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Experts, PDP Warn Buhari Against Borrowing $29.96bn

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  • Experts, PDP Warn Buhari Against Borrowing $29.96bn

Economic and financial experts have warned President Muhammadu Buhari to exercise caution over his administration’s plan to borrow $29.96bn from external sources.

Similarly, the opposition Peoples Democratic Party called on Nigerians to stop Buhari from borrowing the amount and moving N180bn appropriated for special intervention to fund critical recurrent and capital items.

It also asked the two chambers of the National Assembly not to approve the request by the President.

Buhari had on Tuesday asked the National Assembly to approve the external borrowing plan to enable his government to raise funds to execute key infrastructural projects across the country between now and 2018.

But experts said on Wednesday that the amount was too huge and that the Buhari-led administration needed to tell Nigerians the specific infrastructural projects in exact locations across the country that the money would be used to finance.

A professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, described the external borrowing plan of the Federal Government as too bogus.

Tella also asked the government to give a detailed breakdown of the proposed projects the funds would be used for, and specific plan of how it intended to pay back.

He said, “The money is too huge. We need to know the breakdown of the projects it will be used for. If it is for project financing whereby it is tied to specific projects in certain parts of the country, then fine. We need to also specify how much will be borrowed each year over the next three years of the borrowing plan.

“To me, the money is too huge. We do not manage our debts properly. We need to specify the repayment plan and what is going to be our income over the next five years or more. We are not good managers of resources; we are going to run into serious problems with this. If all these details cannot be given, then the National Assembly should approve just $10bn from it. Already, we know that we can’t borrow to finance recurrent expenditure. ”

An economic analyst at Ernst & Young, Mr. Bisi Sanda, also said the government needed to carry out reforms of its financial management system before embarking on such a borrowing.

Otherwise, he said it would be tantamount to borrowing to finance the ostentatious living of some corrupt government officials.

Sanda said, “Borrowing, in principle, is not wrong. But if you are using it to finance the corruption or ostentatious lifestyle of public officials, then there is a problem. It has been said some time ago that Nigerians only get 45 per cent value from all government expenditure. This is unlike in the USA where the people get 100 per cent value.

“Our public financial management must be transformed first. Seventy per cent of the budget in Nigeria goes on recurrent expenditure. What about the budget padding allegation and the huge bill of the legislature? We need to address the public financial management system, otherwise, we will find ourselves in the debt trap and leave huge debts for coming generations.”

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said there was nothing wrong with borrowing, but the government must specify the projects the money so raised would be used for.

“We need to tie this borrowing to specific infrastructural projects we know of in the country. We should say this rail line or highway will be financed with such an amount from the borrowing. This money must be tied to specific projects,” he said.

The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said, “I agree with borrowing, but it must be tied to specific projects. The amount is a huge amount. That is about 140 per cent of our current external reserves.

“It is almost double the amount of the current external debt of the country. We need to know specific projects that the money will be used for. Until we know that, I can’t say it is a right step in the right direction.”

Reject proposal, PDP tells NASS

The PDP asked Buhari to explain to Nigerians what his administration had done with the recovered looted funds and how the 2016 budget was faring.

The spokesperson for the Senator Ahmed Makarfi-led faction of the party, Prince Dayo Adeyeye, stated this in a statement in Abuja on Wednesday.

Adeyeye said that the President must itemise what he intended to finance with the proposed borrowing of almost $30bn instead of lumping everything up in a coded term “and to plunge the nation’s future into a burden of debt”.

He said that the President’s approach could not be the preferred solution to the economic quagmire, which he alleged was created by the present government.

Adeyeye, a former Minister of State for Works, said, “This government budgeted N6.07tn for the 2016 fiscal year with a deficit of N2.22tn, and according to the breakdown, N1.8tn was budgeted for capital expenditure and President Buhari is now seeking to borrow over N9tn ($29.96bn) for ‘critical infrastructure’.

“This is absurd and way outside the government’s budgetary provisions for capital expenditure and must be rejected by all well-meaning Nigerians.

“Nigerians will recall that the Minister of Information and Culture, Alhaji Lai Mohammed, in June  made public through a press statement an account of recovered looted funds between May 2015 and May 2016 amounting to N78.3bn, $185.1m, £3.5m and €11,250m in cash, while others were under interim forfeiture. What happened to the recovered funds?”

Adeyeye added that the Chairman of the Economic and Financial Crimes Commission, Mr. Ibrahim Magu, recently said that the commission had recovered more money in the last eight months than it did in 12 years.

He said that Nigerians needed to know how much revenue the government had been able to generate from crude oil, non-oil and independent revenue sources since assumption.

The PDP leader said that the clarification would boost the confidence of Nigerians on the management of their resources, especially in this period of recession, and was necessary before thinking of engaging in external borrowing.

“The APC-led Federal Government is again taking Nigeria prior to year 2005 when the external debt burden derailed the growth of Nigeria’s economy and weakened the GDP before the total cancellation of her debt,” he added.

Adeyeye also said that the proposed action of the Federal Government would be a great injustice to the citizens now and in the future if they were plunged back into debt.

He said, “Let us state unequivocally that history will not forgive this APC government and its collaborators if they allow this injustice and maladministration of our economy and citizens to stand.

“We, therefore, call on the two chambers of the National Assembly to reject this anti-people request by an anti-people government that has no genuine interest for the growth and development of the people of this country.

“We again call on all Nigerians to speak with one voice and stop President Buhari from further destroying of our great nation, Nigeria, and by extension, Africa.”

DMO sets borrowing limit

Meanwhile, the Debt Management Office has said the maximum amount that Nigeria can borrow in 2017 from both local and foreign sources without breaching the debt threshold it has set for itself is $22.08bn.

The DMO said in its debt sustainability report that Nigeria could afford to borrow $22.08bn next year, equivalent to 5.89 per cent of the projected Gross Domestic Product, if it wanted to keep the overall borrowing under the limit of 19.39 per cent of the GDP that had earlier been set.

For this year, the total public debt-to-GDP ratio is projected at 13.5 per cent, the DMO said in the report, seen by Reuters on Wednesday.

It said the total public debt stood at 28.10 per cent of revenue in 2015, slightly above the 28 per cent threshold set by the government.

As of June 2016, Nigeria’s public debt stood at N16.29tn, up from N12.60tn at the end of last year.

The DMO said, “Although the level of debt stock is still appreciably low relative to the country’s aggregate output, the debt portfolio remains mostly vulnerable to the various shocks associated with revenue, exports and substantial currency devaluation.

“This highlights a potential risk to the debt portfolio, which could be exacerbated by the developments in the international oil market, as further decline in global oil prices would exert undue pressures on the already fragile economy, including the debt position.”

It proposed that the new borrowing next year be split as $5.52bn from the domestic markets and $16.56bn from offshore, subject to local market conditions and the options available abroad, adding that foreign borrowing should have a minimum maturity of 15 years.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms

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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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Economy

Nigeria’s Food Inflation Hits 40.66% Year-on-Year in May 2024

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Nigeria's Inflation Rate - Investors King

Nigeria’s food inflation rate surged to 40.66% on a year-on-year basis in May 2024, a significant increase from 24.82% recorded in May 2023.

The latest figures from the National Bureau of Statistics (NBS) highlight the rising cost of essential food items, exacerbating the economic challenges faced by many Nigerians.

The NBS report attributes the steep rise in food inflation to substantial price increases in several staple items.

Notably, the prices of Semovita, Oatflake, Yam flour, Garri, and Beans saw considerable hikes.

In addition, the cost of Irish Potatoes, Yams, Water Yam, Palm Oil, and Vegetable Oil also climbed significantly. Within the protein category, Stockfish, Mudfish, Crayfish, Beef, Chicken, Pork, and Bush Meat experienced notable price jumps.

The month-on-month food inflation rate in May 2024 was 2.28%, reflecting a slight decrease of 0.22 percentage points from the 2.50% recorded in April 2024.

This month-to-month decline was due to a slower rate of price increases for Palm Oil, Groundnut Oil, Yam, Irish Potatoes, Cassava Tuber, Wine, Bournvita, Milo, and Nescafe.

Despite the minor monthly decrease, the average annual food inflation rate for the twelve months ending May 2024 was 34.06%.

This marks a significant rise of 10.41 percentage points from the average annual rate of 23.65% recorded in May 2023.

The sharp rise in food inflation is raising concerns among economic analysts and policymakers, as it significantly impacts the cost of living for Nigerians.

The rising food prices are straining household budgets and contributing to an overall inflation rate that threatens economic stability.

In response to the inflationary pressures, the Nigerian government and relevant stakeholders are being urged to implement effective measures to stabilize food prices and address the underlying causes of inflation.

Efforts to boost agricultural productivity, improve supply chains, and tackle market inefficiencies are seen as critical to mitigating the inflationary trend.

The NBS report underscores the urgent need for comprehensive strategies to manage inflation and ensure food security for the population.

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Nigeria’s Inflation Rate Climbs to 33.95% in May, NBS Reports

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The National Bureau of Statistics (NBS) has revealed that Nigeria’s headline inflation rate rose to 33.95% in May 2024, a slight increase from the 33.69% recorded in April.

This 0.26 percentage point rise underscores the ongoing economic challenges the country faces as it continues to grapple with rising prices and economic instability.

The report highlights that on a year-on-year basis, the headline inflation rate increased by 11.54 percentage points compared to May 2023, when the rate was 22.41%. This significant annual increase indicates a persistent upward trend in the cost of living for Nigerians over the past year.

However, the month-on-month analysis presents a mixed picture. The headline inflation rate for May 2024 was 2.14%, slightly lower than the 2.29% recorded in April 2024. This 0.15 percentage point decrease suggests a marginal slowdown in the rate at which prices are rising month by month.

Urban vs. Rural Inflation Rates

The NBS report also provides detailed insights into urban and rural inflation dynamics. In urban areas, the inflation rate in May 2024 stood at 36.34% on a year-on-year basis, a substantial 12.61 percentage points higher than the 23.74% recorded in May 2023.

On a month-on-month basis, urban inflation was 2.35%, down by 0.32 percentage points from April 2024’s rate of 2.67%.

Conversely, the rural inflation rate for May 2024 was 31.82% year-on-year, which is 10.63 percentage points higher than the 21.19% recorded in May 2023.

Month-on-month, rural inflation slightly increased to 1.94% from 1.92% in April 2024, indicating a steady rise in prices in rural regions.

Implications and Responses

The continuous rise in inflation, particularly in urban areas, poses significant challenges for the Nigerian economy.

The increase in prices for essential goods and services such as food, transportation, and housing is putting immense pressure on household budgets and the overall standard of living.

Economic analysts suggest that the persistent inflationary pressures are driven by several factors, including supply chain disruptions, increased production costs, and fluctuating exchange rates. The impact of these factors is felt more acutely in urban areas, where the cost of living is inherently higher.

In response to these inflationary trends, policymakers are under pressure to implement measures that can stabilize prices and ease the financial burden on citizens.

Strategies such as tightening monetary policy, increasing food production, and improving supply chain efficiency are being considered to curb the rising inflation.

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