Petrol price may go up in just a matter of weeks, even as Nigerians have been advised to brace up for the negative effects such a development would have on the economy.
The impending petrol price hike was disclosed by Mr Birsmarck Rewane, the Managing Director of Financial Derivatives Company Limited, who spoke recently at the Lagos Business School Breakfast Session in Lagos.
According to him, the impending hike in petrol price is due to the fact the fuel subsidy has drained the Federal Government’s revenue. Note that The World Bank estimated Nigeria’s total subsidy bill in 2018 at N731bn.
“A gradual reduction in subsidy payments is anticipated. Only N305bn set aside for under-recovery in 2019 budget; expect an increase in the pump price of fuel. 40 per cent shortfall in provision for subsidies (under-recoveries) points to possible price increases.”
The economy needs a boost: Speaking further, Rewane noted that Nigeria has one of the lowest tax to Gross Domestic Product ratios at 5.3 percent, describing the 2019 budget as counter-cyclical. The economy is in dire need of a boost, he said.
He said with expenditures much higher than sustainable revenues, the fiscal deficit had widened by 2.15 per cent to N1.9tn, adding that the supplementary budget could not be avoided.
“Oil revenues are projected to decline due to the impact of OPEC quota on Nigeria’s oil output level.” -Rewane
The solution is IGR: Commenting on funding for the new minimum wage and the impact on states, Rewane recommended that Internally Generated Revenue could be the only solution.
“States get 85 percent of Value Added Tax, as well as other statutory allocations, in addition to internally generated revenue. Personnel expenses of most states exceed IGR. So, there is either an expense problem or a revenue problem. For social reasons, headcount rationalisation may be farfetched. But labour optimisation will help boost productivity.
“IGR remains key to the funding of the new minimum wage. Funding through the statutory allocation (Federal Accounts Allocation Committee) is unsustainable.”
He said increasing VAT will provide temporary succor, complemented by the improved tax administration.
Privatization and equity sale could also help: Bismarck further pointed out other measures that include privatisation, partial sale of equity across state-owned enterprises, liberalisation, commercialisation, amongst other measures.
Zero MPR rate: Mr Rewane also stated that the cut in the Monetary Policy Rate, also known as the benchmark interest rate, had no impact on investment, output, and savings in April.
Recall that the Monetary Policy Commission of the Central Bank of Nigeria had, in March, cut the MPR to 13.5 percent from a record high of 14 percent. Despite this, credit facility to the private sector reduced last month.
In the meantime, Rewane disclosed that “there is a possibility of another 25 basis point cut.”
Paypal’s Venmo now permits cryptocurrency trading
Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
Venmo, a mobile payment service owned by PayPal has announced that it has started allowing users to buy, hold and sell cryptocurrencies on its app. Just like PayPal, Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, and users can carry out transactions with as little as $1 on the app
Founded in 2009, Venmo has over 70 million users and it is one of the most popular payment channels in the US. The payment platform processed around $159 billion in payments last year.
Since the app functions like a social network, adding cryptocurrency will offer a more user-friendly feel for people who love buying and selling crypto.
As bigger companies show more interest in cryptocurrency, there will be wider adoption of virtual currencies in future. Venmo is the latest payment app that is offering support for cryptocurrency on its platform.
Paypal, the parent company of Venmo is one of the most active companies in the crypto space as it allows users to buy, sell and hold cryptocurrencies in their digital wallets. Paypal users can also spend their coins at millions of merchants globally.
Crypto on Venmo is enabled through PayPal’s partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.
What they are saying
Darrell Esch, Venmo’s Senior Vice President and general manager said “Our goal is to provide our customers with an easy-to-use platform that simplifies the process of buying and selling cryptocurrencies and demystifies some of the common questions and misconceptions that consumers may have.”
ABCON asks CBN to check impact of cryptocurrencies on diaspora remittances
The association also noted that the apex bank needs to address other issues driving the patronage of cryptocurrency exchanges for remittance transfers.
The Association of Bureau De Change Operators of Nigeria (ABCON) has asked the Central Bank of Nigeria (CBN) to introduce measures that will neutralize the positive effects of cryptocurrencies as a channel for diaspora remittances.
This is to redirect diaspora remittances away from cryptocurrency exchanges to official channels and also protect such against potential disruptions.
This call was made by ABCON during its Quarterly Economic Review for the first quarter of 2021 where it commended the CBN for the N5/$ rebate scheme introduced to encourage diaspora Nigerians to use official channels to remit their funds.
However, the association noted that the apex bank needs to address other issues driving the patronage of cryptocurrency exchanges for remittance transfers.
What ABCON is saying in their statement
The association in its statement said, “It is noteworthy that public acceptability for cryptocurrency exchanges are rising which could be quite accountable for the wide drop in diaspora inflows to Nigeria. Insecurity in the country is giving it greater prominence as investors and citizens are finding Cryptocurrency a safe haven for their wealth in case of any eventuality.
In most Emerging Markets Bitcoin transfers surged last year, as the pandemic exposed the cheaper and more efficient digital remittance services. Migrants sending money across borders to their families prefer the minimal transaction costs of cryptocurrency exchanges against the exorbitant costs of traditional money transfer companies like Western Union.”
According to ABCON, “Cryptocurrency transactions are faster than the conventional transfers, which require passing through banks reliant SWIFT, the sluggish, half-century-old interbank messaging system that handles cross-border payments.
These exchanges override the political complications of official channels. The global reach of cryptocurrencies avoids the inflation risk inherent to official currencies, especially in politically unstable countries reliant on fickle foreign investors.
Thus, while we commend the efforts of CBN in introducing the package of Five Naira for One Dollar transfer, it can be seen from the analysis above that the challenges exceed just non-payment of foreign currency by the IMTCs and the exchange rate. Strategies that satisfy the most sensitive of these advantages of Cryptocurrency exchanges must be introduced to redirect flows to the official channel.”
ABCON also expressed concerns over the country’s huge unemployment rate, urging the government to apply radical approaches with the use of both conventional and unconventional economic and political tools to redress the trend.
What you should know
- It can be recalled that the apex bank had about 2 months ago, warned the Deposit Money Banks, Non-Financial Institutions and other Financial Institutions against doing business in crypto and other digital assets.
- The CBN directed financial institutions to immediately close the accounts of persons or entities transacting in or operating cryptocurrency exchanges, warning of severe regulatory sanctions in the event of any breach of the directive.
- The Securities and Exchange Commission (SEC) had a few days ago, revealed that it is working with the CBN for a better understanding and regulation of cryptocurrencies in the country.
Nairametrics | Company Earnings
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- 2020 FY Results: Unity Bank Plc posts profit after tax of N2.09 billion.
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- Unilever Nigeria Plc set to hold Annual General Meeting on 6th of May.
- UBA Plc posts profit after tax of N38.16 billion in Q1 2021.
- PZ Cussons Nigeria Plc appoints Ifueko Okauru as Independent Non-Executive Director.