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FG Resumes Payment into Excess Crude Account with $87m

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  • FG Resumes Payment into Excess Crude Account with $87m

The Minister of Finance, Mrs. Kemi Adeosun, said on Monday that the federal government has commenced payment into the Excess Crude Account (ECA), in line with efforts to rebuild fiscal buffers.

Adeosun said for the first time since the administration took over, the federal government last month paid $87 million into the ECA.

“Even though things are difficult, we are saving. As you know, when we came in, we gave the Sovereign Wealth Fund (SWF) an extra $500 million and we are still going to do more. We cannot afford to waste because we don’t have money to waste,” Adeosun said while speaking at The Platform, a programme organised by Covenant Christian Centre in Lagos on Monday.

She said a lot of foreign investors were interested in investing in the country.

Adeosun told her audience: “When I leave here (The Platform), I am going to meet a group of investors that came in from America. Long-term investors are now looking at Nigeria and saying it is time to come in. On Thursday, we had a group of Japanese.

“We are not talking about people that are bringing in sachets of things to come and sell here, we are talking about people that want to set up factories to manufacture transformers. We are talking about industrialists. They are coming back into Nigeria because Nigeria is showing that it is serious.

“We have taken the pains. Often, the medicine that does it the best is the bitterest medicine and we have had very bitter medicine in the last one year. But now, we would have the long-term benefits in terms of growth and jobs.”

According to Adeosun, in terms of entrepreneurship, the federal government recently revived the Development Bank of Nigeria, saying it was a development finance institution project that started under the previous government, adding that the bank would have $1.3 billion of capital that would be lent to microfinance and banks, specifically for on-lending to SMEs.

“Actually, our economy is 50 per cent driven by SMEs and only 10 per cent of them have access to loans. So, if you begin to improve their access to capital, you can rapidly grow jobs and businesses,” she said.

Furthermore, the minister said the policy direction of the federal government would help lay the foundation for a sustainable economy.

She said: “We are going to build an economy that really doesn’t care about what the price of crude oil is. There are 180 million of us in the country and we have two million barrels of oil per day.

“Kuwait has 3.9 million people and three million barrels of oil per day. So, we can’t afford to continue to behave like an oil economy. An oil economy simply pumps the oil out, then use the dollars to buy everything they need.

“That is the economic model that Nigeria has largely been following. We export crude oil and then we buy everything. We don’t add value, we don’t get any of the by-products and that means that Nigeria has become a very unproductive economy. That is not the intention of the Nigerian dream.”

The minister reiterated that a recent study showed that only 214 individuals pay tax in excess of N20 million, saying that the government would take measures to broaden the tax base.

“Oil has made us extremely lazy. The truth is that what we spent monies on in the past were all on wrong things. We are now suffering the effects of the things that were done three years ago.

“When we started the whistle-blowing policy, people were saying why should we pay somebody five per cent? But our argument was that, what about the person who stole 100 per cent? Why fixated on the person that is getting five per cent to bring the money back.”

Adeosun justified the federal government’s increased borrowing, citing the case of the renovation of the runway of the Abuja airport.

“If you spend money on the right thing, you get the right results. We do have to borrow because if we have to wait for oil price to recover, we would be in recession for a very long-term and use the money to develop capital projects.

“One of the things we have been trying to do is to improve our revenue so that we can’t continue to depend heavily on crude oil sales,” she added.

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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South Africa’s Inflation Rate Holds Steady in May

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South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024

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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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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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