Coronomics: Dangote, devaluation, stimulus …

Coronomics: Dangote, devaluation, stimulus …

According to Bloomberg Billionaire’s Index, Dangote’s wealth fell from $15.9bn as of February 25, 2020, to $13.4bn on March 26. As at 27th January 2020, he was worth $16.5bn. He lost about 15.7% of his wealth in 30 days, an equivalent of $2.5 billion. If you calculate from January, it’s about 18% loss in 60 days, an equivalent of $3.1 billion.

Why? What has changed in Nigeria in 30 days?

  • On 17th March 2020, inflation hit 12.20% from 12.13%
  • On 20th March 2020, we received news of the adjustment of the official exchange rate from N306 to N360. Put simply, a 15% devaluation.

You know what? The two terms, inflation and devaluation are harbingers of wealth/capital erosion, if they both visit you in a month, no matter how rich you are you will become poorer.

How does this concern you and your business?

Your wealth, same Dangote rule applies.

Your company’s working capital, say it’s N5 million:

  • At 306, it’s worth 16.3k in dollar terms.
  • At 360, it’s now worth 13.8k in dollar terms.

In context, imagine you placed a bid on 1st March for a project that demands a minimum $16.3k working capital, what this devaluation means to you is that you will need to recapitalise. Devaluation downgrades your capital and compels you to get more.

In more context, on 27th March 2020, Fitch Ratings downgraded the three-highest rated banks in Nigeria, Zenith, GTB and UBA, to Long-Term Issuer Default Rating (IDR) ‘B’ and Viability Rating (VR) ‘b’.

Expect more downgrades as another round of devaluation hangs over our head like an avalanche and COVID-19 infections surge on to force a total lockdown of the economy after crashing oil prices. An economy already infected with rising inflation, depleting reserves, weak infrastructure and rising unemployment.

Government is aware of all this right? Yes, they are, and that’s why they have put the following measures in place to ameliorate your loss at this critical time. It won’t solve many things but it will do something, please pay attention, take advantage; you and your company need every tonic during this crisis.

18th March 2020 – reduction in the pump price of petrol, from N145 to N125

This reduction will save 14% of your running/operating expenses depending on how deep petrol is in your operations or daily life.

16th – 24th March 2020: CBN announced policy measures worth N3.5 trillion

On 18th March 2020, CBN announced N1 trillion intervention in all critical sectors of the economy. The CBN Governor said the stimulus package is in addition to the regime of incentives contained in a six-point palliative announced on 16th March 2020.

The stimulus and measures were further confirmed in the Bank’s MPC communique on 24th March 2020 as measures to ameliorate the impact of the coronavirus on the Nigerian economy. They include:

  1. Additional moratorium of 1 year on CBN intervention facilities
  2. Interest rate reduction on intervention facilities from 9% to 5%
  3. Creation of N50 billion target credit facility for affected households and small and medium enterprises
  4. Granting regulatory forbearance to banks to restructure terms of facilities in affected sectors
  5. Additional N100 billion intervention fund in healthcare loans to pharmaceutical companies and healthcare practitioners intending to expand/build capacity
  6. Identification of few key local pharmaceutical companies that will be granted funding facilities to support the procurement of raw materials and equipment required to boost local drug production
  7. N1 trillion in loans to boost local manufacturing and production across critical sectors.

23 March 2020: FIRS announced the following measures to mitigate the impact of coronavirus on taxpayers:

  1. Extension of timeline for filing of value-added tax and withholding tax from the 21st day to the last working day of the month, following the month of deduction
  2. Extension of the due date for filing of companies’ income tax (CIT) returns by one month
  3. Use of electronic platforms for payment of taxes and processing of tax clearance certificates
  4. Filing of tax returns by taxpayers without audited financial statements which must be submitted within two months of the revised due date of filing
  5. Creation of a portal where documents required for desk reviews and tax audits will be uploaded by taxpayers for online access by the tax authority (Proposed)
  6. Submission of tax returns online by taxpayers via efiling.firs.gov.ng or by designated e-mail accounts published by the FIRS.

24th March 2020: Economic Stimulus Bill by the House of Representatives

The House of Repre­sentatives led by Speaker, Femi Gbajabiamila passed an Eco­nomic Stimulus Bill to help cushion the effect of corona­virus on corporate bodies and individuals as follows:

  1. Protect employees from loss of jobs as a result of COVID-19 by granting a 50% income tax rebate on the total actual amount due or paid as pay-as-you-earn (PAYE) tax under the Personal Income Tax Act, 2004 (as amended), to Nigerian companies who retain all their employees from 1 March 2020 to 31 December 2020
  2. Suspend import duties on medical equipment, medicines and personal protective gears required for the treatment and management of COVID-19 for three months, effective 1 March 2020.
  3. Introduce a new moratorium on mortgage obligations of Nigerians under the National Housing Fund. The Bill was sponsored by all principal officers of the House and is awaiting the Senate’s review and passage before presentation to the President for his assent.

29th March 2020: FG grants 3 months moratorium for repayment of all govt funded loans

President Muhammadu Buhari in his nationwide presidential broadcast on Sunday, 29th March 2020 disclosed the following as part of its efforts to cushion the economic effects of the Coronavirus pandemic.

  1. Three months repayment moratorium for all TraderMoni, MarketMoni and FarmerMoni loans with immediate effect.
  2. Similar moratorium be given to all Federal Government funded loans issued by the Bank of Industry, Bank of Agriculture and the Nigeria Export-Import Bank.

Please stay informed, stay safe, stay at home and let your money work for you.

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