Nigeria in brief: Key economic and business updates

Good evening from Abuja, Nigeria.

This is Samuel Okocha, your curator and editor at 234Digest. As we transition from our weekly editions to more frequent daily snapshots, I’m excited to bring you the latest updates on Nigeria’s economy and business environment. Today marks our third daily edition, and, again, I hope you find these briefings insightful and engaging. Remember, our deeper dives will continue every Sunday.

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Today’s brief

Nigeria’s energy sector gets a boost

The Nigerian Government has announced value-added tax (VAT) exemptions on several energy products, including diesel, Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), electric vehicles, and clean cooking equipment. These exemptions, introduced through the VAT Modification Order 2024, aim to reduce living costs, improve energy security, and support Nigeria’s transition to cleaner energy sources.

Tax incentives for deep offshore oil operations

In a related move, new tax incentives have been introduced for deep offshore oil operations and gas production under the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. These incentives are designed to position Nigeria’s deep offshore basin as a prime location for global oil and gas investments. Nigeria hopes to attract as much as $10 billion in new investments in deep-water gas exploration through tax breaks and other measures proposed in a new policy framework for the industry. The Federal Executive Council has approved the framework, which will now move to the National Assembly to be passed into law.

Central bank to automate forex trades

Meanwhile, Nigeria’s central bank is set to automate foreign currency trades from December, ditching a nearly decade-old over-the-counter trading system in a bid to enhance transparency and remove market distortions. The Central Bank of Nigeria (CBN) announced that the new system would “facilitate a market-driven exchange rate accessible to the public” and released new guidelines for players in the foreign exchange market. A two-week test run is scheduled for November.

Private sector activity expands

On the economic front, Nigerian private sector activity expanded for the second straight month in September as new orders rose, especially for chemical and pharmaceutical products. The central bank’s purchasing managers index (PMI) of private-sector activity rose to 50.5 points from 50.2 points in August, above the 50-point line that denotes increases in activity. However, President Bola Tinubu’s reforms to the currency market and cutting of petrol and electricity subsidies have stoked inflation, eroding Nigerians’ purchasing power. The PMI report noted that 23 out of 36 sub-sectors reported growth in September, with cement posting the highest rise, while transportation and warehousing reported the biggest decline.

Interest rate hikes and economic impact

Finally, the central bank has hiked interest rates five times this year to tackle inflation, but analysts say this has raised the cost of borrowing for businesses, negatively impacting economic activity. Despite these challenges, the administration remains committed to sustainable growth and boosting Nigeria’s global competitiveness in oil and gas production.

Quote of the day: “The future belongs to those who believe in the beauty of their dreams.” – Eleanor Roosevelt

Photo of the day

And that’s a wrap. Thank you for joining me for today’s edition of 234Digest. As I continue to bring you the latest updates on Nigeria’s economy and business environment, I appreciate your readership and support. Don’t forget to tune in on Sunday for our deeper dive edition.

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Have a wonderful weekend.