Business News
A look at the attendant impacts of the new Customs Exchange Rate
The Nigerian Customs Service (NCS) announced that the exchange rate for customs duty has been increased from the official benchmark of N306/US$ to N326/US$.
Earlier this month, the Nigerian Customs Service (NCS) announced that the exchange rate for customs duty has been increased from the official benchmark of N306/US$ to N326/US$. This implies that importers and exporters whose products are valued and transacted in dollars now have to pay additional N20 per US$ worth of goods. Notably, the new exchange rate was implemented with immediate effect.
In defense of the customs service, the move has been described as a move to improve Government revenue.
However, the decision to hike the exchange rate has been met with strong criticism from importers and exporters alike. It was reported that the president of Shippers Association of Lagos State remarked that the Government must have been ill-advised on this new policy. According to him, the Government’s move in pursuing revenue generation rather than trade facilitation is fast crippling the economy. Our opinion about this decision is not much different.
The prior exchange rate for customs duty was in line with the CBN’s official rate. However, the new N326/US$ rate creates a new exchange rate in the economy in addition to the NAFEX rate, official rate, parallel market rates, increasing the multiple exchange rate saga. The increasing practice of a multiple exchange rate system in Nigeria will only continue to increase investor’s uncertainty as regards doing business and investing in Nigeria.
[READ ALSO: “Worst is behind us” Research sees improving economy under Buhari second term]
Furthermore, stemming the increasing tide of smuggling through Nigerian borders have garnered attention over the past two years given the negative impact it has had on several businesses. We, however, believe policies that increase the cost of clearing goods at the port would only further encourage smuggling as well as increase corruption among customs officials. Thus, this implies a ripple effect on business activities which have suffered from the impact of smuggling activities.
Among the current administration’s major themes of economic development is diversification of the economy from being oil-focused. This has increased the drive to encourage non-oil exports which have led to the CBN banning access to forex for importers of over 50 products. However, the move to increase the exchange rate on customs duty would have the impact of making Nigerian exports more expensive given many of these exports are valued in dollars.
In addition, we believe the ultimate impact of this new policy would lead to an increase in the prices of commodities given Nigeria imports most of its consumption in different forms. Majority of Nigerian local producers rely on foreign inputs in the production of their goods, thus the cost of production would be impacted negatively.
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Financial Services
CBN grants Mortgage Refinancing Companies approval to refinance Non-member banks
The CBN has expanded access to mortgage financing by removing restrictions on refinancing mortgages earlier imposed.
The Central Bank of Nigeria (CBN), has granted approval to Mortgage Refinancing Companies (MRC), to re-finance non-member banks.
This is contained in a circular referenced FPR/DIR/GEN/CIR/07/056 and signed by Ibrahim Tukur, the Director of Financial Policy and Regulation Department, CBN.
The circular improved on the earlier provisions contained in section 7.3.1.5 which states that “A mortgage refinance company (MRC) shall not, without the prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than twenty times the value of the borrower’s shares with the MRC or 25 percent of its shareholders’ funds unimpaired by losses.”
(READ MORE: Unity bank wants to be seen, but time is running low)
What this means
Based on the provisions contained in the latest circular, MRCs are now free and legally permitted to refinance the qualifying mortgages of banks and all other non-members ( that do not hold equity), subject to meeting all other relevant requirements specified in the framework.
In a nutshell, the restriction on non-member mortgage lenders from refinancing their mortgages with MRCs has been removed.
Why this matters
Prior to the provisions contained in the latest circular, CBN had expressed fears that provisions of section 7.3.1.5 negatively impacts the mortgages sub-sector, as it constrains the MRCS from refinancing the mortgages of non-shareholder banks. Therefore, the new order will help to remove the restrictions already highlighted.
In lieu of this, the latest circular stated that the provision of section 7.3.1 5 is hereby revised to “the MRC shall not, without prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than 25 percent of its shareholders’ funds unimpaired by losses,” the circular reads.
Business News
Nascon Allied Industries Plc: Increase in sale of goods boosts revenues
Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating unit
Nascon Allied Industries Plc recorded a boost from an increase in the sale of goods revenue-generating units, as total revenues increased slightly. The company reported revenues of N21.87 billion in 2020 (9months) – 4.01% increase compared to N21.03 billion in the corresponding period of 2019.
What you should know
Key highlights from 2020 (9months) results
- Revenues increased by 4.01% from N21.03 billion to N21.87 billion YoY.
- Revenues from sale of edible, refined, bulk grade salt; seasoning and vegetable oil, increased to N21.87 billion, +22.53% YoY.
- Other income increased to N12.81 million, +27.43% YoY.
- No revenue was recorded for freight income on the deliveries of salt and seasoning income-generating unit.
- Gross profit increased to N8.96 billion, +74.56% YoY.
- Operating profit increased to N3.64 billion +18.60% YoY.
- Pre-tax profits increased to N3.47 billion, +16.63% YoY.
- Post-tax profits increased to N2.29 billion, +13.27% YoY.
- Earnings Per Share increased to 115 kobo, +12.75% YoY
- Total assets increased to N44.36 billion, +45.79% YoY.
- Total liabilities increased to N32.04 billion, +67.21% YoY.
- Total equity increased to N12.32 billion, +9.35% YoY.
(READ MORE:Dangote’s NASCON Allied Industries Plc moves operation from Apapa)
Bottomline
Nascon Allied Industries Plc recorded a boost from increase in sale of goods revenue-generating unit, but no revenue was recorded for its freight income on the deliveries of salt and seasoning revenue generating-unit.
Though companies have generally recorded decreased revenues in the last three quarters, mostly due to COVID-19; Nascon Allied Industries Plc was able to increase its total revenues and pre-tax profits in the period under consideration.
Tech News
Instagram disables its “Recent” feature
Instagram recently announced it had removed the “recent” tab from hashtag pages on a temporary basis
Instagram disclosed that it would remove the “Recent” tab from its hashtag pages for people in the United States of America.
The social networking and video sharing service stated this on its official Twitter handle. It said it is “doing this to reduce the real-time spread of potentially harmful content that could pop up around the election.”
Starting today, for people in the U.S. we will temporarily remove the “Recent” tab from hashtag pages. We’re doing this to reduce the real-time spread of potentially harmful content that could pop up around the election.
— Instagram Comms (@InstagramComms) October 29, 2020
What you should know
Nairametrics had reported on Instagram’s apology for its algorithm malfunction that led to the flagging of #EndSARS posts as fake.
Instagram has also taken the following measures to ensure a successful November election.
- The registration of 4.4 million votes this year through its flagship platform – Instagram and Messenger.
- Serving as a means of information and tool to people in the US on the electoral process
- The ban of any content that can thwart the success of the election.
(READ MORE:U.S dollar stable amid U.S holiday)
Mark Zuckerberg, the CEO of Facebook, said he was perturbed about the high risks for civil unrest in the US due to the upcoming presidential election.
“I’m worried that with our nation so divided and election results potentially taking days or weeks to be finalized, there is a risk of civil unrest across the country.”
Furthermore, he disclosed on a call while discussing Facebook’s Q3 earnings, that “given this, companies like ours need to go well beyond what we’ve done before.”
Why this matters
The aim of the short-term decision is to decrease the spread of misinformation in the forthcoming US election.
CBN grants Mortgage Refinancing Companies approval to refinance Non-member banks
UACN Property Development Company Plc: Decrease in sale of property stock, others depletes revenue
Nascon Allied Industries Plc: Increase in sale of goods boosts revenues
Instagram disables its “Recent” feature
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Daily Parallel Market Exchange Rate – ₦460/$1
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