Business News
Devaluation’s drum beats louder
Africa’s biggest economy is again reacting to this crisis the same way it did in the past as she failed to stop its currency from devaluing
Half a decade after Nigeria failed to stop its currency from devaluation, Africa’s biggest economy is again reacting to the crisis the same way it did in the past.
It worked out poorly then as oil revenues, which accounted for a large junk of foreign-exchange earnings, failed to rise in the time leading to a depletion in the Central Bank of Nigeria’s (CBN) firepower (foreign reserves) to defend the naira. It is most likely to happen again if the West Africa nation sticks to the same precedence.
An increase in supply after OPEC failed to agree on production cuts with Russia has combined with demand falling, as the coronavirus outbreak disrupts economies globally.
This means oil prices will remain low for longer than the central bank’s falling reserves can support the naira, which has dropped to the least among major oil-producing countries this year.
(READ MORE: Foreign investors shun CBN as latest OMO bills record zero bids)
The Central Bank of Nigeria has blamed currency speculators for any weakness in the currency and the Economic and Financial Crimes Commission is raiding Bureau de Change outlets to arrest offenders hoarding foreign currencies
Thelma Ugonna, CFA, a financial analyst spoke to Nairametrics in a phone interview recently saying, “With rising uncertainty in the global market triggered mostly by the recent breakout of Coronavirus and the Oil price war between Russia and Iran, Investors’ appetite for holding liquid assets/ cash especially the dollar has risen. This can be seen by the sales of Treasury bills of over N9 billion yesterday even with negative real rates of 8%.
“Investors can decide to hold foreign currencies with a bid to take advantage of opportunistic purchases in the future while others opt to hold cash to reduce their risk against currency depreciation. Cash holdings also help to provide an anchor in the value of portfolios during periods of high volatility.”
Reverting to past measures, Central Bank Governor, Godwin Emefiele plans to tighten capital controls by banning forex for hand sanitizers needed to curb the spread of the coronavirus, adding it to dozens of items already barred from accessing foreign exchange.
However, foreign-currency reserves have decreased by 20% in the past two years to the lowest of $36 billion since November 2017, giving little room for the nation to support the naira.
(READ MORE: CBN offers N1.1 trillion intervention fund to support real, health sectors)
A currency expert working with Algorithm Algebra also told Nairametrics on phone today that he saw emerging markets in Africa carefully trying to deploy rate cuts at the same time as currency management.
He continued that, “they will continue to utilize their FX reserves to smooth currency volatility, but will not seek to stem the trend or defend any particular levels. In the current environment when external demand is very weak, allowing some currency weakness alongside lowering interest rates is the best way to try and ease overall financial conditions.
However, Central Bank of Nigeria, CBN, recently said it has enough foreign exchange reserves to keep the current value of the naira and warned currency speculators to stop causing panic in the market.
Nigeria’s Central bank also stated it had commenced a robust investigation into activities of speculators in collaboration with the Nigerian Financial Intelligence Unit and related agencies to uncover these persons and dealers behind the panic.
Business News
Global oil market to re-balance in 2 months’ time
In the meantime, OPEC+ wants to keep the existing production output cuts beyond the June expiry date as part of efforts to rebalance the market. Countries like Saudi Arabia, the United Arab Emirates (UAE) and Iraq, have all reaffirmed their commitment to this effect.
With the uncertainty that still prevails in the global oil market due to the prevailing coronavirus pandemic, analysts have been coming up with different forecasts on the future of the market. The latest forecast is that the market will most likely recover by July 2020.
Crude oil prices and oil demand plunged over the past few months as a result of the pandemic. However, with the lifting of global lockdowns and gradual reopening of global economies, oil prices are expected to rebound. Russia’s energy minister, Alexander Novak, said the global oil supply and the oil demand will most likely rebalance by July.
In the meantime, OPEC+ wants to keep the existing production output cuts beyond the June expiry date as part of efforts to rebalance the market. Countries like Saudi Arabia, the United Arab Emirates (UAE) and Iraq, have all reaffirmed their commitment to this effect.
In his analysis earlier today, OPEC’s Secretary-General, Mohammed Barkindo, urged OPEC+ members not to flout the output cut. According to him, OPEC+ members must remain committed to production cuts despite signs that oil demand is beginning to recover.
(READ MORE: Oil price gains likely to halt over demand uncertainty, as US-China tension intensifies)
On its part, Russia had agreed to cut down its oil production to 8.5 million barrels of crude per day in May and June, down from 10.5 million barrels. There is a possibility that the country could extend the current level of output cut beyond June, a situation that is expected to serve as a major boost in the rebalancing of the oil market.
Last week, the International Energy Agency (IEA) said that it had seen signs that the oil market would rebalance quicker than originally expected after the United States and OPEC implemented the agreed output cut. The development came as a big relief to Nigeria because the rebound of oil prices and the rebalancing forecast will help reduce the country’s fiscal pressure and boost its revenue.
Note that the Brent crude and Bonny light crude sold for about $36 per barrel and over $33 per barrel respectively. These are above the revised budget oil benchmark of $25 per barrel for the 2020 budget.
Business
LIRS further extends deadline for filing annual tax returns by one month
“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.” – Ayodele Subair
The Lagos State Internal Revenue Service (LIRS) has again extended the deadline for filing of Annual Tax Returns from May 31 2020 to June 30, 2020.
This is part of the state government’s effort to provide relief to taxpayers in light of the economic impact of the Covid-19 pandemic. With this development, annual returns for individuals, both employees and self-employed persons, can be filed anytime before June 30, 2020.
In a press release signed by Monsurat Amasa, the head of LIRS’ Corporate Communications Department, the agency urged taxpayers to take advantage of the magnanimity of the government and file their returns. The LIRS’ Executive Chairman, Mr. Ayodele Subair, explained the extension thus:
“As the Lagos State Government keeps abreast of global best practices in containing the Covid-19 pandemic and eases the effects of an economic downturn on taxpayers and residents of the State, LIRS had initially extended the deadline for filing annual tax returns for two months, from the statutory March 31st of every fiscal year to May 31, 2020.
“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.”
(READ MORE: COVID-19: Lagos issues new guidelines, considers full reopening of economy)
He further explained that taxpayers can file the annual returns from the comfort of their homes and offices using the LIRS eTax platforms. They can also generate assessment and payment schedule, and other tax administration matters on the same platform. Updates on business operations and alternative payment platforms are to be found on the verified handles, and the LIRS website.
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