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IMF says Nigeria’s quiet reinstatement of petrol subsidy to gulp 50% of oil revenue

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The International Monetary Fund (IMF) has stated that President Bola Tinubu’s administration’s quiet return of petrol subsidy is anticipated to consume about 50% of its estimated oil earnings for this year.

Based on the IMF’s assessment, Africa’s largest producer of crude oil is expected to incur an implicit subsidy of around N8.43tn ($5.9bn), which will reduce its projected N17.7tn of oil earnings. This advice was stated in the most recent IMF staff country report for Nigeria.

The Bank of America estimated that Nigeria may incur a cost of $7 billion to $10 billion this year if it imported a quantity of gasoline ranging from 18 billion to 25 billion litres. Tatonga Rusike, an economist specializing in sub-Saharan Africa at Bank of America, stated in a written communication.

This recent comment was made about a year after the President, during his inaugural speech, publicly halted the disbursement of subsidies.

“Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions. Petrol subsidy is gone,” Tinubu had declared.

The President’s declaration resulted in a surge in petrol prices, which rose from N197 to a range of N480 to N570. The pump price was then increased to N617 per litre and is currently being sold for prices ranging from N620 to N700 per litre.

The report read, “Fuel subsidies were reformed in June 2023, however, adequate compensatory measures for the poor were not scaled up promptly and subsequently paused over corruption concerns.”

“The devaluation of the naira days later, which was aimed at creating a free-floating currency, led fuel prices to more than triple, fanning inflation and protests.

“To help Nigerians cope, authorities started capping fuel pump prices below cost, reintroducing implicit subsidies by end-2023,” the IMF said.

The currency has experienced a depreciation of around 70% against the dollar since last June. Nigeria, although it is the biggest oil producer in Africa, relies on imports for most of its gasoline requirements due to insufficient refining capacity to satisfy domestic demand.

The International Monetary Fund (IMF) stated that it anticipates the elimination of the fuel subsidy to be fully implemented within two years. This will occur as the government expands its cash transfer program, which is specifically aimed at assisting the most impoverished individuals in the country.

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Nigeria: Court insists Binance executive can face trial on behalf of firm

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In an ongoing tax evasion case, a Nigerian court decided on Friday that Binance executive, Tigran Gambaryan, may go to trial on the cryptocurrency exchange’s behalf.

Binance and executives Gambaryan, a U.S. citizen and head of financial crimes compliance, and British-Kenyan national Nadeem Anjarwalla, a regional manager for Africa, face four counts of tax evasion. They are also accused of participating in specialized financial transactions without a license and laundering more than $35 million in another case.

All of them have entered not-guilty pleas on the allegations of money laundering. Following the court hearing on Friday, Binance’s attorney chose not to comment. The attorney for Gambaryan was similarly silent.

“We are deeply disappointed that Tigran Gambaryan, who has no decision-making power in the company, continues to be detained,” a Binance spokesperson said in a statement on Friday after the court hearing.

“These charges against him are completely meritless. He should be freed while discussions continue between Binance and Nigerian government officials.”

Gambaryan is still being held while Anjarwalla left the nation in March. The office of Nigeria’s security adviser has declared that it is collaborating with Interpol to pursue Anjarwalla’s detention.

After its executives were imprisoned as part of a crackdown on cryptocurrencies in February after being invited to the African nation for talks with officials, the CEO of Binance has warned Nigeria of establishing a dangerous precedent.

Nigeria’s Federal Inland Revenue Service (FIRS) has announced that Gambaryan may face prosecution on behalf of the exchange; Binance has not been accused in the tax evasion case.

According to prior statements from Gambaryan’s attorney, Gambaryan was “neither a director, partner, nor company secretary” and did not have any formal authorization from Binance to take on the accusations on the firm’s behalf.

Judge Emeka Nwite decided on Friday that Gambaryan, who is Binance’s chief financial compliance officer and was lawfully designated to represent the company in a meeting in Nigeria, should be served with the charges against Binance.

On Wednesday, Gambaryan is scheduled to appear in court and enter a plea on Binance’s behalf. On Friday, Gambaryan’s request for bail in the money laundering case was turned down. As the nation struggled with ongoing dollar shortages, cryptocurrency websites became the go-to venues for trading the Nigerian naira. Nigeria has blamed Binance for its currency problems.

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Nigerian govt denies reports it plans to borrow pension fund for infrastructure

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The Nigerian government has denied reports that it plans to borrow the N20tn pension fund to finance infrastructural projects.

In a statement made in Abuja, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, stated that the government would abide by the laws and guidelines in place pertaining to the pension fund.

Following a two-day Federal Executive Council meeting at the Presidential Villa on Tuesday, the minister reportedly informed reporters that the government would present a plan to use local funds, including the fund, to finance infrastructure development.

Edunstated that the government does not intend to exceed these legal boundaries, emphasising that the government was committed to protecting workers’ pensions.

“It has come to my notice that stories are making the round that the Federal Government plans to illegally access the hard-earned savings and pension contributions of workers. Nothing could be farther from the truth.

“The pension industry, like most the financial industries, is highly regulated. There are rules. There are limitations about what pension money can be invested in and what it cannot be invested in.

“The Federal Government has no intention whatsoever to go beyond those limitations and go outside those bounds which are there to safeguard the pensions of workers.

“What was announced to the Federal Executive Council was that there was an ongoing initiative drawing in all the major stakeholders in the long-term saving industry, those that handle funds that are available over a long period to see how, within the regulations and the laws; these funds could be used maximally to drive investment in key growth areas,” Edun clarified.

The plan to spend the pension fund was reported and was widely criticised. The Trade Union Congress of Nigeria and the Nigeria Labour Congress had earlier on Thursday urged the government to abstain from making any changes to the pension fund.

They stated, “Nigerian workers have entrusted their hard-earned savings for retirement security, not as a means for government projects. It is imperative to halt any further plans to tap into these funds, especially given the lack of transparency and accountability in past government borrowing practices.”

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