Nigeria’s exchange rate at the NAFEX window remained stable to close at N385.50 during intraday trading on Tuesday, August 11, 2020. In a similar development, the exchange rate at the parallel market remained stable for a second consecutive trading day on Tuesday as it closed at N475/$1 after exchanging for as high as N485/$1.

READ ALSO: Exchange rate falls across the forex markets as CBN devalues the naira

Market Watch

Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable again against the dollar to close at N475/$1 on Tuesday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Monday, August 10.

READ ALSO: Naira falls to N475/$1, another new low as exchange rate disparity widens

NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N385.50/$1.

• This was the same rate that was reported on the last trading day, Monday, August 10.
• The opening indicative rate was N386.20 to a dollar on Tuesday. This represents a 3 kobo drop when compared to the N386.17 to a dollar that was recorded on Monday.
• The Naira fell to as high as N387 during intraday trading before strengthening to the closed rate of N385.50. It also sold for as low as N380/$1 during intraday trading.

Forex is sold at several prices and at different times during the day.

READ ALSO: Naira gains at the NAFEX window as market liquidity improves

Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window improved significantly on Tuesday, August 11, 2020, as it rose by  705% day on day.

• According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $3.97 million on Monday, August 10, 2020, to $31.96 million on Tuesday, August 11, 2020.
• The forex turnover for the day although improved significantly from the previous trading day, still remained low. This just as dollar supply has remained very weak.
• The average forex sale for last week was about $50.6 million which is an improvement on the $32 million that was recorded the previous week. FX turnover which hit a record low of $3.97 million, recorded a significant improvement but is still a far cry from the over $200 million turnover that was recorded in January.
• Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
• The exchange rate disparity between the official NAFEX rate and the black-market rate is still as wide as N89.5. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). The wide disparity between the 2 rates has created huge arbitrage opportunities for some highly connected individuals.

Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.

The foreign exchange market appears to be getting used to the recent adjustment of the official exchange rate by the Central Bank of Nigeria.

It is a given that 2020 has been one of the most trying years for business owners and entrepreneurs. Some businesses have been crushed completely, with some left barely breathing.

The year started with the announcement of the increased VAT rates, moved on to the coronavirus pandemic and its attendant challenges, the global oil crisis and its implications on national revenue, and just after the easing of the lockdown, the recent increase in fuel price. What do all these connote for Micro, Small, and Medium Enterprises that were already groaning under stiff economic policies and trying to survive the hard days? Your guess is as good as mine.

Taxation in the middle of a pandemic

Amid all of these challenges, the government (through its agencies) trying to widen its tax net and improve revenue, with more duties and tax options being imposed on Nigerians. Just recently, as courier and logistics business operators were still trying to grapple with the implications of the increased NIPOST license fees, when NIPOST and FIRS went on a social media war of words over which agency is constitutionally justified to collect the Stamp Duties.

There is also the recent rental tax announced by the government, a move still being protested by unions who have argued that this pandemic period is a time for the government to give out palliatives, not widen its tax net.

What do the multiple changes and challenges in 2020 mean for MSMEs?

In a recent tweet on his handle, Partner & Chief Economist at PwC Nigeria, Andrew Nevin (Ph.D.) noted that the current circumstances will stifle the entire economy and constrain MSMEs from growing, as it is quite difficult to grow in an economy that is not growing.

“… The complexity and cost of governance and the fiscal crisis is leading to a situation where successful companies in the tax net are subject to more and more taxes, which means they cannot grow and some companies in the formal economy will try to move back to the informal economy, further compounding the issue,” Nevin tweeted.

… the complexity and cost of governance, and the fiscal crisis is leading to a situation where successful companies in the tax net are subject to more and more taxes, which means they cannot grow …

— Andrew S. Nevin, PhD (@nevinomics) August 7, 2020

(READ MORE: CBN lists major constraints affecting businesses, as borrowing rates projected to rise )

Nevin also noted that even though the SMEs employ over 80% of the country’s workforce, the startups in Nigeria hardly get to the point where they are valued at over $1 billion. And this is because the uncertainties of doing business in Nigeria are quite high. Gokada, for instance, had a thriving business environment and was set to break even when the new policy was introduced banning motorcycles across major routes in Lagos. This, he said, shows the uncertainty of the business environment in Nigeria.

… a very good example is GoKada … they invested heavily in Lagos, and the Governor was supportive .. then for perhaps very good reasons security requires that the business is banned … and the GoKada investment has been lost …

— Andrew S. Nevin, PhD (@nevinomics) August 7, 2020

In addition, attracting global capital to scale a unicorn requires more money than are readily available for risky companies in Nigeria. The challenging business environment and the ‘reputation’ associated with the Nigerian flag makes it very hard to get sufficient external capital.

According to him, SMEs entering the formal sector means higher productivity and monitored payment of taxes. Yet, entry into the formal sector is still a choice most small businesses do not want to embrace due to the economic environment.

“… if the cost and complexity of entering the formal sector is too high, then the SME will elect to stay in the informal sector with all the attendant issues, including that they can be subject to harassment by the authorities,” he said.

(READ MORE:Innocent Chukwuma: From selling spare parts to manufacturing an indigenous automobile brand)

He noted that the large SME sector arises partly from unemployment and people rushing into entrepreneurship as a means of livelihood; as well as the difficulties to grow a large and strong business.

“These type of statistics always tell us the sector is huge but it is huge because it is too difficult to grow big companies, so this is not a sign of strength. The best structure for the economy is to have strong large companies that then create room for SMEs to be part of their ecosystem.

“Large companies raise standards (look at quality of Dangote companies for example) and raise productivity and create opportunities for others so large SME sector is sign that business is too difficult because if Nigeria was functioning correctly, we would have 100+ Dangotes in the Economy,” Nevin tweeted.

Explaining the challenges of MSMEs in Nigeria, Chairman and Managing Partner at Ofuani Maidoh & Co, Clement Ofuani, noted that small businesses in Nigeria have more pressing challenges to deal with than the government-imposed fiscal burdens.

Ofuani told Nairametrics in an interview, that the harsh and hostile operating environment makes for a more serious challenge for small businesses.

“Epileptic electricity power supply, inefficient transportation system and insecurity impose more operating costs on MSMEs than the fiscal taxes listed,” he stated.

Ofuani, who served as Senior Special Assistant to President Umaru Musa Yar’Adua on Policy, explained that the Finance Act waives income tax for companies with turnover below N25 million, thus granting fiscal reliefs to most small businesses.

(READ MORE: Nigerian firms expect to start employing again in August – CBN survey)

“The stamp duty on rental agreements and other agreements are additional burdens as is the increase of VAT to 7.5% but the below-the-table taxes paid by MSMEs in form of unreceipted ‘taxes’ to the security personnel along the transportation corridors, and to bureaucrats for normal government services are the greatest frustrations that make Nigeria uncompetitive in global commerce and as an investment destination,” Ofuani stated.

Amid all of these formal and informal challenges, it becomes very difficult for the small start-up to grow beyond its startup stage and become a big company.

The on-going pandemic and recent policies have done little or nothing to address these challenges and despite the palliatives, loans, and support schemes being launched by the government at various levels, most of these small businesses will still find their growth stunted by some of these “unreceipted taxes”.

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increase as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 47,290 confirmed cases.

On the 11th of August 2020, 423 new confirmed cases and 6 deaths were recorded in Nigeria, having carried out a total daily test of 2,355 samples across the country.

To date, 47,290 cases have been confirmed, 33,609 cases have been discharged and 956 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 319,851 tests have been carried out as of August 11th, 2020 compared to 317,496 tests a day earlier.

COVID-19 Case Updates- 11th August 2020,

• Total Number of Cases – 47,290
• Total Number Discharged – 33,609
• Total Deaths – 956
• Total Tests Carried out – 319,851

According to the NCDC, the 423 new cases were reported from 22 states- Lagos (117), FCT (40), Ondo (35), Rivers (28), Osun (24), Benue (21), Abia (19), Ogun (19), Ebonyi (18), Delta (17), Kwara (17), Kaduna (15), Anambra (14), Ekiti (11), Kano (9), Imo (6), Gombe (4), Oyo (3), Taraba (3), Bauchi (1), Edo (1) and Nasarawa (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 16,074, followed by Abuja (4,525), Oyo (2,890), Edo (2,399), Rivers (1,972), Kano (1,643), Kaduna (1,628), Delta (1,613), Plateau (1,584), Ogun (1,497), Ondo (1,324), Enugu (914), Ebonyi (888), Kwara (882), Katsina (746), Borno (690), Abia (663), Osun (652), Gombe (635),  and Bauchi (578).

Imo State has recorded 485 cases, Benue (430), Nasarawa (371), Bayelsa (346),  Jigawa (322), Akwa Ibom (235), Niger (226), Ekiti (193), Adamawa (185), Anambra (156), Sokoto (154),  Kebbi (90), Taraba (78),  Zamfara (77), Cross River (73), Yobe (67), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

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