Business

Capital flight takes toll on the naira as $22.1bn flow out in 5 weeks,

Published

11 years ago

February 23, 2015

—average of $4.5 billion goes out per week
—$18.6 billion was purchased from rDAS in five weeks

The Nigerian economy is facing huge financial hemorrhage as politicians, corporate bodies and foreign investors are moving funds massively out of the country as well as from naira to dollar. In a survey of payments made by the CBN on behalf of the public, a total of $22.1billion went out of the country in five weeks, an average of $4.5 billion a week. While about $3.083billion went out in the week ending 31st July 2014, the amount of foreign exchange flowing out of the country rose to $4.2 billion for the week ending 30th August. It however dropped to $4.1billion on the 30th of September and moved astronomically to $5.29 billion for the week ending 31st October 2014. The foreign exchange outflow went further up to $5.35billion for the week ending November 30th. This capital flight has resulted in the crash of the naira exchange rate which had remained stable before the election and the crash of the international crude oil price.

But the CBN has attributed the collapse of the naira at the inter-bank to currency speculators who buy and hold currency for them to sell at a future date to make some gain. The movement of funds out of the country comes by way of Nigerian residents buying up dollars with their naira and moving it offshore.

The trend became more noticeable in July 2014 where in fact, in a matter of weeks, several billions of dollars were purchased through the banks and bureaux de change. The movement of funds is noticeable from CBN record in direct remittances, whole Dutch Auction sales of dollars etc. According to data obtained from CBN in the five weeks, the total amount of foreign exchange that went out through direct remittances amounted to $3.33billion, Debt service/payment – $155million. The bulk of the outflow went through the wholesale at the Dutch Auction market where a total of $18.6 billion was purchased from the CBN. Curiously, foreign exchange purchases backed by Letters of credit in the five weeks amounted to just $108.8 million.

Capital flight has led to the depletion of Nigeria’s foreign reserves thus weakening the naira. Nigeria’s foreign exchange reserves, which was $5.4 billion in 1999, rose to an overwhelming level of $51.3 billion at end of 2007 and further to $53.0 billion in 2008, but owing to the crash in the international price of crude oil in 2008 and the aftermath of the global financial crisis, the reserve declined to $42.4 billion in 2009, further declined from $38.138 billion at the end of April 2014 to $33.04 billion in February 2015.

Market operators are however seeing it from the perspective that the reduction of credit line to Nigeria banks by their foreign counterparts as a result of the crash in crude oil prices and the uncertainty surrounding the 2015 elections is partly responsible for the high volume of funds leaving the country as the usual 90 days trade credit line has dried up in some banks which have had to meet the needs of their customers through direct cash payment.
The CBN on Wednesday last week scrapped the Retail and Wholesale Dutch auction of foreign exchange saying that all genuine importers should source funds from the inter-bank market. It however said that it will continue to intervene in the inter-bank.

The apex bank in a statement signed by its Director of Communication, Mr. Ibrahim Mu’azu, said: “The managed float exchange rate regime, which the bank had adopted following the liberalisation of the foreign exchange market, has for the most part been successful in ensuring exchange rate stability in line with its mandate.

“In recent times, however, with the sharp decline in global oil prices and the resultant fall in the country’s foreign exchange earnings, the bank has observed a widening margin between the rates in the inter-bank and the RDAS window, thus engendering undesirable practices including round-tripping, speculative demand, rent-seeking, spurious demand, and inefficient use of scarce foreign exchange resources by economic agents.

“This has continued to put pressure on the nation’s foreign exchange reserves with no visible economic benefits to the productive sector of the economy and the general public.
“In view of the foregoing, it has become imperative that appropriate actions be taken to avert the emergence of a multiple exchange rate regime and preserve the country’s foreign exchange reserves.

“Consequently, we wish to inform all authorised dealers and the general public that, with effect from the date of this press release, the Retail Dutch Auction System (RDAS/WDAS) foreign exchange window at the CBN is hereby closed. Henceforth, all demand for foreign exchange should be channeled to the INTERBANK FOREIGN EXCHANGE MARKET. For the avoidance of doubt, all authorised dealers and the general public should note that the CBN will continue to intervene in the inter-bank foreign exchange market to meet genuine/legitimate demands.
In a flash note to investors, Afrinvest said: “This is a positive development as we have always clamoured for a one-way quote to reduce speculation and unhealthy malpractices. The development can be tagged a tacit devaluation of the Naira given that the CBN will sell at the pre-existing inter-bank rates. As a result, we expect to see some stability at the inter-bank market in the short term as there will be no incentive to round trip or speculate given the minimal spread between the inter-bank rate and the parallel market. In addition, the banks will likely forfeit the huge spread earned on forex trading as offer will be filled on “demand basis”.

“Whilst this move may suggest that the CBN has jettisoned the managed floating exchange rate regime, we note that the new system still appears to be linkable to a “guided floating exchange rate” as prices will be market-driven.
However, the banks will still be able to play at the inter-bank window alongside CBN’s intervention as may be genuinely or legitimately required.

“On the economy, this decision may reduce the pressure on the exchange rate in the interim. However, foreign investors may still remain wary of foreign exchange risks in view of depleting external reserves (5.2 per cent decline YTD) and other concerns around the domestic polity. Nevertheless, it is instructive that the volatility and uncertainties within the foreign exchange market space would be taken care of by this policy as speculation is more or less taken out.

This decision is expected to compel the banks to look more inward and focus on real banking generating activities so as to improve their bottom line. The pressure that has confronted the Naira recently has been aggravated by speculative attack mounted at the inter-bank for which the banks have enjoyed certain income spreads. With the new policy, the banks need to remain committed to creating risk assets allowable within the capital adequacy threshold in order to earn more interest income that will enhance profitability.

This decision more or less confirms the new normal of Naira/Dollar at sub N200.00/US$1.00 hence increasing the cost of imported inputs for the FMGCs thereby impacting profit margin. Investors are expected to price-in the new development into the share prices of the FMGCs when taking investment decisions.

The most impact of this decision will be felt in the capital market as we expect equities and bond markets to feel the impact. We do not expect increased inflow from FPIs as foreign exchange risks remain evident despite the re-assurance from the CBN to defend the Naira. Other risks around Nigeria’s credit rating, interest rate and domestic polity will continue to determine the direction of these markets. While we expect bond yields to remain high owing to various macroeconomic risks, we expect the equities market to continue to trade sideways. The pressure on the naira at the foreign exchange market might continue to mount and see further depreciation in value of the naira this year. The Naira fell by 200 kobo on Tuesday, as the parallel market exchange rate rose to N180 per dollar from N178 per dollar on Monday.

Official reserves at the beginning of this week stood at $32.7bn, 18 per cent below end-February 2014 levels. In December, the central bank spent $2.3bn defending the naira. Despite intervening occasionally, the pressure on the naira intensified, leading to the CBN having to shift demand out of RDAS to the inter-bank market. While this brought some relief to the RDAS (the average dollar sale per auction in January was just $248m the inter-bank rate diverged sharply from the official rate. The hand writing was on the wall for de-facto devaluation.

FBN Capital in its note to investors said: “With this announcement, the central bank has effectively shifted all (RDAS) foreign exchange demand to the inter-bank market, thus minimising its role as the “prime” market maker. The move is a necessary one towards ensuring that the naira stabilises and reflects demand and supply dynamics, and should assist in improving market depth and efficiency. It effectively closes the arbitrage opportunity for “round-tripping, speculative demand, rent-seeking and spurious demand.

“The markets had been expecting some kind of adjustment to the foreign exchange rate, discounting the CBN’s regular insistence that the naira was appropriately priced, although the exact timing was difficult to call. As long as the CBN continues to intervene to meet “genuine/legitimate” demand as it stressed, the inter-bank rate should hold at current levels, even with the expected spill-over demand from the RDAS.

With oil prices staging a slight recovery recently to $60/barrel, the naira should see some slight support. Given that all transactions have now been shifted to the inter-bank market, we expect consumer goods companies in particular to feel the impact of CBN’s decision, given that a significant proportion of their raw materials is imported.”

Business

FG earned N2.78trn from Company Income Tax in second quarter 2025—NBS

Published

1 week ago

November 28, 2025

Business News Report

National Bureau of Statistics has said that Nigeria’s Company Income Tax rose sharply in the second quarter of 2025, hitting N2.78 trillion.

The figure represents a significant 40.27 per cent increase compared to the N1.98 trillion recorded in the first quarter of the year, reflecting both improved tax compliance and stronger corporate performance across key economic sectors.

The NBS report said that domestic company income tax payments accounted for the bulk of the revenue, contributing N2.31 trillion, while offshore collections stood at N469.36 billion during the period under review.

According to the NBS, the financial and insurance sector recorded the highest quarter-on-quarter growth, rising by an astonishing 772.29 per cent, driven by improved profitability among banks, fintechs, and insurance firms following robust half-year earnings.

This, according to NBS, was followed by wholesale and retail trade, as well as motor vehicle repair activities, which grew by 538.38%.

Activities of households as employers also surged by 526.79%, although their overall contribution to total company income tax remained negligible.

On the flip side, some sectors experienced sharp declines in company income tax remittances.

Activities of extraterritorial organizations and bodies dropped by –45.01%, while education, public administration, defence, and compulsory social security recorded declines of –26.61% and –18.17% respectively.

The contraction in these sectors, particularly education and public administration, highlights persistent structural and fiscal challenges confronting government-funded institutions.

In terms of contribution to total tax revenue, financial and insurance activities led with a dominant 44.13%, reflecting the sector’s continuing expansion and strong capital flows.

Manufacturing followed with 15.57%, bolstered by increased production output and improved supply chain activity.

Mining and quarrying ranked third, contributing 9.18%, supported by higher commodity prices and renewed interest in solid mineral development.

At the bottom of the contribution chart were activities of households as employers, which accounted for just 0.01%, as well as activities of extraterritorial organizations and bodies, and water supply, sewerage, waste management, and remediation services, each contributing 0.04%. Despite economic headwinds, year-on-year company income tax collection still rose by 12.66% when compared to Q2 2024, underscoring moderate but steady improvement in government revenue mobilisation.

Company income tax collection in the same period of 2024 rose by 150.83 per cent N2.47 trillion. In the first three months of the year, company income tax collection stood at N984.61 billion. According to the report, local payments in the period under review amounted to N1.35 trillion, while foreign CIT payments contributed N1.12 trillion. On a quarter-on-quarter basis, the agriculture, forestry, and fishing sectors exhibited the highest growth rate at 474.50%, followed by financial and insurance activities at 429.76%, and manufacturing at 414.15%.

Business

Lagos govt promises MSMEs continued visibility, market access

Published

3 weeks ago

November 16, 2025

Business News Report

Lagos State government has reaffirmed its unwavering commitment to supporting micro, small, and medium enterprises (MSMEs) across the state through visibility, capacity building, and market access. Commissioner for Commerce, Cooperatives, Trade, and Investment, Folashade Ambrose-Medebem, made the pledge on Sunday at the closing ceremony of the 2025 Lagos International Trade Fair (LITF). The 38th edition of the event, organised by the Lagos Chamber of Commerce and Industry (LCCI), had its theme as “Connecting Business, Creating Value.”

Ms Ambrose-Medebem said every entrepreneur, regardless of scale, deserves an enabling environment to thrive and contribute meaningfully to the state’s economic prosperity. She said the state, through strategic investments in infrastructure, institutional reforms, and continuous engagement with the private sector, was building a Lagos that worked for business. The commissioner added that the state would continue to foster innovation, competitiveness, and sustainability.

“As a government, we remain steadfast in our commitment to making Lagos the preferred destination for commerce and enterprise. This fair has once again demonstrated the power of connection: connection between producers and consumers, investors and innovators, the government and the private sector, and local entrepreneurs and global brands. Every handshake, every conversation, every business card exchanged here is a building block toward the future we are creating, a future of prosperity that leaves no one behind,” she said.

The commissioner urged businesses to continue to connect, collaborate, and create value, saying, “In Lagos, we do not just trade goods; we trade ideas, build futures, and transform lives. “Together, let us continue to make Lagos not just a place of commerce, but a symbol of progress, innovation, and endless opportunity.” Gabriel Idahosa, president of LCCI, urged governments at all levels to continue addressing the issues of creating an enabling environment in the country.Mr Idahosa said focus should be on infrastructure, security, and implementing the right policies to address the key drivers of high inflation.

This, he said, was needed to fully harness the vast enterprising resources of domestic and foreign investors for the diversification of our economy and the welfare of our people. He pledged the commitment of the organised private sector to stand solidly behind the state in its quest to actualise its innovative initiatives on all fronts. NAN

Business

Jumia posts $17.7m pre-tax loss in Q3, down 1% in 12 Months

Published

3 weeks ago

November 12, 2025

Business News Report

Jumia Technologies AG posts a $17.7 million loss before income tax in the third quarter of 2025, down 1% year-on-year from $17.8 million in the third quarter of 2024. The road to profitability has remained long as ecommerce continues to face uncertainties, including widening competition with rivals in the same industry. The e-commerce company revenue came in at $45.6 million compared to $36.4 million in the third quarter of 2024, representing a 25% year-over-year surge in the period. The company reported gross merchandise value of $197.2 million compared to $162.9 million in the third quarter of 2024, up 21% year-over-year. Excluding South Africa and Tunisia, physical goods GMV grew 26% year-over-year, Jumia revealed in the unaudited financials.

Jumia said in its report that the GMV growth was driven by supply and strong marketing execution, partially offset by lower corporate sales in Egypt. Excluding corporate sales, GMV in reported currency grew 37% year-over-year. Nigeria’s momentum accelerated, with order growth up 30% and GMV up 43% year-over-year, Jumia said. The e-commerce giant’s operating loss reduced by 13% year-over-year to $17.4 million compared to $20.1 million in the third quarter of 2024. The company’s adjusted earnings before interest tax depreciation and amortisation loss dropped by 17% to $14.0 million compared to $17.0 million in the third quarter of 2024.

Jumia reported a loss before income tax of $17.7 million, a slight reduction of 1% compared to $17.8 million in the third quarter of 2024. Liquidity printed at $82.5 million, a decrease of $15.8 million in the third quarter of 2025, compared to an increase of $71.8 million in the third quarter of 2024, which included the net proceeds from the August 2024 At-the-Market (ATM) offering, and a decrease of $12.4 million in the second quarter of 2025.

Its net cash flow used in operating activities settled at $12.4 million compared to net cash flow used in operating activities of $26.8 million in the third quarter of 2024 and $12.7 million used in the second quarter of 2025. The result includes a positive working capital contribution of $0.4 million.

Jumia reported that customers’ orders grew 34% year-over-year, driven by strong execution, enhanced product assortment, and healthy consumer demand across key categories. It said quarterly active customers ordering physical goods grew by 23% year-over-year, highlighting continued engagement and customer loyalty. As of September 30, 2025, the Company’s liquidity position was $82.5 million, comprised of $81.5 million in cash and cash equivalents and $1.0 million in term deposits and other financial assets, it said in the report Jumia’s liquidity position decreased by $15.8 million in the third quarter of 2025, compared to an increase of $71.8 million in the third quarter of 2024, which included net proceeds from the August 2024 At-the-Market (ATM) offering, and a decrease of $12.4 million in the second quarter of 2025.

Net cash used in operating activities was $12.4 million in the third quarter of 2025, compared to a net cash used of $26.8 million in the third quarter of 2024 and $12.7 million used in the second quarter of 2025. The result includes a positive working capital contribution of $0.4 million in the third quarter of 2025, compared to a negative working capital contribution of $9.1 million in the third quarter of 2024, primarily reflecting improvements in operating performance.

In addition, the Company reported $1.4 million in capital expenditures in the third quarter of 2025, compared to $0.9 million in the third quarter of 2024, primarily reflecting investments in infrastructure and facility enhancements to support business growth. “This quarter marks a significant acceleration in customer demand and order growth, driven by strong execution across our markets and growing consumer trust in the Jumia brand. We believe Jumia has reached an inflection point as our compelling value proposition, and improved operational discipline position us for sustainable, profitable growth.

“We continue to strengthen our cost structure and sharpen operational discipline, reinforcing our path toward profitability. Our focus remains on execution and customer engagement as we build a more efficient business.
“We believe that we are on track to reach breakeven on a Loss before Income tax basis in Q4 2026 and achieve full-year profitability in 2027, positioning Jumia for long-term growth and value creation.”