E-Financial
Fed Makes Emergency Rate Cut, What Does this Mean for Nigeria?
By Lukman Otunuga, Senior Research Analyst at FXTM,
The Federal Reserve caught markets completely off-guard this week by lowering interest rates by 50 basis points.
It’s the first unscheduled, emergency rate cut since October 2008 and also marks the biggest one-time cut since then.
Rising concerns over the coronavirus outbreak impacting economic growth have forced central banks across the world to ease monetary policy with the Federal Reserve joining the squad. According to the Fed, “the fundamentals of the U.S economy remain strong. However, the virus poses evolving risks to economic activity.” This emergency rate cut certainly opens doors to further rate cuts in the future which is good news for emerging markets including Nigeria.
Lower US interest rates may provide an opportunity for the Central Bank of Nigeria to ease monetary policy in an effort to stimulate consumption which accounts for 80% of GDP. These efforts may be complicated by inflation which rose for the fifth straight month to 12.3% in January 2020. Although one of the central bank’s objective is to achieve price stability, a rate cut in the face of the coronavirus outbreak could support economic growth in 2020.
Sentiment towards the Nigerian economy has improved over the past few weeks amid positive economic fundamentals and encouraging Q4 GDP data. However, falling oil prices, global growth concerns and questions whether Nigeria will meet its oil revenue goal have fostered a sense of caution.
On the bright side, Nigeria reclaimed its title as the largest economy in Africa after South Africa entered a technical recession. Unstable domestic conditions inspired by power cuts weighed heavily on output and business confidence in South Africa with shaky global conditions compounding to the pain. While Nigeria was able to expand 2.55% in Q4, South Africa’s economy went the other direction by contracting 1.4%.
It remains uncertain whether Nigeria will be able to mirror a similar expansion in Q1 of 2020 due to severely depressed Oil prices and slowing global growth. The commodity has dropped over 20% since the start of the year and could weaken further on demand side fears. Given how roughly 90% of export earnings and over 50% of government revenues are from crude exports, this certainly presents significant risks to economic growth.
The government needs to find other sustainable revenue sources to reduce exposure to external risks. It is widely known that diversification remains the key to Nigeria’s woes but this requires massive investments in infrastructure and time. There has been a push to expanding the tax base to raise non-oil revenues, but it remains to be seen whether this will have the desired results. Value added tax (VAT) has been increased from 5% to 7.5%. This could line the government’s coffers but it may come at the expense of rising inflation.
All eyes will be on the OPEC meeting this week which is expected to conclude with the cartel initiating deeper supply cuts. While such an outcome could push oil prices higher, the upside will most likely be limited by demand side uncertainties fuelled by the virus outbreak.
Fidelity Bank has announced a three-month extension of its Get Alert in Millions (GAIM) Season 6 promo, now running until November 30, 2025, with total cash rewards increased from ₦159 million to ₦189 million.
L-R: Direct Sales Executive, Fidelity Bank Plc, Adegboyega Ademokunwa; GAIM 6 Eight Monthly draw Winner, Innocent Okoro Orji; Branch Leader, Fidelity Bank Plc, Gbagada, Chinwe Umez-Eronini; and Product Manager, Savings, Fidelity Bank Plc, at the GAIM 6 prize presentation ceremony held at Gbagada Building Materials market in Lagos recently.
This move follows strong customer demand for more participation time and has received full regulatory approval.
Originally launched in November 2024 for nine months, the GAIM 6 campaign was set to end in August 2025. However, based on customer feedback, the bank extended the promo to allow more Nigerians to benefit.
Recently, the bank celebrated 20 winners nationwide, each receiving ₦1 million through electronically supervised draws overseen by the Federal Competition and Consumer Protection Commission (FCCPC) to ensure fairness.
With over ₦30 million still up for grabs in upcoming monthly draws, the final prizes include ₦2 million for second runner-up, ₦5 million for first runner-up, and a ₦10 million grand prize. Recipients also gain access to financial advisory support at the Fidelity SME Hub to help maximize their rewards.
Fidelity Bank serves over 9.1 million customers through digital channels and 255 branches, earning various awards for innovation, digital transformation, and SME banking excellence.
The bank continues to promote savings culture and financial empowerment across Nigeria through initiatives like GAIM.
Dr Daramola Omoyele, an economist and data analyst has warned that the introduction of a Tax Identification Number (TIN) under Nigeria’s new taxation legislation could compromise efforts towards stronger financial inclusion.
An estimated 38 million Nigerian adults are currently unbanked.
Nigerian Observer quoted Omoyele as explaining that the TIN, which by the new law is a requirement for bank account opening and filing of tax returns, adds up to several other digital IDs existing in a siloed system.
There is the National Identification Number (NIN), the Bank Verification Number (BVN), and the general multipurpose card, among other existing ID numbers, he pointed out.
The TIN is provided for in the Nigeria Tax Administration Act 2025 which was enacted in June, but couldn’t immediately go into force due to contention from different national stakeholders in the country.
Recently, the federal government announced that the legislation is now expected to go into force in January 2026, and will help the country in efforts to strengthen tax compliance, broaden the tax base for more revenue, and digitalize the tax administration.
To Omoyele, it would have been better for the government to build on the blocks which are already in place, citing the NIN as an example, for a harmonized data system and single digital ID to be used for different purposes.
Beyond that, there are fears that the current challenges in obtaining the NIN and other digital IDs could be replicated in the process of obtaining the TIN.
The federal government has highlighted the need for data harmonization in the past, but concrete results are yet to be obtained.
Omoyele cited examples of countries like India where the Aadhaar digital ID is used across services. South Africa also recently unveiled a roadmap for a single digital ID system to be used for multiple services.
“The irony is that Nigeria already has the building blocks of a single digital identity. The NIN was designed to be the master ID, while the BVN has captured biometric and financial data for millions of bank customers,” The Nigerian Observer quoted Omoyele as saying.
“Instead of harmonising these, the new TIN law introduces another obstacle at a time when about 38 million adults remain unbanked.”
“Nigeria must stop building silos and start building systems that talk to each other. One number is enough. The new TIN law is well-intentioned, but it risks worsening an already messy identification system,” he added.
The Central Bank of Nigeria (CBN) has issued a new directive mandating all Domestic Systemically Important Banks (DSIBs) to publicly announce the appointment of a new Managing Director/Chief Executive Officer (MD/CEO) at least three months before the scheduled exit of the incumbent.
In addition, banks are required to obtain regulatory approval for the successor’s appointment no later than six months before the current MD/CEO’s tenure ends.
The CBN said that the move was aimed at ensuring seamless leadership transitions and reducing potential disruptions in the top management of key financial institutions.
“This requirement is aimed at: minimising disruptions at the top management level. Enabling appointees to adequately prepare for their new roles, and mitigating risks associated with abrupt leadership changes”, the apex bank noted.
This was contained in a circular to DSIBs and signed by Rita I. Sike Director, Financial Policy & Regulation Department, CBN.
According to the circular, Section 2.14 of the CBN corporate governance guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria (2023) mandates the boards of such institutions to approve succession plans for their Managing Directors/Chief Executive Officers (MD/CEO), Executive Directors (EDs), and senior management staff.
“In view of the critical role Domestic Systemically Important Banks (DSIBs) play in maintaining financial system stability, the CBN reiterates the importance of effective succession planning in these institutions.
“Accordingly, and in line with sound corporate governance practices, each DSIB is required to: obtain regulatory approval for the appointment of a successor MD/CEO not later than six months before the expiration of the incumbent’s tenure.
“Publicly announce the appointment of the successor MD/CEO not later than three months before the planned exit of the incumbent. You are hereby directed to ensure strict compliance with the above directives,” the circular added.
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