This would mean that borrowing becomes costlier; the CBN also aims to use monetary policy rates to control inflation.

The Central Bank of Nigeria has increased monetary policy rate to 27.50% from the earlier 27.25% in which it was pegged.  This would mean that borrowing becomes costlier; the CBN also aims to use monetary policy rates to control inflation.  It is also aimed at ensuring that the naira becomes stronger.

According to a post on the official X account of the CBN, the bank voted to increase monetary policy rate by 250 points.  “The Monetary Policy Committee (MPC) Voted unanimously to raise Monetary Policy Rate (MPR) by 250 basis point from 27.25% to 27.50%” the statement read.

The CBN also voted to “retain Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks.”  “The Committee also retains the Liquidity Ratio (LR) at 30% and Asymmetric Corridor at +500/-100 basis points around the MPR.” the apex bank posted.

The increase in monetary policy rates have failed to reduce the inflation in the country with general inflation and food inflation experiencing increase.  It is unclear if the CBN monetary policy rate does not affect government borrowings as state governments have continued to borrow increasingly from domestic sources.  The CBN have continued to insist that increasing monetary policy rates were vital to economic stability and recovery in the country.

According to the International Monetary Fund (IMF) in its October 2024 World EconomicOutlook, Nigeria’s inflation remains in double digits and exceeds targets in nearly half of the region. Although regional GDP-weighted headline inflation is expected to decline from 18.1% in 2024 to 12.3% in 2025 and will remain higher in oil-exporting countries like Nigeria. Projected fiscal consolidation is expected to improve the external sector, with the median current account deficit decreasing from 4.3% in 2024 to 3.7% in 2025.

However, oil exporters like Nigeria might see their current account surpluses narrow from 1.5% to approximately zero percent. Recent macroeconomic adjustments, such as reductions in fuel subsidies and increased exchange rate flexibility, have intensified short-term hardships.The IMF projects that Nigeria’s real GDP growth will increase from 2.92% in 2024 to 3.3% in 2025, while consumer price inflation is expected to decline from 32.5% to 25.0%. External debt is projected to increase from 22.7% of GDP in 2024 to 25.0% in 2025, and reserves are expected to increase to 7.2% of imports, up from 6.8%.

The government needs to put policies in place to curb inflation to ensure the decline projected is attained. Additionally, domestic resource mobilisation should be a priority to reduce the need for borrowing and increase fiscal expenditure.

According todata from the Central Bank of Nigeria (CBN) on money and credit,money in circulation increased by 56.13% year-on-year, reaching N4.31 trillion in September 2024, up from N2.76 trillion in September 2023. This surge reflects a 4.04% rise in cash circulating in the economy, rising from N4.14 trillion in August 2024. This trend highlights Nigeria’s heavy reliance on cash transactions,with cash held outside banks growing faster than money issued for circulation. Also, Nigeria’s money supply (M3) increased substantially to N66.95 trillion in September 2024, up 62.8% from N41.94 trillion in the previous year and showing a 1.6% rise from N65.19 trillion in August 2024.

However, the increase in currency circulation and overall money supply suggests pressures that may exceed Nigeria’s productive capacity, contributing to Increase in inflation. Approximately 93.1% of Nigeria’s currency in circulation was being held outside banks in September 2024, compared to 87.5% the previous year. The shift may be attributed to factors such as low trust in banking services, inflationary pressures, and the cash-dependent nature of Nigeria’s informal economy.

The rising currency circulation and expanding money supply present complex challenges for the economy, highlighting the need for targeted policy interventions. The Cashless Policy by the CBN aims to reduce reliance on cash transactions, potentially easing inflation by controlling currency circulation and money supply. Therefore, addressing challenges like network glitches and insufficient ATMs to ensure that effective electronic payment systems are available to implement this policy for conciseness and clarity.

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The Federal Executive Council (FEC), yesterday approved a N47.9 trillion federal budget estimate for the 2025 fiscal year during its meeting at State House, Abuja. Briefing newsmen after the FEC meeting held at the Council Chambers and presided by President Bola Tinubu.

Minister of Budget and Economic Planning, Atiku Bagudu, explained that the budget approval was part of the Medium Term Expenditure Framework (MTEF) for 2025-2027, in accordance with the Fiscal Responsibility Act 2007. Bagudu said the executive will put necessary efforts in place to ensure that the 2025 budget estimate was passed by the National Assembly and signed into law by the president before the end of December. Bagudu explained that FEC pegged the price of crude oil at $75 per barrel, exchange rate at N1,400 to the dollar, and oil production at 2.06 million barrels per day. He added that with the growth rate of 3.19 per cent, which came in the second quarter of 2024, the federal government will continue to tackle inflation, strengthen economic resilience, and provide more support for the economy in 2024.

Consumer prices in Nigeria increased by 118bps to 33.88% y/y in October (September: 32.70% y/y). The outturn is 39bps and 48bps higher than Cordros’ (33.49% y/y) and Bloomberg’s median consensus (32.40% y/y) estimates, respectively. On a month-on-month basis, headline inflation increased by 12bps to 2.64% (September: 2.52% m/m).

Food inflation rose significantly by 139bps to 39.16% y/y in October (September: 37.77% y/y). The higher Food inflation on a year-on-year basis was driven by increases in prices of the following items: Guinea Corn, Rice, Maize Grains, Yam, Water Yam, Coco Yam, Palm Oil, Vegetable Oil, Milo, Lipton, and Bourvita. On a month-on-month basis, food prices surged by 30bps to 2.94% (September: 2.64% m/m).

Similarly, core inflation (All items less farm produce and energy) increased by 94bps to 28.37% y/y (September: 27.43% y/y). The highest increases were recorded in prices of the following items: Bus Journey within the city, Journey by motorcycle, Bus journey intercity, Rents (Actual and Imputed Rentals for Housing Class), Meal at a local Restaurant (Accommodation Service Class), hair cut service, woman hairbrush, and women’s hairdressing (Hairdressing salons & personal grooming establishments Class). The core index settled at 2.14% m/m in October 2024 compared to the 2.10% m/m in the previous month

The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said the apex bank is prepared to use any tool at its disposal to manage inflation, which has continued to spiral northward.

Inflation figures had risen to 32.7 per cent in September after receding for two months as price pressures have been exacerbated by the government’s decision to scrap petrol and electricity subsidies and to devalue the naira twice since President Bola Tinubu took over last year.

Cardoso, speaking at the FT Africa Summit in London, said the apex bank is ready to use any tools at our disposal to manage inflation; as he said, he expected headline inflation to moderate in the coming months, and food inflation was proving stickier. Noting that the bank was working closely with the government to address this, Cardoso said Nigeria must not slacken in its reform drive as it is beginning to attract ‘growing and serious interest’ from foreign investors, citing recent visits to the country by Citigroup CEO Jane Fraser and JPMorgan’s Jamie Dimon

The National Pension Commission (PenCom) has directed licensed pension fund administrators (LPFAs) to suspend further investment in commercial papers with immediate effect. Commercial paper is a short-term debt instrument issued by corporations to finance inventory, accounts payable, payroll, and other short-term liabilities.

In a circular with reference number ‘PENCOM/TECH/ISD/2024/402’, dated October 23, and signed by the Head surveillance department of PenCom, A.M. Salem, the commission said the Securities Exchange Commission (SEC) did not have established regulatory framework on the issue. According to the News Agency of Nigeria, the circular was addressed to managing directors and chief executives officers (CEOs) of all LPFAs.

PenCom warned the LPFAs to desist from investing in the affected portfolio pending the issuance of guidelines on the issuance of commercial papers by the SEC. “PenCom has noted the increased investment by Licensed Pension Fund Administrators (LPFAs) in commercial papers issued by limited liability companies,” the commission said.

Nigeria’s  contributory pension assets hit N21.14  trillion at the end of August 2024 as against  N20.79 trillion recorded in July 2024, showing N345.65 billion increase.

According to latest data from the National Pension Commission (PenCom), the number of registered contributors, otherwise called Retirement Savings Account (RSA) holders, also grew to 10, 457,073 at the end of August 2024, from 10,419,520 recorded in July.

In second quarter (Q2) 2024, total contributions moved into individual RSA holders’ accounts stood at N 377 billion,  with the  public sector contributing N217 billion. The private sector contributed N160.83 billion, according to PenCom data compiled by analysts at the Pension Fund Operators Association of Nigeria(PenOp).

In the second quarter (Q2) of 2023, public sector contributions were higher at N286.69 billion, while the private sector contributed N234.47 billion, showcasing strong performance from both sectors. By contrast, in Q2 2022, the public sector contributed N136 billion, and the private sector, N101.96 billion, showing a steady but more modest increase in contributions.

Looking back at Q2 2021, both sectors contributed almost equally, with N97.17 billion from the public sector and N97.91 billion from the private sector.

This marked a year where the gap between sectors was minimal, signalling balanced pension remittances. In Q2 2020, the public sector contributed N118.50 billion, while the private sector’s contribution was lower at N70.69 billion, PenOp said.

Overall, the public sector has generally led in pension contributions over the years, but the private sector has been catching up steadily, especially since Q2 2021, where it nearly matched and sometimes exceeded public sector contributions. This growth suggests improved compliance, increasing employer participation, and growing awareness of pension obligations in both sectors. However, if more states were to join the Contributory Pension Scheme (CPS), these numbers could improve even further. Increased participation from states would lead to greater compliance, a broader base of contributors, and ultimately, a more robust pension system that could drive higher remittances and financial security for retirees across the country, analysts say.

JUST IN: President Bola Tinubu has transmitted tax reform bills to the National Assembly for consideration.
The details of New Nigeria Tax Bill:

TAX RATES & BASIS:

Corporate Income Tax (CIT):

• Small companies (annual turnover below ₦50 million): Exempt from CIT.

Other companies:

• For the year of assessment 2025: 27.5% of taxable profits.
• From 2026 onwards: 25%.

Personal Income Tax (PIT):

• First ₦800,000: 0%.
• Next ₦2,200,000: 15%.
• Next ₦9,000,000: 18%.
• Next ₦13,000,000: 21%.
• Next ₦25,000,000: 23%.
• Above ₦50,000,000: 25%.

Withholding Tax (WHT):

• As contained in the earlier gazetted WHT REGULATIONS, 2024

Capital Gains Tax (CGT):

• 10% on gains arising from the disposal of chargeable assets, including real estate and shares.

Value Added Tax (VAT):

The VAT rate specified in the New Tax Bill is as follows:

• For the year 2025, VAT is set at 10%.
• For the years 2026, 2027, 2028, and 2029, VAT is set at 12.5%.
• From 2030 onwards, VAT will be set at 15%.

These progressive rates reflect a strategic approach to increase VAT over time, aligning with the government’s revenue optimisation goals.

Digital Assets and Transactions:

Taxed similarly to financial instruments, with gains subject to Capital Gains Tax at 10%.

5 KEY HIGHLIGHTS:

Digital Economy Inclusion: The Bill recognises and introduces taxation for digital assets, online services, and fintech activities, bringing the Nigerian tax system in line with international standards.

Consolidation of Tax Laws: By merging various tax regulations into a single legal framework, the Bill simplifies tax administration and compliance, reducing complexity for taxpayers.

Tax Incentives and Reliefs: The Bill includes provisions for small businesses, exempting those with an annual turnover below ₦50 million from Corporate Income Tax, encouraging entrepreneurship and small-scale enterprise growth.

Withholding Tax (WHT) Adjustments: The Bill streamlines WHT rates for various transactions, ensuring taxes are deducted at source, reducing the likelihood of tax evasion.

Removal of VAT on Rent: In line with the Finance Act, VAT is no longer applicable to rent-related transactions, reducing the financial burden on businesses and individuals who lease properties.

Taxation of Gains from Digital Assets: Gains from digital transactions are now clearly subject to Capital Gains Tax, reflecting the growing importance of the digital economy.

The New Tax Bill marks a major reform in Nigeria’s tax system, offering a comprehensive, unified, and modern framework for taxation. By broadening the tax base, simplifying compliance, and recognizing emerging sectors such as the digital economy, it positions Nigeria to enhance revenue generation while promoting fairness and equity. As the Bill takes effect from 2025, it is expected to streamline tax administration, support business growth, and encourage compliance, all while fostering a tax system that is responsive to the needs of a rapidly evolving economy…