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

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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.

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Tinubu orders creation of single-digit tax system

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Tinubu orders creation of single-digit tax system

President Bola Tinubu has directed a creation of a single-digit tax system with a maximum of nine taxes for a company or an individual.

Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, disclosed this in Abuja while speaking with the management team of Guinness Nigeria who paid him a visit.

A statement on Wednesday by Dare Adekanmbi, Special Adviser on Media to the FIRS chairman, quoted Adedeji as saying, “The President gave a directive that he wants a single-digit tax in the country, meaning that the maximum number of taxes we will have after the work of the Presidential Committee on Fiscal Policy and Tax Reforms will be nine taxes.”

The statement added that the plan was aimed at having a conducive environment “created for businesses to flourish and grow the economy.”

 

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Naira gains further against dollar

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Naira gains further against dollar

The Naira rose further in the official market on Tuesday, trading at N1,382.95 to the dollar.

According to data from the FMDQ’s official trading portal, the Naira rose by N25.09, or 1.78 percent, from the previous day’s rate of N1,408 versus the dollar.

On Tuesday, total turnover was $245.58 million, up from $222.15 million on Monday.

Meanwhile, at the Investor’s and Exporters (I&E) window, the Naira traded between N1,486 and N1,300 against the dollar.

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The News Agency of Nigeria (NAN) reports that the Central Bank of Nigeria (CBN) had, earlier on Tuesday at its 294th Monetary Policy Committee (MPC), raised Monetary Policy Rate (MPR) by 200 basis points from 22.75 per cent to 24.75 per cent.

CBN governor Yemi Cardoso said that was meant to tackle the nation’s rising inflation.

Naira gains further against dollar

(NAN)

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CBN jacks up interest rate amid soaring inflation

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CBN jacks up interest rate amid soaring inflation

The Central Bank of Nigeria (CBN) on Tuesday raised the interest rate from 22.75 per cent to 24.75 per cent amid soaring inflation.

Governor of the central bank, Olayemi Cardoso, made this known after the two-day Monetary Policy Committee (MPC) meeting held on Monday and Tuesday.

The country’s latest annual inflation rate jumped to 31.70 per cent from 29.90 per cent for last month, fueled by a continuous rise in food prices.

Cardoso disclosed that the MPC voted to adjust the asymmetric corridor around the MPR at +100 to -300 basis points.

He said the committee voted to retain the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and adjust the CRR of merchant banks from 10 per cent to 14 per cent.

The committee also voted to retain the liquidity at 30 per cent.

He said, “Members noted the continued rise in headline inflation driven largely by food prices, because of supply shortages, and high cost of Logistics and Distribution.

“The committee, therefore, was of the view that addressing food insecurity is key to containing current inflationary pressures.”

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