Global News: US Postal Service flip-flops on Hong Kong-China packages, lifting a ban imposed a day earlier.
Nigerian Government Increases 2025 Budget from N49.7trn to N54.2trn
The U.S. Postal Service is reversing course a day after placing a ban on all inbound packages from China and Hong Kong. The post office had announced Tuesday that it would no longer accept parcels from the China and Hong Kong after the U.S. imposed an additional 10% tariff on Chinese goods and ended a customs exception that allowed small value parcels to enter the U.S. without paying tax.
Our Thoughts
The main contention here is called Demining Tax law. It basically says that for goods below $800, they should be, they should not be subject to any tariff when they are imported from other countries.
And so shops like Temu, Shein have benefited from this tax law and even to ship very cheap goods to America.
Now, the impact of this, while U.S. Postal Service reversed their decision quickly, It appears to be a sign of things to come. From this, the question is who would be impacted by this? The consumer because if these goods need to be taxed or if tariffs need to be added to these goods, then the price is going to grow up. That will result in inflation in America, higher cost of goods in America.
The second impact will be on companies like Amazon which has a significant number of third party resellers from China. So that would make their goods more expensive on the platform. But then on the other side, first party products would mean that Amazon products are generally sourced from China already. So this would also impact them, impact Amazon as a company negatively.
Then three, the US government is going to get more taxes. Get more revenue in terms of taxes . Four, these retailers would either have to sell at a more expensive rate to the American market if the consumers in America can accommodate it or they would have to look for other markets to sell their goods. This might mean bigger supply of cheap goods to other countries around the world.
Finally this also poses an opportunity for anyone who can make or get cheap goods from China, rebrand it in one way, shape or form or do the final packaging in another country and then ship to America to avoid these taxes. This looks like the major trading lines of the world are going to be changed one way or the other and I think this is major and may be a sign of things to come. It poses opportunities for some and shuts down opportunities for others so we would just have to watch and see. However, this conversation needs to be tracked because it has significant impact globally.
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African News: DRC demands international sanctions 'to stop Rwanda.
The international community must take action and impose sanctions on Rwanda to curb the M23 rebel conflict in eastern Democratic Republic of Congo (DRC) and keep the peace in the wider region, the DRC's communications minister told Reuters on Monday.
Our thoughts
This is actually a little worrisome and it is quite important for that region to get their act together and to de-escalate this situation because the level of growth and development that has come to that region has been largely stemmed from peace. And the moment the threat of attacks and reprisals begins to escalate, it just pulls back all the reforms. It is very important that trade is largely hinged on security.
Trade is largely hinged on peace. By trade we mean tourism, we mean going to Rwanda for conferences, we mean selling stuff to Rwanda or importing stuff from DRC. A very large portion of trade that builds the country, builds largely on security. Now what generally tends to happen is that if there is some kind of asset that is in contention and is the trigger for the dispute, a few people would benefit from it, but the bulk of both countries would suffer.
So it is very important for the East Africa bloc to actually... really look into this anti-escalator situation. We'll be watching but there's no time for this, especially for Rwanda and the level of growth.
Nigerian News: Nigerian Government Increases 2025 Budget from N49.7trn to N54.2trn.
President Bola Tinubu, yesterday, increased the appropriation bill for the 2025 fiscal year from N49.7 trillion to N54.2 trillion. Tinubu announced the increment in separate letters, which he forwarded to both the Senate and the House of Representatives yesterday.
Our thoughts
The president sent a letter to the national assembly to increase the budget by 3 trillion, basically the exact amount from N49.7trn to N54.2trn. The reason being that they wanted to fund some national sectors, and that the additional budget was going to be funded by the impact of tax reforms, national revenue from customs service.
This budget already seems quite lofty in terms of the possibility of generating revenue. Whilst there appears to be lots of belief in the tax reforms, it is still unclear the actual impact it will have on revenue. One the data seems sketchy in terms of people's actual revenue as the major blocks that we have data on are corporate and matured companies and civil servants.
But... the revenue, but how really do you know if a business, and how do you really know how much a business name is making when the money goes to a savings account? How really do we know how much value that.
However, globally, the tax authorities are dependent on the citizens to actually pay their taxes and file effectively and what happens is that they take your word for it and take what you file, but if for any reason you appear on their radar and they do an investigation and find out that you do not file appropriately, or you do not pay completely or there's any discrepancy, then you would be subject to very grievous consequences. The reason for this structure is that no tax authority has the human capacity to track down everyone. Such that there needs to be a system of trust around it.
So bringing this back to Nigeria, no matter how much we say that the tax reforms will be good and implemented, if we are unable to take out all the layers of soft taxes that are on the way for small businesses, and if we do not give tangible value to attract people to actually pay their taxes, then we might see some improvement but it might not take us to the promised land.
For example, if you say that you are in a high tax bracket, you can walk into any country in Nigeria and get 20% off and if you are in another tax bracket, you can go to certain kinds of hospital. To access healthcare, most people would go to the band they want to be in, pay their tax and declare what they need to declare to just stay in that band just to get the benefits of those things because it adds up. Organizations would pay your complete salary and not do adjustments if they understand they would take out the health insurance obligation part.
If people dont see the value in paying those taxes and they do not have that reduced tax burden that we all have to incur then implementation of this would struggle. There is a bigger picture, it's not just about numbers. There is work that needs to be done.
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