VAT hike, closed borders: Nigerians may face hard times in 2020

The year 2020 may bite the average Nigerian hard with increased VAT, a potential electricity tariff increase and the continued effects of the border closure.

In all, the Central Bank of Nigeria has stood valiantly defending the naira and heavily depleting the country’s foreign reserves. Defending the naira cost more than $3.3bn in the second half of 2019.

The Federal Government’s revenue position is alarmingly untenable, and with the modest increase in the National Minimum Wage still yet to take effect, the CBN simply cannot continue to defend the Naira at current levels,” SBM Intelligence said in their report predicting the events of 2020.

“The Naira will be devalued,” the report said. The prediction is based on the CBN governor’s triggers for a devaluation– reserves at $25 billion to $30 billion, and oil prices at $50 to $45.

“If the current trend continues, the CBN will have to take a decision regarding devaluing the Naira to relieve some pressure on the reserves.”

When the All Progressives Congress was not in power, they heavily protested for the removal of petrol subsidy but after they won the election in 2015, they soft-pedalled on subsidy removal.

SBM Intelligence believes the current drag on the already lean revenues by subsidy means the government will be forced to trim the fat and let go of or adjust subsidy.

“Despite the populist stance of his administration, we expect President Buhari to announce an increase in the price of petrol at some point in 2020.”

The partial closure of the borders wiped out the gains made with the reduction of food and general inflation in the first half of the year. No goods were allowed to move in and out of the country’s land borders with the Benin Republic, Niger and Cameroon.

Although the government has said the border will reopen on January 31, 2020, many believe the government will offer reasons on why the borders should remain shut.