Last week was another interesting week with a series of activities and events making the rounds in the economy and markets. These events have an effect on your money, and we will be breaking down what it all means.
Joe Biden’s Tax Plans
Biden’s tax plans last week had a strong effect on the market and led to a sell-off in many asset classes – especially crypto. The rumours were that Treasury Secretary Janet Yellen wanted to institute an 80% crypto capital gains tax. The market did not react well to this with over $200 billion dollars lost in cryptocurrencies on Friday as a result.
President Biden plans to fund his ambitious infrastructural plan with the capital gains tax which targets people who earn over $1 million dollars a year.
Many investors are still bullish on the long-term with cryptocurrencies, perhaps this is a good time to ‘buy the dip’ and for those unaware, capital gain tax can only be applied when the asset is sold.
CBN vs Exporters
Last week, the CBN assured exporters of unhindered access to their dollar earnings. The backstory here is that the CBN had in January 2021, announced that all Nigerian exporters who are yet to repatriate their export proceeds, will be barred from banking services effective from January 31, 2021.
The exporters instead prefer to sell their forex to the parallel market where it can be exchanged for a higher naira value, boosting their gains on foreign currency conversions. They also avoid regulatory squabbles by opening foreign bank accounts where most of the export proceeds are warehoused and then sold at the black market.
Nigerian Mutual funds take a 4% dip in Q1 2021
Mutual Funds are traditionally a good investment vehicle for many Nigerians. However, so far, 2021 has been a slow year for mutual funds as the net asset value of the funds declined by 4.01% from N1.57 trillion as of 31st December 2020 to N1.51 trillion as of 1st April 2021.
The highest return for the quarter stacked 4.87% and has a minimum investment of $2,500. However, the question is will investors be satisfied with this return especially with inflation heading to 20%. Considering this particular fund invests in debt instruments an almost 5% ROI should attract a number of investors.
Bitcoin peer to peer trading surges 27% after CBN crypto ban
CBN’s restriction on banks facilitating cryptocurrency exchanges has enabled Nigerians to find other ways to buy crypto through P2P (peer to peer). Data reveals that Nigerians have moved over $103 million.
Cryptocurrency adoption in Nigeria is still on the rise and there seems very little the regulators can do about it. The Nigerian central bank is not the only regulator trying to control cryptocurrency adoption, last week, the CBRT (Central Bank Republic of Turkey) also announced a ban on cryptocurrency citing excessive volatility and lack of regulation.
Hyundai & Kia to set up an assembly plant in Ghana in 2022
Ghana has proven to be a prime investor location for Foreign Direct Investment in Sub-Saharan Africa. This announcement is just a few weeks after Twitter announced its plans to open its first African office in the country.
An official statement from Alan John Kyerematen, Ghana’s Minister of Trade and Industry reads “The local assembly of vehicles, 3,600 direct and indirect jobs would be created in Ghana, and the addition of components and parts manufacturing will also add about 6,600 direct and indirect jobs.”
It has become more glaring that attracting investment into Nigeria is increasingly difficult due to regulatory uncertainties and macro factors.