Naira Weakens to 990/$1 on Parallel Market as Dollar Demand Overwhelms Supply

The naira came under intense pressure on Wednesday, leading to a significant depreciation as it fell to N990 to a dollar at the parallel market segment of the foreign exchange market, compared to the N950 to a dollar it traded the previous day.

On the other hand, on the official Investors and Exporters’ (I&E) FX Window, the nation currency appreciated marginally to N771/$1, compared to N777/$1 from the previous day.

The weakening of the naira to a record low took place on a day the Chairman, Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, on Wednesday, disclosed that about N5.24 trillion accrued into the federation account between January and June 2023.

However, with the parallel market at N990/$1 and the official I&E window closing at N771, the gap between the official and parallel market has widened to N219.

THISDAY spoke with some currency dealers in Lagos State, who revealed that the demand for the greenback seen yesterday was unprecedented, just as they attributed the development to speculative demand.

Mr. Ibrahim Salisu, while speaking in an interview with THISDAY, said: “Today started off normal but around 11:30 am till evening, we don’t know what may be responsible but dollar became scarce. I’m unable to find even $2000 as we speak.”

Another parallel market operator who spoke with THISDAY in Lagos, who pleaded to remain anonymous, also confirmed the speculative demand observed on Wednesday.

On the I&E window on Wednesday, the total turnover was $64.36 million compared to the daily volume of $71.01 million exchanged the previous day, as the supply of the greenback continued to wane.

Also, the highest spot rate of the day was pegged at N799.9/$1 while its lowest spot was exchanged at N475/$1.

 Meanwhile, Shehu, yesterday disclosed that about N5.24 trillion accrued into the federation account between January and June 2023.

He said out of the gross revenue inflows, the Nigerian National Petroleum Company (NNPCL) JV Petroleum Profit Tax (PPT) amounted to N627.30 billion, which was captured and recorded by the Federation Account Allocation Committee (FIRS), but utilised by the NNPCL for other FGN obligations.

Shehu, explained that the figures were captured in the monthly report to the Federation Account Allocation Committee (FAAC) by the Central Bank of Nigeria (CBN) under the CBN Federation Account Component Statement.

He, however, noted that the NNPCL did not remit any amount into the federation account during the period either as profit revenue or other revenues as contained in the Petroleum Industry Act (PIA) 2021, as its revenue performance could not be assessed because neither its revenue target was disclosed nor its revenue remittance to the federation account was provided.

A source however told THISDAY on Wednesday night that NNPCL’s none remittance to federation account is essentially due to subsidy payment. “It had to net off the subsidy on importation of pms, since it was compelled to sell  at far below cost price.”

Nonetheless, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) remitted N823.51 billion while the FIRS recorded a gross collection of N3.65 trillion but remitted N3.02 trillion, retaining the difference as the cost of collection during the review period.

Shehu, in a statement made available to journalists, further disclosed that the Nigeria Customs Service (NCS) remitted N764.63 billion.

Also, the sum of N1.49 trillion was realised as Value Added Tax (VAT) while N83.02 billion accounted for revenues from Electronic Money Transfer Levy (EMTL) out of which N3.32 billion was paid to FIRS as cost of collection.

The FIRS also received N82.03 billion and N3.32 billion as cost of collection on PPT/CIT and EMTL collections respectively in the period.

The report revealed that both FIRS and NCS together received N59.59 billion as cost of collection within the period under review while the NUPRC received N33.96 billion.

Similarly, N16.68 billion was realised from the solid minerals sector.

The RMAFC boss also revealed that N1.38 trillion was shared to the three tiers of government in accordance with the approved VAT sharing formula during the period while N1.11 billion was paid in consultation fees on VAT.

On the statutory allocations to the three tiers of government, Shehu said N3.06 trillion was shared among the tiers of government within the review period.

He said N48.10 billion was paid to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), adding that, “this money was collected by NUPRC as penalty on gas flared.”

He clarified that revenues on gas flare penalty used to be part of the federation account’s revenues before the PIA, 2021 which provided that such revenues should be paid 100 per cent to the NMDPRA.

Shehu, however, described the 32.27 per cent statutory deductions of the total gross inflow into the federation account as superfluous adding that it constituted a drain on the treasury.

According to him, the sum of N1.69 trillion was deducted at source by the office of the Accountant General of the Federation as approved statutory deductions.

He said there was a further deduction of the sum of N70 billion by the FIRS under the name of FIRS Priority Projects in the second quarter.

He argued that the Nigerian economy at the moment required some pragmatic measures to enhance distributable revenues to the three tiers of government for the overall development and growth of the country.

The RMAFC, among other recommendations on the operations and management of the federation account, advised that payment of the cost of collection to revenue-generating agencies should receive a cost of collection that is commensurate to the revenue generated against its revenue target in the Appropriation Act.

Among other things, the commission stressed the need for the government to review the payment of 100 per cent (less cost of collection) revenue realised from gas flared penalty to the NMDPRA, adding that the gas flare penalty was hitherto a Federation Account revenue component taken over by the PIA, 2021.

Other recommendations included the need to holistically review all legislations with respect to statutory deductions to allow for an increase in the amount to be shared among the three tiers of government; greater emphasis on the solid minerals sector to improve revenue generation therefrom and further achieve economic diversification;

It said no further deduction should be made by the FIRS under the ‘priority projects’ to avoid a repeat of the situation under NNPC where a large chunk of funds was deducted as first line charge under the NNPC priority projects; and that all accruals due on 13 per cent Derivation should be deducted as at when due to avoid refunds in the future.

Shehu said, “This is to guarantee accountability, probity, and transparency in the management of the Federation Accounts and disbursements to the 3-tiers of government.”

The commission also recommended that all NNPCL JV PPT should be paid to the federation account through FIRS, adding that such taxes should not be retained by the company in the name of financing FGN priority projects.

It said NNPCL should be made to remit promptly all revenues due to the federation account as and when due in compliance with the provisions of the PIA, 2021.

The chairman, however, reiterated the commitment of the commission to ensuring the elimination of opacity in the management of the country’s commonwealth and promoting prudence, transparency and accountability in line with the new administration’s Renewed Hope Agenda which promises a new era for economic growth and development.

James Emejo and Nume Ekeghe

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