In line with the Medium-Term Expenditure Framework, President Muhammadu Buhari has approved an amendment to the excise duties for alcoholic beverages and tobacco with effect from June 4, 2018. The government will add an extra fixed tax per cigarette spread over three years (2018: ₦2.00) to the current ad-valorem rate of 20%.
For alcoholic beverages, the current ad-valorem rate will be replaced with specific rates based on volume, spread over three years to moderate the impact on prices. According to the Minister of Finance, Mrs. Kemi Adeosun, even with the increases, Nigeria’s cumulative excise duty rate for tobacco remains below those of its counterparts at 23% (South Africa: 37%). This change is in line with international best practice and comes after recent IMF recommendations to Nigeria regarding increasing excise duties. We note that whilst this should be a boost to the government’s coffers, the amendment comes at a time of still-weak consumer purchasing power.
The Nigerian bourse added 18bps at the close of last week following mixed closes across key sectors, taking the week’s return to +68bps.
This week, whilst we expect general market sentiment to remain mixed, we believe investors will continue to keep an eye on corporate earnings as they trickle in.
Stock Watch: After news that U.S. based private equity firm Milost Global Inc. will be investing in JAPAULOIL, the stock has appreciated for thirteen consecutive sessions. JAPAULOIL was the highest gainer for the week (+54% w/w), for the second week running, closing at ₦0.97. The stock has returned 94% so far this year.
We anticipate further mixed trading this week in the fixed income market as system liquidity remains tight. Also, the CBN would be offering ₦191 billion at the T-bills Primary Market Auction this Wednesday.
TOP RECOMMENDATIONS FOR THE WEEK