Fuel subsidy removal may push more people into poverty, KPMG warns - Newstrends
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Fuel subsidy removal may push more people into poverty, KPMG warns



Fuel subsidy removal may push more people into poverty, KPMG warns

A multinational audit, tax and advisory services firm, KPMG, has predicted that the removal of petrol subsidy in Nigeria could see the inflation rate climb to 30 per cent from June.

Indeed, it warned in its latest report that the precarious situation could push more people into poverty unless compensating measures are put in place with effective communication to mitigate its effects on the people.

Removal of petrol subsidy was one of the highlights of President Bola Tinubu’s inaugural address on May 29. The announcement was followed by increase in petrol price by the Nigerian National Petroleum Company (NNPC) Limited.

The price hike elicited quick reactions from the organised labour which accused the government of failing to engage in necessary consultations before removing the subsidy.

The KPMG report stated that the removal of fuel subsidies would result in a temporary increase in inflation, which was at 22.22 per cent, as at April 2023.

It said its prediction aligned with the World Bank projection that a one-off adjustment would lead to higher inflation in 2023 and 2024, and lower thereafter.

KPMG stated, “Our internal macro model also supports the World Bank’s findings with a forecast of an increase of about six per cent over June 2023 inflation rate to bring it to about 30 per cent.

“In mid-2024, however, all other things remaining constant, and as year-on-year base effects kick in, the pace of inflation will drop significantly, though overall prices of goods and services will remain elevated.”

According to the firm, the capacity of the Central Bank of Nigeria (CBN) to manage inflationary pressures through effective monetary policy would be a major factor in halting the inflationary pressures.

However, KPMG stated that the CBN, like monetary authorities in other parts of the world, was struggling to contain runaway inflation while there were legitimate questions regarding the efficacy of interest rate hikes to contain inflation.

It stated, “However, for gradual or immediate deregulation to be effective, several conditions will have to be met, vis-a-vis establishing a robust and sustainable market for eligible importers to access, on a non-discriminatory basis, sufficient supply foreign exchange liquidity at the same rate for all eligible fuel suppliers.

“This will require significant and far-reaching reforms to CBN’s current approach to foreign exchange management to enhance supply of FX and bring down the parallel market rate.”

The organisation said a robust coordination with the states as well as with the fiscal authorities and the CBN in managing the monetary aspects of deregulation and subsidy removal was vital.

KPMG also warned that without foreign exchange reforms and an elimination of the gap between the official and parallel exchange rate, the reforms would not work.


Why Dangote refinery will sell petrol to Nigeria in Dollars – Executive Director



Dangote Refinery

Why Dangote refinery will sell petrol to Nigeria in Dollars – Executive Director

Dangote Refinery is gearing up to commence production after several delays since it was commissioned in May 2023.

Devakumar Edwin, the Group Executive of Dangote Refinery, disclosed that the facility would begin refining diesel and jet fuel by October 2023, while petrol would commence by November 2023.

Edwin, speaking in an interview with S&P Global Commodity Insights noted that the company is ready and is waiting to receive its first crude to begin refining.

He revealed that the company would begin by producing up to 370,000 barrels per day of diesel and jet fuel in October 2023 and gradually increase production to meet the 650,000 barrels per day by November 30.


He said: “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”

Speaking further, Edwin revealed that oil refined in the facility would be bought in US dollars, not naira. He defended the decision by saying that the refinery’s location is in a free trade zone.

“That Nigerian oil will be purchased in US dollars, not naira as some reports had suggested, because it is located in a free zone on the outskirts of Lagos”

Edwin further noted that the facility will not only be refining Nigerian crude but also crude oil from other countries, stressing that it will not be advisable to be solely dependent on Nigerian crude.

He also revealed that the refinery can process most African crudes, apart from heavy Angolan grades, Middle Eastern Arab Light, and even US light tight oil. “We can even take some of the Russian grades… if the global system opens up to allow us to receive [them].”

Why Dangote refinery will sell petrol to Nigeria in Dollars – Executive Director

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Protests persist in Ghana over economic hardship



Protests persist in Ghana over economic hardship

Protests over economic hardship in Ghana has entered a third day as many people took to the streets of Accra, the country’s capital, to express their anger.

The protesters, some brandishing placards or the national flag, on Saturday voiced their grievances about the soaring cost of living and the scarcity of jobs as they marched on ignoring the close monitor of the riot police.

Ghana, a nation known for its production of gold, oil, and cocoa, is grappling with its severe economic crisis mainly due to escalating public debt.

To prevent protesters from reaching Jubilee House, the presidential residence, the police erected barricades.

Organizers from Democracy Hub have declared their intention to occupy this symbolic location.

On the first day of the three-day protest, the police reported that 49 individuals were arrested for participating in an unauthorised gathering and violating the Public Order Act.

Although the government entered into a $3bn three-year loan agreement with the International Monetary Fund in May, critics say the authorities have not done enough to assist those struggling to make ends meet.

According to the World Bank, Ghana’s economic growth is projected to retard to 1.5% this year, down from 3.1% in 2022 and remain depressed in 2024 at 2.8%.

It however predicted that the economy could recover to its potential growth by 2025.

In 2022, a convergence of internal disparities and external disruptions resulted in significant macroeconomic difficulties for Ghana.

The year was characterized by the devaluation of the currency, escalating inflation, and a sharp decline in investor trust.

Inflation for August declined from 43.1% in July to 40.1%.

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Zenith, Access, GTB, 8 others earn N72.7bn from account maintenance



Zenith, Access, GTB, 8 others earn N72.7bn from account maintenance

A total of eleven banks listed on the floor of the Nigerian Exchange generated N72.7bn from account maintenance charges in the half year of 2023.

Data obtained from the half-year financial statements of these listed commercial banks on the Nigerian stock market showed this figure.

Zenith Bank, Access, GTB are clearly the top three banks that raked in the largest amount from the account maintenance fee in the first half of the year, according to a report by Nairametrics on Sunday.

The three banks are followed by United Bank for Africa, First bank and First City Monument Bank.

The remaining five banks on the list are Stanbic IBTC, Sterling Bank, Fidelity Bank, Wema Bank and Unity Bank.

Zenith Bank generated a sum of N21.02bn from account maintenance, representing 28.91 per cent of the total income of the 11 banks.

Access Holdings recorded N13.36bn, a 10.97 per cent year-on-year increase in its account maintenance income.

GTCO generated N10.48bn, which is 11.08 per cent year-on-year increase over N9.44bn recorded in the half-year 2022.

UBA generated N9.64bn from account maintenance income between January and June 2023, representing a 46.11 per cent increase compared to N6.59bn recorded in the corresponding period of 2022.

First Bank of Nigeria’s account maintenance income was put at N5.19bn. This is a decline of 43.5 per cent from N9.17bn generated in half-year 2022.

FCMB came sixth on the list with N3.85bn in revenue from account maintenance, which is 16.3 per cent higher than N3.32bn recorded in 2022.

The other five banks are Stanbic IBTC –N2.64bn; Sterling Bank – N2.39bn; Fidelity Bank – N1.76bn; Wema Bank – N1.63bn and Unity Bank – N745m.

The amount generated from account maintenance charges in the half-year of 2023 represents a 7.44 per cent increase compared to N67.69bn recorded in the corresponding period of 2022.

The fees are charged on current accounts only regarding debit transactions to third parties and debit transfers/lodgements to the customer’s account in another bank.

Banks’ earnings from account maintenance charges may be seen as low compared to other revenue streams.

A directive by the Central Bank of Nigeria, on bank charges to commercial banks allows them to charge their customers a “negotiable” N1 per mille.


This means banks can charge N1 per N1,000 debit transactions on current accounts. Banks’ account maintenance charges come in the form of COT ( as Commission on Turnover) which is a charge levied on customer withdrawals by their banks.

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