The Pacesetter Frontier Magazine

Tag: finance

  • FG Reduces Interest Rate On Late Tax Payments From October

    FG Reduces Interest Rate On Late Tax Payments From October

    Precious Nwonu, Enugu

    The Federal Government has introduced a new tax administration order that will reduce the interest charged on late payment of taxes from October 1, 2026.

    The Nigeria Tax Administration Order 2026 was signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, according to a statement by the Federal Ministry of Finance.

    The order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, which provides for interest on tax liabilities that remain unpaid after the due date.

    Under the new framework, the interest rate for taxes payable in naira will be linked to the Central Bank of Nigeria’s Monetary Policy Rate, with an additional one percentage point.

    Oyedele explained that the new rate represents a reduction from the previous five-percentage-point spread.

    However, the applicable interest rate will not fall below the yield on 364-day Nigerian Treasury Bills, reflecting the government’s cost of borrowing when tax payments are delayed.

    For tax liabilities denominated in foreign currencies, the order sets the interest rate at the Secured Overnight Financing Rate, a benchmark for US dollar borrowing, plus six percentage points.

    The order further provides that if SOFR is discontinued, its officially recognised successor rate will be used.

    The Nigeria Revenue Service has been directed to publish the applicable interest rates on its website by the third business day of every month.

    The minister said the new system would give taxpayers greater certainty about the financial consequences of delaying tax payments while ensuring that late payment does not become a cheaper source of financing than borrowing from the market.

    Oyedele said the reform was also designed to promote fairness and predictability in tax administration by ensuring that taxpayers know the applicable rates in advance.

    The new rates will apply to interest accruing from October 1, 2026, including interest on tax liabilities that became due before that date.

    However, interest that accrued before October 1 will remain subject to the rules applicable at the time, where specifically provided for under the previous regime.

    The 2026 order replaces the 2017 notice on interest charged on unpaid taxes, as well as other earlier notices dealing with the same subject.

    The reform does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.

    Tax authorities will also retain the power under Section 66 of the Act to waive penalties or interest where sufficient grounds are established.

    Oyedele urged taxpayers to file their returns and settle their tax obligations on time, while advising those with outstanding liabilities to make payments promptly or engage the relevant tax authority to address their obligations.

    The minister also encouraged taxpayers to regularly check the Nigeria Revenue Service website for the monthly applicable interest rates.

  • CBN Steps Up Bank Checks to Block Terrorism Financing

    CBN Steps Up Bank Checks to Block Terrorism Financing

    Precious Nwonu, Enugu

    The Central Bank of Nigeria (CBN) has rolled out a stronger supervisory framework aimed at deterring the use of Nigerian banks and financial institutions for terrorism financing and other financial abuses.

    In an official statement, the apex bank’s Acting Director of the Corporate Communications and Investor Relations Department, Hakama Sidi-Ali, announced that the CBN has made terrorism financing supervision one of its foremost current priorities. This aggressive focus forms part of the bank’s ongoing commitment to thoroughly protect the Nigerian financial system from abuse by illicit actors.

    Sidi-Ali explained that this newly reinforced push explicitly covers four broad operational areas: how financial institutions manage terrorism financing risk, how they monitor transactions for signs of terrorism financing, how they execute targeted financial sanctions, and how they report suspicious transactions linked to terrorism. Rather than sitting back and waiting for problems to surface on their own, the apex bank plans to implement a strict, risk-based approach, ensuring that banks and institutions seen as more exposed to these risks will attract closer supervisory attention.

    “This supervisory focus also supports Nigeria’s ongoing domestic and international cooperation on counter-terrorism financing, counter-proliferation financing, financial integrity, and the protection of the financial system. Further supervisory engagement will be undertaken as appropriate,” Sidi-Ali stated.

    According to her, the bank will continue to apply a risk-based supervisory approach, utilizing both on-site and off-site engagements.

    This strategy is designed to enforce highly effective Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing (AML/CFT/CPF) controls across the financial sector, in strict alignment with existing legal and regulatory obligations. She added that further supervisory engagement will be undertaken as appropriate, indicating that additional enforcement steps could follow depending on what the CBN’s checks turn up.

    In tandem with these regulations and in line with the provisions of the Terrorism Prevention and Prohibition Act (TPPA), 2022, the Nigeria Sanctions Committee (NSC) recently designated six individuals and three entities as terrorist financiers, subsequently adding them to the official Nigeria Sanctions List.

  • Nigeria facing tighter financing as US hikes rate

    Nigeria facing tighter financing as US hikes rate

    Nigeria’s economy, particularly the financial sector is faced with the risk of increased capital outflow in 2022 given the proposed interest rate hike by the United States of America’s Federal Reserve Bank (US Fed), equity researchers have said.

    Additionally, they said the rate hike would increase the cost of foreign borrowing for Nigeria and possibly cause further depreciation of the Naira.

    The US Fed has indicated plan to increase interest rate at least four times this year in response to rising inflation with the first hike expected to happen mid-March when the Federal Open Market Committee (FOMC) meets.

    US inflation rate had surged 6.8 percent in November last year, it’s highest since 1982, according to the Labour Department.

    The proposed rate increase is the first in three years since the Fed reduced its benchmark borrowing rate to almost zero as the nation confronted a pandemic that threw the global economy into a sudden and shocking tailspin.

    Impact on Nigeria

    Equity dealers and investment analysts have now indicated that the planned rate hike by the Fed would mean increased attraction of investment to US economy with its fund managers, which constitute the largest foreign investors in the world, pulling their funds out of Nigeria and other emerging markets of the world.

    They, however, recommended a corresponding rate hike in Nigeria in order to stem the impact of the planned increase in the US.

    Commenting on the situation, David Adonri, Vice-chairman, Highcap Securities, said: “Interest rate hike in the US will increase the attraction of investments to the US economy. It will also strengthen the US Dollar. Consequently, capital inflow to most countries will decline drastically in 2022.

    “The Nigerian economy is expected to suffer serious decline in capital importation this year as a result of the US rate hike.

    “The Fed rate hike will also increase foreign borrowing cost for Nigeria and possibly cause further depreciation of the Naira. More investors may opt for hard currency as investment option in 2022.”

    On the possible impact on the equities market, Adonri posited that the hike would result in reduced portfolio investment inflow.

    Already foreign portfolio inflows into the equities market has been on decline. The latest data on domestic and foreign portfolio investment in the stock market for November 2021 showed that foreign portfolio inflow saw a 19.4 percent Year-on-Year (Y/Y) decline to N189.42 billion in November 2021 from N226.13 billion in November 2020.

    However, the rate of outflow slowed down, falling by 106.5 percent Y/Y to N209.76 billion from N433.15 billion in the corresponding period in 2020.

    The data also indicated that FPI outflows surpassed inflows throughout 2021. For instance, outflows surpassed inflows by 49.9 percent in the first quarter of 2021 (Q1’21) with total outflows standing at N90.12 billion, while inflows stood at N60.11 billion.

    In the second quarter (Q2’21) of the year, outflows rose to N116.72 billion, while inflows closed at N105.24 billion, outpacing inflows by 10.9 percent.

    The trend continued in the third quarter (Q3’21) with outflows again surpassing inflows by 12.1 percent. For Q3 ’21, outflows stood at N151.811 billion, while inflows were N135.39 billion.

    Adonri said: “The equities market is a major platform through which capital is imported into Nigeria via portfolio investment.

    “Based on Nigeria’s country risk together with high foreign exchange (forex) risk and negative real return on investment, US Feds rate hike is expected to reduce foreign portfolio investment.

    “Capital flight may increase as more funds may actually exit Nigeria in 2022 for the US to take advantage of the rate hike.

    “A lot of foreign capital enters Nigeria through the bonds market. With US Feds rate hike, and already existing negative real return on Nigerian bonds and other debt instruments, lesser foreign capital is expected to flow into the bonds market in 2022.

    “Foreign investment in Treasury Bills (TBs) is also expected to decline due to US Feds rate hike.”

    Agreeing with him, Victor Chiazor, Head, Research and Investments at FSL Securities Limited, an arm of Fidelity Bank Plc, said: “The proposed rate increase by the US Feds if implemented is clearly going to trigger more capital flows out of Nigeria especially given the low interest rate levels in Nigeria currently.

    “This will negatively affect both the Nigerian equities market and fixed Income market as investors will exit their positions and move capital back to the US given the higher yield environment and stable currency.”

    Also speaking, Emmanuel Onoja, Head, Research at GTI Group, a Lagos based investment banking firm, noted that higher interest rates in the US and other developed markets would, invariably, increase the cost of capital for the emerging/frontier markets like Nigeria, increasing debt burden and capital outflows.

    Recommendations

    Meanwhile, the analysts have recommended a corresponding increase in the benchmark interest rate in Nigeria to stem the impact of the planned rate increase in the US and keep funds stable in the country.

    According to Chiazor of FSL Securities, “The most direct way of attracting or keeping these funds will be to increase our interest rate environment to yields higher than the current inflation level. This will also mean that government interest expense will begin to rise on the back of a high yield environment.

    “In any of these scenarios the equities market will struggle as a result of a higher yield environment as funds will be redirected to the fixed Income market.”

    Corroborating him, Onoja of GTI Group said: “The rate increase in the US will impact the direction of monetary policy domestically as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria, CBN, may need to hike rates to make Naira assets attractive.

    “This will mean higher yields on fixed income assets in 2022 and pressure on equities as a higher risk-free rate increases the cost of equity.”

    In his own views, Adonri of Highcap Securities said: “The current negative real return on Nigerian capital market investments due to inflation makes yield on Nigerian financial assets unprofitable and uncompetitive at current rates.

    “If this is combined with the high forex and country risks, the Nigerian capital market may not be competitive enough in 2022 to withstand the negative impact of US Feds rate hike.

    “Except if there is a Nigerian rate hike to correct domestic imbalance and also in response to US Feds rate hike, with current macroeconomic conditions and indicators, capital may exit Nigeria more than inflow in 2022 due to US Feds rate hike.”

    (Vanguard)

  • Aggregate Foreign exchange inflow in the country increases to $23.60bn

    Aggregate foreign exchange inflow into the country in the fourth quarter of 2020 rose to $23.60bn from $21.46bn in the third quarter, figure from the Central Bank of Nigeria revealed on Tuesday.

     

    The CBN stated in its report on ‘Foreign exchange flows through the economy’ for the fourth quarter that though there was an increase in foreign exchange flows through the economy in the review quarter compared with the preceding quarter due to the reopening of most economies including Nigeria, the second wave of COVID-19 hampered a return to the levels experienced in the corresponding quarter of 2019.

     

    Part of the report read, “Consequently, aggregate foreign exchange inflow in the fourth quarter of 2020 was $23.6bn, compared with $21.46bn and $36.32bn in the third quarter of 2020 and corresponding quarter of 2019, respectively.

     

    This indicated an increase of 10.0 per cent over the previous quarter, but a decline of 35 per cent below the level in the corresponding quarter.

     

    It added that foreign exchange outflow through the economy rose by 13.1 per cent above the third quarter of 2020 to $8.38bn in the review period but declined by 51.5 per cent below the level in the corresponding quarter of 2019.

     

    Accordingly, foreign exchange flow through the economy resulted in a net inflow of $15.22bn in Q4, 2020, compared with the net inflow of $14.05bn and $19.05bn in the preceding quarter and corresponding quarter of 2019 respectively

     

     

     

     

     

    Source: www.punchng.com

  • FG pledges its commitment to increase revenue generation and enhance the economy

     

     

    The Federal Government has pledged its commitment to improving revenue generation and enhancing economic competitiveness in the country.

     

    The Minister of Finance, Zainab Ahmed, made the pledge on a virtual platform on Monday during the Executive Roundtable on the Finance Act 2020 and Economic Outlook for 2021 organised by PricewaterhouseCoopers.

     

     

    In her opening remarks, she said, “The Federal Government of Nigeria will continue to champion economic policies aimed at improving revenue generation, enhancing economy competitiveness, encouraging domestic investors and enhancing macroeconomic stability despite the significant challenges posed by COVID-19.

     

    “This administration is committed to stimulating economic growth by fostering economic resilience in our business communities and broader economy in line with the thematic thrust of the 2021 budget.

     

    “I want to also add that the Federal Government is forging stronger collaboration with the subnational government, state government as well as the local government.”

     

    PwC Partner and Chief Economist, Dr Andrew Nevin, asked Nigeria to leverage on exporting services to the world.

     

    He said Nigeria had a populace of intellectuals earning foreign exchange which should be leveraged on.

    ‌

    He said, “Nigeria exports brains and we are earning significantly from it around the world and that is the asset we need to optimise.

     

    “The interesting thing is that we can export brains from Nigeria without people leaving Nigeria. In fact, if you think about Nigeria’s unique conditions, our ability to export is not manufactured goods.”

     

    PwC Tax Leader, Mr Taiwo Oyedele, who spoke on the import levy on cars said that the total tariff to be paid on imported cars was 40 per cent as against five per cent that has been in the public domain.

     

    He said, “This is really important to clarify. For new cars, it is only the levy that has been reduced from 35 to five per cent. The import duty of 35 per cent is still available on new and used cars which means for a new car, the total tariff you pay on import is 40 per cent.”

     

    Oyedele explained that 40 per cent levy was still high enough to en courage people to buy locally.

     

     

     

    Source: www.punchng. com

  • Finance: FG owes CBN N9.8tn debt

    Part of the report read, “Sustained use of direct monetary financing could raise risks to macroeconomic stability – given the current weak institutional safeguards – but we expect the FGN to reduce its use of the facility in 2021.

     

    “The FGN directly borrowed 1.9 per cent of GDP from the CBN to fund its fiscal deficit in 2020, estimated by Fitch at 3.6 per cent of Gross Domestic Product.

     

    “A number of emerging markets resorted to central bank deficit financing in 2020 against a background of urgent spending needs and temporary market dislocations associated with the coronavirus pandemic.

     

    “However, the use of central bank financing in Nigeria predates the pandemic shock.”

     

    The report added, “We estimate that the balance of the government’s WMF with the CBN was around N9.8tn (6.7 per cent of GDP) at end-2019, up from N5.4tn (4.2 per cent of GDP) at end-2018.

     

    “Unlike the government, we include this balance in our metrics for Nigeria’s government debt. Borrowing from the facility accounted for 30 per cent of the FGN’s debt at end-2019, on our estimates.”

     

    ‌

    Fitch Rating stated that repeated central bank financing of government budgets could raise risks to macro-stability in the context of weak institutional safeguards that preserve the credibility of policymaking and the ability of the central bank to control inflation.

     

    The CBN’s guidelines limit the amount available to the government under its WMF to five per cent of the previous year’s fiscal revenues.

     

    However, it added, the FGN’s new borrowing from the CBN had repeatedly exceeded that limit in recent years, and reached around 80 per cent of the FGN’s 2019  revenues in 2020.

     

     

    Source: wwwpunchng.com