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Fuel Subsidy Removal Cripples 90% Of Nigerian Businesses – Report

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The fuel subsidy removal policy of President Bola Tinubu’s government, which took off in June 2023, negatively affected 90 per cent of businesses in Nigeria.

This is according to a recent report by Fate Foundation, titled “State of Entrepreneurship,” which surveyed over 10,000 businesses across the 36 states of the country and the FCT.

According to the report, smaller businesses were affected more than big businesses, and the policy resulted in high operating costs and lower profits due to weak demand and the loss of customers.

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The report further stated: “Entrepreneurs in the South East were the most affected, while those in the South South were the least affected, relative to other regions. The impact of the policy was even for both male and female entrepreneurs.”

The report also revealed that around 89 per cent of businesses in the country were negatively affected by the naira scarcity experienced in the first quarter of 2023, with the agricultural sector being the most affected.

It further explained that the impact of the naira scarcity on farmers led to the contraction of the agricultural sector’s output by 0.9 per cent in the GDP report for Q1. The decline was the first in over three decades.

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Regarding Nigerian entrepreneurs’ outlook towards business opportunities, around 86 per cent reported being optimistic about the future. However, the figure is less than the 93 per cent who affirmed their positive outlook in 2022.

According to the report, service sector businesses accounted for the country’s major share of businesses.

While 35 per cent of businesses offer services, 22 per cent sell goods, and another 42 per cent trade in both goods and services. At the sectoral level, 18.8 per cent of total businesses operate in the wholesale and retail trade sector,” the report stated.

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JUST IN: CBN May Increase Bureau De Change’s Share Capital To N2bn

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The Central Bank of Nigeria is considering plans to increase the share capital of Bureau De Change operators to N2bn and N500m for Tier 1 and Tier 2 licenses.

The currency operators were previously charged N35m for a general license.

This was contained in the draft paper of a “Revised Regulatory And Supervisory Guidelines For Bureau De Change Operations In Nigeria” published by the apex bank on Friday.

The new guidelines contain several new changes to the guidelines for BDC operations in the country and if endorsed will be effective at a date decided by the CBN.

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Recently, operations of the currency operators have suffered heavy backlash following the free fall of the naira against the dollar.

Government officials have severely blamed the black market operators for this fall though liquidity remains a huge challenge.

This week, operatives of the Economic and Financial Crimes Commision arrested over 250 BDC operators in Abuja and many more in other states of the federation.

Under the minimum capital requirements, the central bank is introducing a two-tier license for BDC operators in the country.

A Tier 1 BDC is authorised to operate on a national basis can open branches and may appoint franchisees, subject to the approval of the CBN.

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A Tier 1 BDC (which is the franchisor) shall exercise supervisory oversight over its franchisees. All franchisees shall adopt their franchisor’s name, branding, technology platform, and rendition requirements.

Also, a Tier 2 BDC is authorised to operate only in one state or the FCT. It may have up to three locations – a head office and two branches, subject to approval of the CBN. It is not permitted to appoint franchisees.”

Under Tier 1 operators are expected to have N2bn as minimum share capital while also depositing a Mandatory Caution Deposit of N200m.

The application and license fee is also N1 million and N5 million respectively.

“Under Tier 2 operators are expected to have N500 million as minimum share capital while depositing a Mandatory Caution Deposit of N50 million. The application and license fee are also N250,000 and N2 million respectively.”

The apex bank also stated that the prescribed minimum capital of BDCs and any subsequent capital injection shall be subject to verification by the CBN.

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MPC Nominees Promise To End Forex, Food Crises

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The Senate on Wednesday grilled nominees for membership of the Central Bank of Nigeria’s Monetary Policy Committee over the forex crisis and unending food crisis.

President Bola Tinubu had, last week, forwarded to the Senate for confirmation, the names of nominees for the committee of the CBN.

In giving the request expeditious consideration ahead of the MPC meeting slated for next Monday, February 26, the Senate, through its Committee on Banking, Insurance, and Other Financial Institutions, grilled six out of the nominees with questions on required urgent solutions to forex volatility and food crisis.

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The first to be grilled was the Director-General of the Securities and Exchange Commission, Lamido Yuguda, who informed the committee that his nomination into MPC would give the SEC the needed voice in monetary policy.

Yuguda lamented that the value of the Naira as it is today, is not real, having lost its intrinsic value but that the MPC, when inaugurated on Monday, would join other stakeholders to stabilise the national currency.

He said, “The value of any currency is measured by the goods and services that it can buy. The Naira, as it is today, does not possess that value sufficiently which is being critically looked into.”

READ ALSO: Nigerians Knock Seyi Tinubu For Preaching Endurance Over Economic Hardship

In his submission, the nominee from Lagos State, Dr. Mustapha Akinkunmi, said the way out now is to target the exchange rate and not inflation as currently being tackled which hasn’t yielded so much result.

He saod, “A more proactive way of addressing the Naira volatility problem at hand is for the CBN to target the exchange rate itself and not inflation.

“The inflation the country is facing now is largely that of food inflation, which is beyond CBN but for the entire country.

“Production and distribution of food commodities across the country would help to reduce the food inflation, while the aggressive target of the exchange rate, would help to stabilise the Naira with the required increase in productivity.”

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In a similar submission, the nominee from Imo State, Mrs Aku Odinkemelu, said productivity is the key to arresting the volatility of the Naira and food inflation.

Other nominees grilled at the session by the committee were Prof. Murtala Sagagi, Kano State; Bamidele Amoo, Kwara State; and Aloysius Ordu, who worked with the World Bank and the African Development Bank for 30 years at different times.

In his closing remarks, the committee’s chairman, Senator Tokunbo Abiru (APC, Lagos East), told the nominees that their screening was done ahead of the MPC meeting slated for next Monday by the CBN.

Abiru said what Nigerians expect to come after the meeting are solutions to the rising inflation rate, worsening Naira volatility in the forex market and the general rejuvenation of the economy.

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MTN, Dangote Cement, Others Drag Equity Market To N1.8tn Loss

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The equity market opened in the reds on Monday as investors lost about N1.82tn.

Substantial depreciations were observed in bellwether stocks, fuelled by strong sell interest in the market. Specifically, securities such as Dangote Cement, MTN Nigeria, NGX Group, NEM Insurance, and Tantalizer dipped by 10 percent, 10 percent, -9.76 percent, -9.74 percent, and -9.52 percent, respectively.

Both the All-Share Index and the market capitalisation of the local bourse depreciated by 3.15 percent to close at 102,393.23 points and N56.03tn due to waning market sentiment. Hence, the year-to-date return of the index dipped to 36.94 percent from 41.39 percent in the previous trading session.

Trading activities remained subdued into the new week with notable decreases in the total traded volume and value by 17.60 percent and 5.59 percent to 273.85 million units and N7.44bn, respectively. However, the total deals for the day bucked the trend, advancing by 17.60 percent to 9,688 trades.

In eight months of Tinubu administration, Nigeria’s stock market leads the world
Despite the market sentiments, buy pressure was observed in Juli Plc, Daar Communications, Sunu Assurances, ABC Transport, and NAHCO, as their share prices rose by 9.52 percent, 8.64 percent, 6.74 percent, 6.67 percent, and 5.86 percent.

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On the sectoral front, tracked sub-sector indices closed in red territory. The Industrial Goods sector topped the chart for the most losers with a massive 6.02 percent decline, primarily driven by sell-pressure in Dangote Cement. This was followed by the Insurance sector with a loss of 2.49 percent, attributable majorly, to share price declines in NEM Insurance, Linkage Assurance, and VeritasKap.

Sectors such as Banking, Consumer Goods, and Oil/Gas declined by 0.24 percent, 0.77 percent, and 0.28 percent, respectively.

Guaranty Trust Holding Company Plc was the most traded security by volume with 28.85 million units, while Geregu led in value at N1.74bn.

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