The federal government is expected to raise the Value Added Tax (VAT) to 15 per cent from the current 7.5 per cent by 2027 to enable it fund its fiscal deficit and debt service obligations, including social and job creation projects. International business research firm, Economist Intelligence Unit (EIU), stated this in its Country Report.
The federal government is expected to raise the Value Added Tax to 15 per cent from the current 7.5 per cent by 2027 to enable it fund its fiscal deficit and debt service obligations, including social and job creation projects. International business research firm, Economist Intelligence Unit , stated this in its Country Report.
It said traders will continue to be concerned that controls on the currency could be tightened at any point, adding, however, that another step devaluation is unlikely. "However, our core view is that the CBN will fail to deliver a positive real short-term interest rate, as doing so would cause unemployment at a high political cost."
Nonetheless, the EIU report said,"We maintain our view that a lax monetary-fiscal policy mix will undermine the longer-term value of the naira. In line with a slide in world oil prices from a cyclical peak, we forecast that the currency will end 2028 at N2, 381: $1 and that the spread with the parallel market will be 5-15 per cent."
"The 2024 budget includes a large increase in non-debt recurrent spending as high inflation necessitates higher public-sector salaries and cash transfers to poor households." The report said following the recent hike in MPR by 400 basis points, to 22.75 per cent in February, and the cash reserve requirement by 1,200 basis points,"Another 100 basis points is likely to be added to the policy rate in 2024, assuming deficit monetisation continues and imported inflationary pressures remain strong."
The EIU report predicted real GDP growth to slide from 2.9 per cent in 2023 to 2.5 per cent in 2024. It explained,"Given population growth of about 2.4 per cent, this will mean continued stagnation in GDP per head. Sluggish growth reflects a surge in already high inflation, expected monetary tightening and balance-sheet constraints facing multinationals that earn in local currency, given the naira's collapse.
On policy trends, the report pointed out that market reforms under President Bola Tinubu were intended to attract investment but did not constitute a coherent plan. EIU continued,"Deficit monetisation and high inflation will undermine the currency. A possibility is that monetary policy will be tightened to a point at which foreign investors view the naira more favourably.
"This is probably only achievable towards the end of 2024. In mid-January Nigeria took out a $3.3 billion loan from the African Export-Import Bank, secured on oil revenue in a so-called crude oil prepayment facility.There was a problem processing your submission. Please try again later. Furthermore, the report described the new 650,000-barrel/day Dangote mega-refinery as another possible circuit breaker for the country. It said the facility was gearing up for its first fuel exports, to be followed by cargoes to the domestic market.
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