Last week was particularly eventful for the economy and markets, with cryptocurrencies dominating the news in a significant way. These are our big takes for the week:
One man and all that power?
The biggest news of last week was Bitcoin price as Elon Musk, CEO of Tesla triggered a massive selloff after he declared that his company will stop accepting Bitcoin as a means of payment for Tesla cars.
He claimed: ¨Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment¨. Elon was speaking about the amount of energy that was used to mine Bitcoin. A Statista report showed that bitcoin uses 143-terawatt-hours (TWh) of electricity per year, more energy than Norway and Switzerland.
At the time of writing this report, Bitcoin was trading at about $43,000 and the price fall extends this week after Elon Musk furthered implied in a tweet on Sunday that Tesla might have sold its bitcoin holdings.
The lyrics to Kanye West’s 2010 song, Power, where he quotes, “No one man should have all that power” quickly comes to mind, and the statement holds true today with Elon Musk who seems to have an unequalled control of the cryptocurrency market.
However, the only way to checkmate this is the big R for regulation. Something many crypto stakeholders will not accept.
Binance under investigation by the US Justice Department
Still on events in the cryptoverse, the largest cryptocurrency exchange by trading volume, Binance is facing money laundering and tax evasion investigations from the US Justice Department and IRS. Binance says they follow the books and take their legal obligations very seriously – as a matter of fact Americans are blocked from using the exchange.
The company has not been accused of any wrongdoing yet, but it definitely seems like there is a stronger approach by the regulators in the US to strongarm crypto players.
Nigeria generates N392.8 billion from company income taxes
It is said that there are two things certain in life, death and taxes. Switching to more domestic matters, the NBS released figures for company income tax by sectors for Q1 2021 and tax revenue increased by 32.84% compared to Q1 2020.
What is interesting to note is that the Breweries, Bottling and Beverages Sector generated the highest amount of company income tax with N23.26 billion generated.
Will the CBN finally increase interest rates?
With Nigerians battling the rising inflation in the country, many might have expected the CBN to take a more contractionary approach to its monetary policy. However, the CBN has been more tilted towards maintaining the 11.5% MPR rate they reduced last year from 13.5% to stimulate the economy in a recession.
With a 0.11% GDP growth in Q4 2020, effectively taking Nigeria out of recession, it can be said that the rate reduction played a contributory part in that. However, inflation has been a lingering concern. The CBN has in the recent past stated that inflation is a result of other factors such as logistics and supply issues, insecurity, and pretty much everything beyond their control.
We anticipate the MPC meeting on the 24th and 25th of May for the CBN´s next move.