Opulence 365

31-07-2024

This month we explore the strategic manoeuvres shaping our world—from the gripping action of the 2024 Olympics to significant economic shifts. Introducing our theme for July 2024 newsletter: ‘Opulence 365’ — a concept that underscores strategies designed to drive success throughout the entire year.

In Nigeria, changes such as adjustments in Withholding Tax, the Bank Windfall Levy, and Monetary Policy Rate hikes, are noteworthy. Simultaneously, the U.S. Presidential elections continue to capture global attention with its distinctive twists. Here, we unpack these developments and their implications for the savvy investor (you).

“With money comes great power that requires the right knowledge to keep it and make it multiply”

– Robert Kiyosaki

Resilience in Action: How the U.S. Economy Thrived Despite Global Disruptions  

In a summer marked by several challenges, from hurricanes to cyber glitches, the U.S. economy still managed to shine. Amidst rising crude oil prices fuelled by geopolitical tensions and Hurricane Beryl’s disruption of oil supplies, the U.S. economy demonstrated unexpected resilience. Despite notable drops in crude inventory, U.S. businesses continued to flourish.

The U.S. economy grew by 2.8% in the second quarter of 2024, up from 1.45% in the first quarter, bolstered by increased consumer spending and business investment. The rise in crude oil prices, while notable, didn’t dampen the economic spirits, and the brief cyber outage triggered by a system update from cybersecurity firm CrowdStrike has now been resolved. This glitch, which may have caused disruptions in sectors like healthcare, finance, and personal computing, was a minor bump in the road compared to the broader economic uptrend.

Don’t We All Seek a Better Financial Market?

Nigeria’s financial landscape was buzzing with activity in July 2024. Central Bank Governor Yemi Cardoso’s new regulations, which now permit banks to deposit excess currency directly at Central Bank of Nigeria (CBN’s) branches, was a strategic move to stabilize the financial system. New limits for foreign currency deposits were also introduced, as part of an ongoing recapitalization plan for banks.

However, the Nigerian financial scene faced its own set of challenges. The Securities and Exchange Commission (SEC) imposed sanctions on banks failing to meet recapitalization requirements. Meanwhile, the CBN’s decision to sell $20,000 to Bureau De Change (BDC) at ₦1,450/$ and introduce new guidelines for dormant accounts has not done much to ease the liquidity issues as the exchange rate has climbed up to ₦1,609/$.

Also, the CBN’s persistent rate hikes, including a recent increase to 26.75% from 26.25%, have added to the financial strain. While the intent behind higher rates is to curb inflation, the Nigerian economy has yet to see the balance between rate hikes and inflationary pressures.

That’s not all!

The Finance Act Amendment, which increases the windfall levy on banks to 70%, reflects Nigeria’s ongoing fiscal adjustments. This move comes on the backdrop of a significant devaluation of the Naira over the past year, and a harsher landscape for Nigerian businesses. Banks with long positions in foreign currencies have thrived, while those with unhedged liabilities have faced tough times.

The proposed windfall tax has sparked debate. If implemented, it would tax realized profits from exchange transactions at 70%, a jump from 50%. This shift could create complexities in profit allocation and affect banks’ effective tax rates, given the deferred tax liabilities previously recognized under the 30% rate.

Reader’s Corner

“Think of it this way: Once a dollar goes into your asset column, it becomes your employee. The best thing about money is that it works 24 hours a day and can work for generations.”

– Robert Kiyosaki

As we navigate through these turbulent times, it’s clear that both governments and businesses are adapting their strategies to ensure economic resilience.

For readers keen on financial mastery, understanding these dynamics is key. Embrace the learning curve, stay informed, and remember, investment and strategic planning are essential to achieving financial success.  

Until next time, keep investing in your financial knowledge and adopt the right strategies!

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