We’re chuffed to be back after being away for 2 weeks break. We missed you!
While we were away we crossed 100 subscribers, Thank you for sticking with us, let’s do a thousand subscribers next.
Before we head into today’s stories, We’d like to give a special shout out to one of our team members, Adeboro ̶O̶d̶u̶n̶l̶a̶m̶i̶ Rotimi who’s getting married today. We wish her a happy married life. 🎊
Let’s dive into the news 😊
A few weeks ago, The Federal Executive Council (FEC) which is made of the President, Vice president, ministers & representatives of parastatals, agreed to increase the Value-added Tax (VAT) rate from 5% to 7.2%. However, the new rate still has to be approved by the National Assembly and state governments.
What this means
VAT is a tax applied to a product whenever any value is added, including in its production and final stage. This affects every item you can think of except essential items such as food, medicine, educational materials and other essential items. Because the burden of Tax is usually transfered to the buyer, the price of items not exempted will increase.
Why it matters?
VAT brought in ₦1.090 trillion in government revenue for 2018, an increase by 44% should see government revenue increase by almost ₦500 billion if other things remain equal.
NLC argues that the VAT rate increase is the government’s way of taking away the financial benefits of the new minimum wage which increased from ₦18,000 to ₦30,000.
The solution to more revenue might not be in increasing VAT but instead in increasing the number of people who pay VAT.
This is because there is a huge gap between registered and active taxpayers in Nigeria. Out of 1 million registered corporate taxpayers, only 56,000 were active in 2016. And of 1.5 million registered VAT taxpayers, only 77,000 were active.
As Stears Business rightly suggested, It’s advisable that Nigeria focuses more on the number of taxpayers, than the amount paid by each taxpayer.
Nigeria Bureau of Statistics released the figures of Nigeria’s International Trade for Q2 2019 – April, May, June.
What do the numbers say?
Total Imports: N4.01 Trillion | Total Exports: N4.59 Trillion | Trade Surplus: N588.8 Billion
Business is booming as Nigeria’s International trade increased in Q2 2019, total trade grew by 4.42% compared to Q1 2019, and by 24.16% relative to Q2 2018.
Who are the countries Nigeria trades with?
5 Major Export Trading Partners: India – 17.27%, Spain – 11.97%, Netherlands – 10.41%, United States – 7.68%, France – 6.09%.
5 Major Import Trading Partners: China – 25.47%, United States – 10.53%, Netherlands 9.33%, India – 7.48%, Belgium – 6.21%
Why it matters
With Petroleum accounting for ~94% of Nigeria’s export revenue , Nigeria is still highly reliant on Petroleum. We hear there are plans to diversify Nigeria’s economy but we can’t see the effect.
China is Nigeria’s biggest import partner and one of Nigeria’s biggest loan providers. A look at Nigeria’s debt profile shows that as at March 2019, Nigeria owed the Exim Bank of China $2.5 billion. This shows Nigeria is dependent on China, and with the advent of the US – China trade war, any sneeze China makes would most likely affect Nigeria.
Dig Deeper: Read NBS Report on Foreign Trade in Goods
The Central Bank of Nigeria (CBN) wants you to handle less cash so they recently introduced a directive that stipulates a “cash handling charge” of 3% and 2% deposit and withdrawals respectively, made from an individual bank account that exceeds N500,000, also 5% and 3% for withdrawal and deposit above 3million Naira for corporate accounts. As the emails you’ve received from your bank must have stated, this drive started on September 18 in all commercial banks in 6 states of the federation, including Anambra, Lagos, Kano, Abia, Rivers, Ogun and FCT, Abuja.
Zoom out: On March 30th, 2012, CBN Introduced a cashless policy to help eradicate most of the negative effects associated with high usage of physical cash and in general push Nigeria to the forefront of digitization as the rest of the world by 2020.
But Nigerians love ‘raw’ cash
Yes, we do! It’s Saturday, we need to spray money at weddings or avoid the embrassment that POS machines and ATM can cause. This is backed up by the fact that the world bank found out that despite having over 80% of mobile users in Nigeria, only about 6% of Nigerian use electronic banking, this means a relatively higher population of Nigerians still indulge more in physical cash banking transactions.
Alternative way out
We get it, there’s nothing more certain than having the cash in your hand, cash you can smell and feel but to avoid unnecessary transaction costs Individuals and business owners especially, will have to engage electronic banking. Online apps or websites that integrate electronic payment and POS services should be utilized. Hopefully this would spur people with techphobia to embrace change finally.
Its been 47 days and counting since the publisher of Sahara Reporter, former Presidential aspirant and convener of the controversial ‘Revolution Now’ protest, Omoyele Sowore, was arrested by the Department of State Service (DSS) on August 3rd, the eve of his planned revolution protest.
He was detained for alleged “threat on public safety, to peaceful coexistence and social harmony in the country.” Such Beautiful Legalese there.
Situations that led to his arrest
Sowore had planned a “peaceful revolutionary protest”, with hundreds of people indicating interests from all over the country and beyond. But the DSS claimed the protest was percieved as a threat to the country’s security, charging him for revolt and insurrection which might lead to forceful takeover of the Muhammadu Buhari’s government.
In the face of the law
A federal high court in Abuja has ordered for the release of Sowore with the caveat that he must submit his travel documents. However, It’s been a few days after the release orders from the court and Sowore is not yet home with his family.
Why it matters
This looks like a case of Buhari administration operating outside the constitution, intimidating and threading on citizens.
“Two things form the bedrock of any open society — freedom of expression and rule of law. If you don’t have those things, you don’t have a free country.”
The minister of Aviaition, Hadi Sirika announced that Nigeria Air, the national carrier project that was suspened indefinitely last year, would come back to life.
Why it mattersThe major benefits of a national carrier are provision of Jobs, promotion of Tourism as a national airline will focus Nigerian destination as opposed to private airlines, it would be a source of foreign exchange to the government. Sounds like the typical benefits of any normal business.
On the flip side, many national airlines have a reputation for losing a ton of money and eventually going under due to mismanagment – Nigerian Airways, Virgin Nigeria. Also From 2016 till date, the national carrier has gotten approximately ₦1.644 billion ($4.5 million) in budgetary allocation with only a company name and logo, as well as a reportedly concluded baseline study, to show for it.
Key Questions: Should a national carrier be a priority for today’s government? Can Nigeria be trusted to run a National Carrier airline?
Sudan’s finance minister Ibrahim Elbadawi announced that the Sudanese government has launched a nine-month plan to stabilize the economy.
The government intends to rationalize spending and tackle inflation (inflation is a sustained increase in the price of goods and services), and has reduced prices of bread and petrol until June 2020.
Also, Sudan’s Prime Minister – who recently met with South Sudan President Salva Kiir – will ask for a $2 billion support from the World Bank during his visit to New York, to help actualize this plan.
Wait. How bad is it?
In truth, reviving Sudan is comparable to retrieving the Titanic from the ocean floor. Plagued by decades of economic mismanagement and civil war, the South Sudan withdrawal, and the more recent political crisis leading to the removal of former president Omar Al-Bashir, Sudan has $52 billion in foreign debt, and high unemployment. 😩
Strengthening ties with South Sudan is a bold and vital move, because, well, that’s where the oil is. South Sudan had plunged into its own internal conflict in 2013 between government soldiers and rebels, and this halted their oil production. In January 2019 they resumed oil production, with India, China, and Malaysia taking stakes in South Sudanese oil fields.
Are these signs that our #PrayersForSudan have been answered?
Talks to resolve a conflict over the $5 billion Grand Ethiopian Renaissance Dam (GERD) – started in 2011 and prospectively Africa’s largest dam – being built by Ethiopia have failed to achieve progress, Egypt has said. Summarily, Egypt believes that the project will greatly reduce its share of Nile water, while Ethiopia says otherwise.
Tip of the water-berg
The longest river in Africa, River Nile cuts across many African countries, including Egypt, Ethiopia, and Sudan. It provides almost all of Egypt’s freshwater and powers the Egyptian Aswan Dam. With the force of the Nile, Ethiopia expects the GERD to generate about 6450 megawatts of electricity and solve most of their power problems in one fell swoop.
For fear of droughts, Egypt proposed that the two-year GERD construction period be extended to keep Aswan Dam’s water level from dropping below 165 metres. If not, they would risk losing more than 1 million jobs, electricity valued at $300 million, and $1.8 billion in annual economic output.
So what about Sudan?
Well, the GERD holds great prospects for Sudan talked about earlier, as it promises cheap electricity and expanded agricultural production which are vital to her economic rebirth.
Truth be told…
The future is an enemy we can’t fight – but it’s one we can prepare for. Perhaps the first step in this preparation would be a ‘sincere’ commitment by these countries to help one another solve problems.
If there’s this much crisis without the GERD, what would happen when it’s built?
A formal impeachment inquiry into US President Donald Trump was announced on Tuesday the 24th by Nancy Pelosi, Speaker of the US House of Representatives.
This happened after Trump asked the Ukrainian government to investigate Mr. Joe Biden – former United States Vice President and front-runner for the 2020 Democratic nomination, and his son Hunter Biden – a board member of Burisma Holdings, major Ukrainian natural gas producer. Trump had held back military aid to Ukraine and released this after his call with Ukrainian President Volodymyr Zelensky – though he claims that this was unrelated to the Biden case, saying that European nations should aid Ukraine too.
It didn’t start this week.
Impeachment talks on Trump have been on for years – even before he assumed office. One outstanding incident was the Mueller inquiry into Russian meddling in the 2016 US presidential election. Trump is a Republican, by the way – and he’s got enemies both home and away. It’s noteworthy, though, that impeachment is NOT removal from office – just a step in the process.
Behind the curtains
Pelosi, who is a Democrat, seems to have been waiting for an opportunity to shift the battle focus from anti-Republican to constitutional. Since the Republicans control the Senate, it’s arguable that Trump’s eventual removal is but a pipe dream – except if the “cankerworms” in his party are influential enough to turn the tables.
After 178 years of operation, British tour operator and of the the world’s oldest travel brands with 19 million annual customers, Thomas Cook closed business on Monday.
How bad were things?
Quite bad, Thomas Cook had a debt of 1.7 billion pounds, about $2.1 billion, Although It had been in negotiations to obtain $250 million in emergency financing when it declared bankruptcy.
About 600,000 travelers around the world were affected by this shutdown, and more than 20,000 employees worldwide suddenly became jobless.
Why did this happen?
Although travel bookings business has increasingly moved online, Thomas cook failed to do so fast enough, opting instead for physical stores and telephone assistance.
Thomas Cook was a one stop shop for travel offering flights, hotels etc. but over the years due free access to the different elements of a travel tour, demands for travel tours have declined, meaning less business for the company.
Also In most recent times, the advent of Brexit has meant that many traveller have delayed their travel plans untill the fate of Uk is known, causing a shortage of normally expected revenue,
Did anyone see this coming?
Well customers who were left stranded might have been surprised, but not the British governement. The British government knew about this but refused bail out the battered company.
The Uk government is of the opinion that doing so would set a bad precedent by encouraging other troubled companies to take undue risks. It’s fair to say Thoma cook got cooked!
And that’s all for this week! 😎
Was this forwarded to you? Please Subscribe here.
Got a question about something you don’t understand from this newsletter? Ask us here