Economy

How Finance Bill Will Boost Earnings of Insurance Companies

Published

5 years ago

24/12/2019

By Adedapo Adesanya

When in October 2019, President Muhammadu Buhari presented the 2020 Appropriation Bill to a joint session of the National Assembly, he also handed over a Finance Bill to the lawmakers.

The Finance Bill, which was recently passed by the parliament, generated mixed reactions because a part of the document said from January 2020, residents of the country will begin to pay a Value Added Tax (VAT) of 7.5 percent instead of the present 5 percent.

The reason for this, according to the federal government, was to help increase revenue so as to fund the 2020 budget of N10.6 trillion passed by the National Assembly over two weeks ago.

Apart from the issue of VAT, the bill also gave an exemption to some companies on the payment of Company Income Tax (CIT), which is 30 percent of profit before tax (PBT). From the new regulation, firms making less than N25 million in a year would be exempted from CIT.

Though President Buhari is yet to sign the Finance Bill into law, it is still generating reactions and an analysis done by Inspen Online showed that insurance firms operating in the country stand to gain a lot from this policy.

In fact, Chairman of the Nigerian Insurers Association (NIA), Mr Tope Smart, was quoted as informing Inspen Online that the signing of the bill will settle the issue of unwholesome tax burdens placed on insurers.

It was stated that with the Finance Bill, the tax burden, which had before now negatively impacted on their earnings, underwriters will begin to perform better and possibly create more value for their shareholders, especially those listed on the Nigerian Stock Exchange (NSE).

According to the platform, the Finance Bill will make it possible for insurers to carry forward losses indefinitely in contrast to the current 4-year restriction in place. This is because a certain part of the new law made provisions to delete certain rules for insurance companies.

Also, included in the bill, life and non-life businesses would no longer be liable to special minimum tax provision and all necessarily incurred expenses will be tax deductible.

In addition, taxable investment income would be limited to income derived from the investment of shareholders’ funds. This seeks to clarify taxable income and limits it to income accruing to the insurance company as against income accruing to the insurance fund.

The bill, when signed into law, will ensure the fair taxation of insurance companies as some sections direct insurance companies to pay out their capital in the form of a minimum tax because they are almost always in a never-ending refund cycle with the tax authorities as a result of the Companies Income Tax Act (CITA), which is meant to amend and simplify controversial aspects in its policy, instead it has made it more unclear particularly for the insurance sector.

For instance, in Section 16(2)(a) of the CITA, the profits of a life business insurance company are calculated by taking management expenses, including commission, subject to subsection (8)(b) of the Act from gross income (investment income and revaluation surplus).

While for non-life businesses, section 16(1)(b) states that profits will be calculated for tax purposes by deducting the reinsurance cost and a reserve for unexpired risk (the premium corresponding to the time period remaining on an insurance policy), subject to subsection (8)(a) of the Act from a gross premium, interest and other income receivable in Nigeria.

But with the signing of the Finance Bill, this will be repealed.

Economy

NASD OTC Bourse Declines Further by 0.16%

Published

23 minutes ago

22/01/2025

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.16 per cent decline on Tuesday, January 21, extending its loss this week to two.

This further depleted the market capitalisation of the alternative stock exchange by N1.65 billion at the close of transactions to N1.071 trillion from the N1.073 trillion it closed in the preceding session.

In the same vein, the NASD Unlisted Security Index (NSI) slid by 4.79 points to wrap the session at 3,100.33 points compared with 3,105.12 points recorded in the previous session.

The bourse ended with two price losers yesterday led by Geo Fluids Plc, which gave up 32 Kobo to trade at N4.38 per share versus Monday’s closing price of N4.70 per share and FrieslandCampina Wamco Nigeria Plc, which depreciated by 15 Kobo to close at N39.50 per unit compared with the previous day’s N39.65 per unit.

On the second trading day of the week, the number of deal carried out slightly went up by 8.3 per cent to 13 deals from the 12 deals executed at the previous trading session.

Also, the value of transactions increased by 97.2 per cent to N4.5 million from the N2.5 million recorded a day earlier, while the volume of securities traded in the session declined by 71.6 per cent to 183,780 units from the 767,610 units recorded on Monday.

FrieslandCampina Wamco Nigeria Plc remained the most traded equity by value (year-to-date) with 4.1 million units worth N162.9 million, followed by Geo-Fluids Plc with 9.1 million units valued at N44.0 million, and 11 Plc with 55,358 sold for N14.5 million.

Also, Industrial and General Insurance (IGI) Plc closed the day as the most active stock by volume (year-to-date) with 25.3 million units worth N5.9 million, trailed by Geo-Fluids Plc with 9.1 million units sold for N44.0 million, and FrieslandCampina Wamco Nigeria Plc with 4.1 million units valued at N162.9 million.

Economy

Naira Crashes to N1,552/$1 at NAFEM, N1,670/$1 at Black Market

Published

1 hour ago

22/01/2025

Adedapo Adesanya

By Adedapo Adesanya

Pressure further mounted on the Nigerian Naira in the different segments of the foreign exchange market on Tuesday, making its value to shrink against the United States Dollar at the close of business.

In the Nigerian Autonomous Foreign Exchange Market (NAFEM), the domestic currency crashed against its American counterpart during the session by 0.18 per cent or N2.73 to settle at N1,552.78/$1, in contrast to Monday’s closing price of N1,550.05/1.

But against the Pound Sterling and the Euro, the local currency traded flat in the official market yesterday at N1,906.98/£1 and N1,613.48/€1, respectively.

As for the black market segment, the Naira weakened against the Dollar on Tuesday by N5 to sell for N1,670/$1 compared with the preceding day’s value of N1,665/$1.

Meanwhile, the cryptocurrency market heaved a sigh of relief during the session as President Donald Trump created a crypto task force dedicated to “developing a comprehensive and clear regulatory framework for crypto assets.”

The task force will be led by Commissioner Hester Peirce, a long-time advocate for the crypto industry, and will work closely with the crypto industry to develop regulations. This is after Mr Gary Gensler, an opponent of crypto, officially stepped down as chairman of the US Securities and Exchange Commission (SEC) after Mr Trump’s term started.

The task force will also work with Congress, providing “technical assistance” as it crafts crypto regulations.

Solana (SOL) recorded a 9.2 per cent growth to sell at $257.09, Dogecoin (DOGE) rose by 7.6 per cent to $0.36789, Ripple (XRP) added 4.0 per cent to finish at $3.18, and Bitcoin (BTC) increased by 3.7 per cent to $105,515.03.

Further, Binance Coin (BNB) appreciated by 2.8 per cent to close at $699.01, Cardano jumped by 2.1 per cent to trade at $0.9972, Ethereum (ETH) soared by 2.0 per cent to settle at $3,308.21, and Litecoin (LTC) went up by 1.5 per cent to end at $116.72, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.

Economy

Brent Falls Below $80 as US Signals Boost to Oil Output

Published

2 hours ago

22/01/2025

Adedapo Adesanya

By Adedapo Adesanya

The price of the Brent crude oil grade went below the $80 mark on Tuesday after it shed 86 cents or 1.1 per cent to trade at $79.29 per barrel after the US President, Mr Donald Trump, signaled the possibility of his country boosting its oil production.

This move raised concerns of higher US output in a market widely expected to be oversupplied this year, with the US West Texas Intermediate (WTI) crude futures falling by $1.99 or 2.6 per cent during the session to $75.89 per barrel.

On his first day in office, the US President signed an executive order to unleash America’s energy by easing the barriers to oil and gas extraction and production and revoking a series of climate orders by former President Joe Biden.

As pledged in the campaign, the executive order follows the declaration of a national energy emergency.

The declaration includes measures to expedite energy infrastructure delivery, and emergency approvals by agencies “to facilitate the identification, leasing, siting, production, transportation, refining, and generation of domestic energy resources, including, but not limited to, on Federal lands.”

This will likely confirm expectations that the oil market will be oversupplied this year after weak economic activity and energy transition efforts weighed heavily on demand in top-consuming nations the US and China.

President Trump also said he was considering imposing 25 per cent tariffs on imports from Canada and Mexico from February 1, rather than on his first day in office as promised.

The delay helped ease concerns of an immediate tightening of the market among US refiners, many of which are geared to process the type of crude oil supplied by these countries.

The US Energy Information Administration (EIA) reiterated on Tuesday its expectations for oil prices to decline both this year and next.

On its part, the Organisation of the Petroleum Exporting Countries (OPEC) projects robust demand growth in the world both this year and next.

In 2025, OPEC says demand is set to grow by 1.4 million barrels per day leaving its projection unchanged from the December report.

However, losses were also limited after the US president said his administration would “probably” stop buying oil from Venezuela. The U.S. is the second-biggest buyer of Venezuelan oil after China.

Also weighing on prices on Tuesday was the potential end to the shipping disruption in the Red Sea.

Yemen’s Houthis said on Monday they will limit their attacks on commercial vessels to Israel-linked ships provided the Gaza ceasefire is fully implemented.