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Economy

Business Activities in Nigeria Record Slow Growth Amid Cash Shortages

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Business activities in Nigeria

By Aduragbemi Omiyale

Business activities in Nigeria, especially in the private sector, witnessed the weakest rate of improvement in June, a report from Stanbic IBTC Bank has revealed.

This was attributed to the recent challenges around cash shortages as it affected new order growth, causing a renewed decline in output in the period under review.

In its Purchasing Managers’ Index (PMI) for the month, the lender said the Nigerian private sector recorded 50.9 points, lower than the 53.9 points achieved in May, signalling a 24th successive monthly improvement in business conditions in Nigeria’s private sector, though the weakest improvement for 17 months. Any reading below the 50.0-point mark means deterioration.

The report stated that central to the moderation last month was a renewed contraction in output which fell for the first time in 19 months. Although marginal overall, the latest fall contrasted with sharp expansions in recent months. Firms overwhelmingly blamed weaker inflows of new work, but there were also mentions of cash shortages.

Meanwhile, new orders rose for the twenty-fourth month in a row. The rate of growth was marginal and eased to the softest in this sequence, however, as elevated costs deterred some clients from placing orders.

Turning to prices, overall input price inflation quickened from May and was the fourth- steepest in the series’ history. Firms reported higher purchase costs (particularly for fuel and raw materials) and rising staff costs.

Subsequently, and in line with weaker inflows of new work, purchasing activity rose at the weakest pace since January 2021. Stocks of purchases continued to rise sharply, however, and at a rate that was in line with the long-run series average.

Staffing levels rose for the seventeenth month in succession during June amid efforts to boost output. That said, the rate of growth was modest with some firms engaging in restructuring efforts.

Modest expansions in new business, paired with another uptick in headcounts led to a twenty-fifth successive reduction in backlogs. Shortages of some key parts resulted in the weakest decline in backlogs for 17 months, however.

Finally, sentiment regarding output in the year ahead remained firmly in positive territory in June. Although, there were some signs that soaring inflation weighed slightly on hopes with the degree of optimism moderating from May.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Economy

Nigeria Sells Retail Bonds for 13.26% at N1,000 Per Unit

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FGN Retail Bonds

By Modupe Gbadeyanka

The Debt Management Office (DMO) has commenced the sale of the Federal Government of Nigeria (FGN) savings bonds for December 2022.

The retail bonds are sold monthly to low-income earners and other interested investors as a way to raise funds from the capital market to finance budget deficits.

For this month’s sale, the debt office is offering the papers in the usual 2-year tenor and 3-year tenor at a coupon rate of 12.255 per cent and 13,255 per cent per annum, respectively.

Subscriptions for the notes started on Monday, December 5, 2022, and will close on Friday, December 9, 2022, according to details of the exercise released by the DMO.

The interest would be paid to subscribers quarterly, i.e., March 14, June 14, September 14, and December 14, while the bullet repayment would be made at the maturity date.

The savings bond is sold at N1,000 per unit, and investors are required to purchase at least N5,000 and a maximum of N50 million.

Intending investors would be expected to contact their brokerage companies on how to purchase the debt instrument.

The retail bonds are backed by the full faith and credit of the Nigerian government and are charged upon the general assets of the country.

The investment tool qualifies as a security in which trustees can invest under the Trustee Investment Act.

It is also a liquid asset for liquidity ratio calculation for banks and qualifies as government securities within the meaning of the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for tax exemption for pension funds, amongst other investors.

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Economy

New Cash Withdrawal Limits Will Expose Tax Evaders—Oyedele

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expose tax evaders

By Adedapo Adesanya

The Fiscal Policy Partner and African Tax Leader at one of the country’s leading consultancy companies, PwC, Mr Taiwo Oyedele, has said the new cash withdrawal limits introduced by the Central Bank of Nigeria (CBN) would expose tax evaders, individuals and micro, small, and medium enterprises (MSMEs) in Nigeria.

In a series of tweets seen by Business Post, the tax maverick said that with the restrictions placed on cash withdrawals, many people would be forced to carry out transactions using electronic payments, and small businesses that currently operate mostly on cash would become visible to the tax authorities.

It had been reported the apex bank on Tuesday moved to limit the amount of cash withdrawals Nigerians can make with benchmarks placed at several channels, including over-the-counter, point of sales (POS), and automated teller machines (ATMs).

He explained that the policy would trigger various tax obligations, including income tax, value-added tax (VAT), and Pay-As-You-Earn for small businesses and individuals.

On Income tax, he wrote that “If your business is registered as a company, you may be liable to CIT depending on your annual turnover (i.e. no CIT if your turnover below N25 million, 20 per cent if your turnover is between N25 million to N100 million 30 per cent if your turnover is more than N100m) in addition to Education Tax at 2.5 per cent.

“If your business is not registered as a company, then you will be liable to personal income tax based on graduated taxable income bands between 7 per cent and 24 per cent.”

On VAT, he explained that, “All businesses are required to register for VAT and charge 7.5 per cent on their goods and services except those with annual turnover below N25 million.”

For PAYE, Mr Oyedele explained that employees earning more than N30,000 per month are liable to PAYE, which must be deducted and paid to the tax authority by the employer on a monthly basis.

To this, he noted, “You may also be liable to other statutory contributions such as pension depending on your staff strength.”

For individuals, he noted that as they carry out more transactions, this will make them susceptible to transparency as it will make it easier for the government to track those who are tax evaders.

“The more transactions you make electronically, the more the tax authorities will get the intelligence to track your income and net worth, making it easier to fish you out if you are a tax evader.”

He then advised small business owners to register with relevant tax authorities like the Federal Inland Revenue Services (FIRS) and the state internal revenue services where they operate.

Further, the PwC official called on SME operators to open a separate bank account for their business, “or dedicate one for that purpose if you already have a business account) and don’t mix business with personal transactions.”

The government, on its part, he said, needs to sensitise the general public, especially small business owners, adding that the CBN should ensure a proper handshake with the fiscal authorities.

“For instance, the conditions for excess cash withdrawals could include Tax Identification Number,” he opined.

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Economy

CBN to Establish Offshore Banking in Free Trade Zones to Boost Investment

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establish offshore banking

By Adedapo Adesanya

The Central Bank of Nigeria (CBN), in collaboration with the Free Trade Zone Authority (FTZA), has commenced moves to establish offshore banking in the zones in Nigeria so as to encourage investors to repatriate their returns from their businesses.

Speaking on the sideline of a three-day conference to mark the 30th anniversary of the Free Trade Zones in Nigeria, the Managing Director of the Nigeria Export Processing Zone Authority (NEPZA), Mr Adesoji Adesugba, disclosed that having offshore banking operations in the FTZs is a factor that would further boost investors’ confidence in the nation’s FTZs operations.

Mr Adesugba also said that offshore banking in FTZs is an international best practice that Nigeria must adopt to enhance investors’ operations in the FTZs.

“The CBN is in charge of processing offshore banking in the FTZs, and the FTZA and the CBN have met over the issue for almost two years, and we are still meeting. The document to establish the offshore banking operations is ready.

“We are just awaiting the approval of the CBN to commence operations in the Free Zones because Free Zones enterprises are not allowed to enjoy the facilities of the banking system in the Nigerian territory.

“So, we need an offshore banking system. There is no way you can do business without having a bank, so that is what we are asking for. It is high time we start that.

“Every other Free Zone outside Nigeria has that kind of system. It’s not new, but in Nigeria, we still don’t have it. It is an incentive for investors because that is the first thing they ask for when they come to the Free Trade Zones.

“The absence of offshore banking counts against us, so we are asking the Central Bank to please fast-track that for us to have it,” he said.

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