Nigeria's socio-economic conditions worsened despite $3.5bn IMF loan - Report – Newstrends
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Nigeria’s socio-economic conditions worsened despite $3.5bn IMF loan – Report

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  • Backs fuel subsidy removal, CBN reform policies

International Monetary Fund (IMF) says despite the $3.5bn loan it gave Nigeria to cushion the effects of COVID-19 on the citizens and businesses in April 2020, socio-economic conditions of the people have worsened.

It stated this in a report published on Monday on the Article IV Consultation for 2020, which ended on January 27, 2021.

It stated, “Nigeria’s economy has been hit hard by the COVID-19 pandemic. Following a sharp drop in oil prices and capital outflows, real GDP is estimated to have contracted by 3.2 per cent in 2020 amidst the pandemic-related lockdown.

“In April 2020, Nigeria received IMF emergency financial assistance of $3.5 billion under the Rapid Financing Instrument to help cushion the impact of the pandemic.”

It added, “Headline inflation rose to 14.9 per cent in November 2020, a 33-month high, reflecting core and food inflation increases emanating from supply shortages due to the lockdown effected to curb infections alongside, the land-border closure and continued import restrictions.

“The unemployment rate reached 27 per cent in the second quarter of 2020, with youth unemployment at 41 per cent.

“External vulnerabilities due to lower oil prices and weak global demand have increased, with the current account remaining in deficit in the first half of 2021.”

It, however, commended government for acting swiftly to adopt a pandemic-related support package equivalent to 0.3 per cent of GDP in the 2020 revised federal budget despite limited fiscal space.

At the last Monetary Policy Committee (MPC) meeting, Central Bank of Nigeria (CBN) admitted that the 0.3 per cent of GDP COVID-19 stimulus package was abysmally little and said it would provide more.

IMF directors stressed the need for urgent policy adjustment and more fundamental reforms to sustain macroeconomic stability and lift growth and employment.

The fund welcoming the removal of the fuel subsidy and steps to implement cost-reflective tariff increases in the power sector, “stressed the need for significant revenue mobilisation to reduce fiscal sustainability risks, relying initially on progressive and efficiency-enhancing measures with higher tax rates awaiting a more sustained economic recovery.”

The IMF directors highlighted the need for improved social safety nets to cushion potential negative impact on the poor.

They recommended gradual and multi-step approach to establishing a unified and clear exchange rate regime with the near-term focus on allowing for greater flexibility and removing the payments backlog.

“Directors observed that the accommodative monetary stance remains appropriate in the near term, although tightening may be warranted if the balance of payments or inflationary pressures were to increase.

“In the medium term, the monetary policy operational framework should be reformed and central bank financing of budget deficit phased out in order to reduce inflation.

“While welcoming the resilience of the banking sector, directors called for continued vigilance to contain financial stability risks.”

They also noted that COVID-19 debt relief measures for bank clients should remain time-bound and limited to those with good pre-crisis fundamentals.

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CBN raises commercial banks’ capital base to N500bn

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CBN raises commercial banks’ capital base to N500bn

The Central Bank of Nigeria (CBN) has increased the minimum capital requirements for commercial, merchant and non-interest banks.

The CBN increased the capital base for commercial banks with international licences to N500 billion, while national and regional financial institutions’ capital bases were fixed at N200 billion and N50 billion, respectively.

This was announced in a statement on Thursday, noting that the increase was due to prevailing macroeconomic challenges and headwinds.

The statement signed by Haruna Mustafa, director, financial policy and regulation department at the CBN.

It said the upward review would enhance the banks’ resilience, solvency and capacity to continue to support the growth of the Nigerian economy.

Also, the CBN raised the merchant bank minimum capital requirement to N50 billion for national licence holders.

The financial regulator said the capital base for national and regional non-interest banks is N20 billion and N10 billion, respectively.

To meet the minimum capital requirements, the CBN advised banks to consider the injection of “fresh equity capital through private placements, rights issue and/or offer for subscription”.

The CBN also suggested merger and acquisition (M&A), as well as upgrade or downgrade of licences.

“The minimum capital specified above shall comprise paid-up capital and share premium only. For the avoidance of doubt, the new capital requirement shall not be based on shareholders’ funds,” it stated

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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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