s Buhari to go to London for more medical tests -spokesman – Reuters

ABUJA May 7 (Reuters) – Nigerian President Muhammadu Buhari will travel to London on Sunday night for follow-up medical tests, handing over power to his deputy Yemi Osibanjo, his office said.

Buhari, 74, returned to Nigeria two months ago after receiving medical treatment in Britain. Officials have refused to disclose details of his medical condition.

The president met on Sunday a group of 82 girls who had been released after being held captive for three years by Islamist militants, but he did not attend a cabinet meeting last Wednesday. That was his third consecutive absence from the weekly meeting chaired by Vice President Yemi Osinbajo.

“The length of the President’s stay in London will be determined by the doctors,” the president’s office said in a statement.

“Government will continue to function normally under the able leadership of the vice president,” it said, adding that there was no cause for worry.

Buhari, a former military ruler, returned home in March after nearly two months’ medical leave in Britain and said he would need more rest and then go back to Britain for follow-up tests.

The president’s office said Buhari had notified both chambers of parliament of his trip, which will put Osinbajo formally in charge.

Osinbajo, a lawyer who is seen as more business-friendly than Buhari, has played an active role in driving policy changes, chairing cabinet meetings during the president’s medical leave.

Officials have sought to avoid a scenario seen in 2010 when political infighting broke out when then-President Umaru Yar’Adua was sick for months.

Osinbajo was already given full powers to act during Buhari’s previous absence, in contrast to his predecessor Goodluck Jonathan who only took over after Yar’Adua’s death in 2010 ended a power vacuum. (Reporting by Ulf Laessing and Felix Onuah; Editing by Angus MacSwan and Susan Fenton)


Nigeria’s cash problem: Multiple exchange rates, wild swings and dollar shortages – CNN

In Nigeria, it can be hard to know just how much the notes in your wallet are worth. The official exchange rate for the country’s currency, the naira, is around 305 to the dollar. But banks lend to each other at a second rate. A third rate is used by international money transfer companies.

Perhaps the most important rate is the one found on the black market (currently 380).

The result is currency confusion: The central bank even maintains separate rates for religious pilgrims who need dollars for trips to Mecca, Rome or Jerusalem.

The naira faces problems that extend far beyond the trouble caused by multiple rates, however.

Here’s a look at the struggling currency:

Oil money

Collapsing oil prices have heaped pressure on the naira.

The country’s central bank maintained a peg of roughly 200 against the dollar until June of last year. But then, as dollar reserves ran dry, the government changed tack and devalued the currency.

The naira immediately plunged 30%.

Since then, the central bank has intervened to keep the currency’s official rate from depreciating further.

Speculation runs wild on the black market, however.

The naira hit a record low against the dollar of around 520 earlier this year, according to Abdullahi Abdulakeem Abdullahi, CEO of currency trading company Abu Ya’asir International.

The exchange rate has since rebounded along with the price of crude.

The price of Nigeria’s oil addiction

Dollar shortage

Nigeria is suffering from a major shortage of dollars.

Why are dollars needed? Nigeria exports plenty of oil, but it relies on shipments from abroad to source basic household items and food.

Nigerian importers need to pay these foreign companies in their home currencies. But dollars and euros are in short supply.

That’s because anyone with foreign currency is trying to hold onto it — a bet that rates will improve in the future.

Most everyone else is forced to rely on the black market.

Tourists, for example, will find their hotels eager to exchange dollars for naira. But want to switch excess funds back into dollars at checkout? No chance.

“If you walk into a bank to exchange dollars or buy dollars you need to ask for the bank manager. That’s why people go to the black market, it’s easier,” said Abdullahi.

Reserves spent

Crude sales account for up to 70% of government revenue and more than 90% of the country’s export earnings.

Oil is also the source of most of the country’s foreign exchange reserves.

Before the crash in oil prices, Nigeria had nearly $43 billion in reserves. By June 2016, efforts by the central bank to support the naira had pushed the figure below $27 billion.

The central bank said in mid-2016 that it would allow the naira to trade freely. But currency traders report the bank has continued to intervene in the market.

Let it float

Economists say the situation won’t be entirely remedied until the government removes currency controls and truly allows the naira to trade freely.

The International Monetary Fund, in its latest report on Nigeria, recommended the government “remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.”

Abdullahi would welcome change. He describes the current system of multiple exchange rates as simply “crazy.”

Nigeria mops up liquidity to support naira as overnight rate eases – Reuters

LAGOS, April 28 (Reuters) – Nigeria sold 107.64 billion naira ($353 million) in treasury bills on Friday in a move to soak up excess liquidity from the banking system and curb pressure on the currency, traders said.

The central bank sold 54.42 billion naira in the 167-day open market operations (OMO) treasury bills at 18 percent and 55.22 billion naira paper at 18.5 percent, traders said.

But the effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to 5 percent on Friday from 30 percent at the start of the week.

Traders said banking system liquidity was 246 billion naira in credit on Friday, up from 206.96 billion naira in deficit a week ago. The money markets were also expecting the monthly government budget disbursement next week.

On the forex market, the naira eased on the black market to 390 per dollar and held steady on the official market at 305.85.

($1 = 304.85 naira) (Reporting by Oludare Mayowa; Editing by Chijioke Ohuocha)