15 Jun

Daily Watch – Aba shoemakers worry over Chinese investor, FG goes after offshore tax evaders

  • The FG has started a move aimed at stopping major companies from evading tax. To achieve this, the Federal Executive Council has given the Ministry of Finance the go ahead to sign a multilateral convention to implement tax treaty related matters to prevent base erosion and profit shifting. Minister of Finance, Kemi Adeosun, said, “This administration is very focused on revenue generation and mobilisation and part of that work is to improve our tax collection. One of the means by which major companies evade tax is a practice called base erosion and profit shifting which means that the profit that was made in Nigeria using accounting methods is shifted it to a country that has little or no tax. There is a contact among the G20 countries and the OECD to end this and Nigeria was part of those who negotiated this convention and today council gave us permission to go and sign the conventions.”
  • The foreign exchange market has recorded a noticeable convergence between the investors and exporters window (I&E) and the black market. The US dollar was quoted at the rate of ₦367/$ at both markets, after trading Wednesday. Analysts say this is an indication of rising confidence, occasioned by sustained intervention of the CBN in the market. The CBN has been intervening in the official market, in an effort to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, improving dollar supply and providing support for the naira. A BDC operator however said the stability of the naira was due to low patronage and expected dollar sales to BDCs. Isaac Okorafor, CBN spokesman, expressed confidence that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.
  • Fitch Ratings has assigned Nigeria’s upcoming dollar-denominated senior unsecured bonds a rating of ‘B+(EXP)’. This indicates that the relative stability in the foreign exchange market with reversal of the slide in GDP did not reflect in the expectations for the bond offer. In January, Fitch affirmed Nigeria’s long-term foreign-currency IDR at ‘B+’ and revised the outlook to negative from stable. The long-term local-currency IDR was also ‘B+’ with a negative outlook, all reflecting the trepid foreign exchange market and sustained recessionary pressures. The agency said the assignment of the final rating is contingent on the receipt of final documents materially conforming to information it already reviewed. It also noted that the expected rating is in line with Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘B+’. The DMO will commence a ten-day roadshow in June in the United States, UK and Switzerland, for the country’s first diaspora bond of $300 million.
  • Shoemakers in Aba’s Ariaria market are worried about the Abia state government’s plan to bring a foreign investor to compete with local shoe-makers.The Vanguard reports that the shoemakers are fearful that the arrangement would strip them of their little income and make them jobless. One interviewee said that the government may benefit from the taxes the investor would pay but noted that the investor would in turn take the made-in-Aba shoe market away from them. The Abia state government had April 2017 secured a $1.5 billion deal for Mr Zhang Huarong’s Huajian Shoe Industry based in Dongguan, Guangzhuo, China to establish a factory in Aba. The government had said that the Chinese investor’s presence would engender competition among shoe-makers in Aba.
  • Nigeria’s external reserves have dropped to $30.22 billion, the lowest level in three months. The CBN said that the drop happened on Tuesday June 13, representing a weekly decline of $68 million when compared with the $30.290 billion achieved on June 6. The reserve has been on the downward trend since May 4th when it reached a peak of $30.99 billion. Since then, the reserve has dropped by $770 million.