In the just concluded week, freshly released inflation report for South Africa showed inflation rate moderated to 4.00% year-on-year in July 2019 (from 4.50% in June 2019), trending towards the lower band of the Reserve Bank’s target range of 3% to 6%.
The southward movement in the annual inflation rate was driven by the decreases in both food and core inflation rates which eased to 3.4% and 4.2% from 3.7% and 4.3% in June respectively.
Specifically, annual inflation for transport softened to 3.0% in July from 5.5% in June, as fuel cost declined by -0.5%, given the lower price of crude oil at the international market.
South African’s Reserve Bank in its July 2019 meeting cut its benchmark repo rate by 0.25% to 6.5%, in order to stimulate growth – GDP growth rate quarter on quarter contracted by 3.2% in Q1 2019.
Elsewhere, following a London court’s judgement delivered in favour of an Irish company, Process and Industrial Development Limited (P&ID), against Nigerian governement to seize the latter’s assets worth USD9.6 billion, the Governor of the Central Bank of Nigeria, Godwin Emefiele, issued a press statement to allay fears in the investment community.
He stated that apart from the fact that the Economic and Financial Crimes Commission (EFCC) had begun probing the 2010 gas pipeline contract agreement between Nigeria and the foreign company which left the country with the said liability (USD9.6 billion), the Federal Government of Nigeria would also be appealing the judgement.
The leader of the oil-rich African country was slammed with the judgement as it reportedly failed to meet its part of the deal which was to build a pipeline and secure supply of gas (up to 150 million standard cubic feet (scf) of gas per day to P&ID – rising to 400 million scf in the life of the 20-year project supply).
In another development, the Chief of Staff to the President, Mallam Abba Kyari, issued query to the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, to explain reasons behind the shortfalls in revenue collections in the year 2015 to 2017 against what was collected in the year 2012 to 2014; stating that the query was necessary in order to avoid financial crisis going forward.
In his response, the FIRS boss stated that the drop in crude oil prices and crude oil production as well as the recession Nigeria went through chiefly engendered the decline in revenue collections from the year 2015 to 2017 compared to what were collected in 2012 and 2014.
According to the FIRS chairman’s reponse, the price of crude oil fell from an average of USD113.72, USD110.98, USD100.40 per barrel (pb) in the year 2012, 2013 and 2014 respectively to USD52.65, USD43.80 and USD54.08 pb in the year 2015, 2016 and 2017 respectively while crude oil production reduced from an average of 2.31million barrel per day (mbpd), 2.18mbpd and 2.20mbpd in the year 2012, 2013 and 2014 respectively to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017 respectively.
He mentioned that FIRS however grew the non-oil tax component of the total revenue collected by over N1.3 trillion (21%) for the year 2016 to 2018 from 2012 to 2014 partly on the back of implemented intiatives such as ICT innovations, continuous taxpayer education and enlightement.
We feel that the London court judgement will serve as warning to the federal government, as well as to the state governments, to desist from the culture of not keeping to the terms of contractual agreements signed with private sector businesses as the practice discourages private investors even from particpating in public private partnership arrangements.
More so, the consequence(s) of settling such humongous liability from the country’s foreign reserves at this period when the price of crude oil – which has a direct impact on Nigeria’s federally collected and distributed revenue – has continued to dwindle could have high damaging impact on the economy.