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Sale of National Assets’ll Reduce Govt Borrowing



Malaysian Ringgits And Stock Boards Inside RHB Investment Bank
  • Sale of National Assets’ll Reduce Govt Borrowing — Experts

As the debate over the nation’s debt sustainability continues, economic and financial experts have advised the Federal Government to sell some national assets as part of measures to increase its revenue.

The nation’s rising debt profile has raised concerns among experts and other stakeholders in recent times, with the World Bank describing the government’s debt servicing costs as unsustainable.

The Federal Government’s interest-to-revenue ratio rose from 33 per cent in 2015 to 59 per cent in 2016, the World Bank said in a report released earlier this month.

Last week, the Minister of Finance, Mrs. Kemi Adeosun, admitted that the debt burden had escalated when she said the government could not borrow any more and needed to generate funds domestically to fund its budget.

In a contradiction to Adeosun’s statement, the Ministry of Finance on Thursday said the government would continue to borrow from foreign and domestic financial institutions to fund its programmes.

But experts said the government should look more inwards by selling some idle national assets to shore up its revenue.

The Chairman, Nigerian Economic Summit Group, a private sector think-tank and policy advocacy group, Mr. Kyari Bukar, said, “The government should look at the possibility of selling some of its assets. That can generate cash that will then be used to invest properly in infrastructure.

“There are many assets that the government should look at,” he said, citing joint venture assets in the oil and gas industry as an example.

Bukar said, “The other thing that I do believe very strongly, which I don’t know whether is on the table, is that we ought to be looking at listing the NNPC on the stock exchange. Saudi Aramco is going to be listed.

“I think they are trying to put up about five per cent of the company and do an IPO. Everybody is saying this might be the largest IPO in the world. I think the Saudis are being extremely smart. Petrobras in Brazil is pretty much a publicly-owned entity.”

The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said the government could get some quick cash from sale of idle assets with some economic realisable value.

He said, “Today, we have airports that are not being optimised. Take for instance the Lagos international airport; there is no reason why we should not build it into a regional hub so that it will be a transit airport for almost all the countries of West Africa. That way, the government will attract a lot of revenue.

“Nothing stops us from privatising the airports; give them to private sector operators who will now modernise the airports into world-class standard over a period of time.

“Look at the stadia; the one in Lagos has been idle for almost 20 years. Abuja stadium is hardly used. There is nothing that stops the government from privatising the stadia for them to be restructured. There is nothing that stops the government from adopting the concession arrangement for the Lagos-Kano rail corridor, which is commercially viable.”

Chukwu said the government had continued to pump money into the turnaround maintenance of the nation’s refineries rather than selling them.

“Look at the Federal Secretariat in Ikoyi; it is almost a dead asset. That can be a massive hotel complex if it is in the hands of private operators,” he added.

An economist and faculty member at the Lagos Business School, Dr. Bongo Adi, said the government had gone on a borrowing spree because it felt that the country’s debt-to-GDP ratio was low.

He noted that the debt servicing had gulped so much of government’s revenue, adding, “So, if they go ahead to borrow more, that increases the debt servicing going into next year, and that means the government won’t have money to do anything.”

The Federal Government, in its Economic Recovery and Growth Plan, a Medium Term Plan for 2017 to 2020, said it would reduce its stake in Joint Venture oil assets, refineries and other downstream subsidiaries such as pipelines and depots.

There have been calls for the government to consider the sale of some critical national assets to raise money to finance critical infrastructure in order to raise money to reflate the economy.

For instance, the Senate President, Dr. Bukola Saraki, on September 20, 2016 recommended the sale of some national assets and the utilisation of the proceeds for infrastructure development.

He said this was necessary for the nation to fight its way out of the current recession, adding that the measures should include the sale of the Nigeria LNG Limited; reduction of government’s share in upstream oil joint venture operations and financial institutions; and the privatisation and concession of major/regional airports and refineries.

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

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Goldman Sachs Urges Bold Rate Hike as Naira Weakens and Inflation Soars



Central Bank of Nigeria (CBN)

As Nigeria grapples with soaring inflation and a faltering naira, Goldman Sachs is calling for a substantial increase in interest rates to stabilize the economy and restore investor confidence.

The global investment bank’s recommendation comes ahead of the Central Bank of Nigeria’s (CBN) key monetary policy decision, set to be announced on Tuesday.

Goldman Sachs economists, including Andrew Matheny, argue that incremental rate adjustments will not be sufficient to address the country’s deepening economic challenges.

“Another 50 or 100 basis points is certainly not going to move the needle in the eyes of an investor,” Matheny stated. “Nigeria needs a bold, decisive move to curb inflation and regain investor trust.”

The CBN, under the leadership of Governor Olayemi Cardoso, is anticipated to raise interest rates by 75 basis points to 27% in its upcoming meeting.

This would mark a continuation of the aggressive tightening campaign that began in May 2022, which has seen rates increase by 14.75 percentage points.

Despite this, inflation has remained stubbornly high, highlighting the need for more substantial measures.

The current economic landscape is marked by severe challenges. The naira’s depreciation has led to higher import costs, fueling inflation and eroding consumer purchasing power.

The CBN has attempted to ease the currency’s scarcity by selling dollars to local foreign exchange bureaus, but these efforts have yet to stabilize the naira significantly.

“Developments since the last meeting have definitely been hawkish,” noted Matheny. “The naira has weakened further, exacerbating inflationary pressures. The CBN’s policy needs to reflect this reality more aggressively.”

In response to the persistent inflation and naira weakness, analysts are urging the central bank to implement a more coherent strategy to manage the currency and inflation.

James Marshall of Promeritum Investment Management LLP suggested that the CBN should actively participate in the foreign exchange market to mitigate the naira’s volatility and restore market confidence.

“The central bank needs to be a more consistent and active participant in the forex market,” Marshall said. “A clear strategy to address the naira’s weakness is crucial for stabilizing the economy.”

The CBN’s decision will come as the country faces a critical period. With inflation expected to slow due to favorable comparisons with the previous year and new measures to reduce food costs, including a temporary import duty waiver on wheat and corn, there is hope that the economic situation may improve.

However, analysts anticipate that the CBN will need to implement one final rate hike to solidify inflation’s slowdown and restore positive real rates.

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Currency Drop Spurs Discount Dilemma in Cairo’s Markets



Egyptian pound

Under Cairo’s scorching sun, the bustling streets reveal an unexpected twist in dramatic price drops on big-ticket items like cars and appliances.

Following March’s significant currency devaluation, prices for these goods have plunged, leaving consumers hesitant to make purchases amid hopes for even better deals.

Mohamed Yassin, a furniture store vendor, said “People just inquire about prices. They’re afraid to buy in case prices drop further.” This cautious consumer behavior is posing challenges for Egypt’s consumer-driven economy.

In March, Egyptian authorities devalued the pound by nearly 40% to stabilize an economy teetering on the edge. While such moves often lead to inflation spikes, Egypt’s case has been unusual.

Unlike other nations like Nigeria or Argentina, where costs soared post-devaluation, Egypt is witnessing falling prices for high-value items.

Previously inflated prices were driven by a black market in foreign currency, where importers secured dollars at exorbitant rates, passing costs onto consumers.

Now, with the pound stabilizing and foreign currency more accessible, retailers are struggling to sell inventory at pre-devaluation prices.

Despite price reductions, the overall consumer market remains sluggish. The automotive sector has seen a near 75% drop in sales compared to pre-crisis levels.

Major brands like Hyundai and Volkswagen have slashed prices by about a quarter, yet buyers remain cautious.

The economic strain is not limited to luxury items. Everyday expenses continue to rise, albeit more slowly, with anticipated hikes in electricity and fuel prices adding to the pressure.

Experts highlight a period of adjustment as both consumers and traders navigate the volatile exchange-rate environment. Mohamed Abu Basha, head of research at EFG Hermes, explains, “The market is taking time to absorb recent fluctuations.”

Meanwhile, businesses face declining sales, impacting their ability to manage operating costs. Yassin’s store has offered discounts of up to 50% yet remains quiet. “We’ve tried everything, but everyone is waiting,” he laments.

The devaluation has spurred a shift in economic dynamics. Inflation has eased, but the pace varies across sectors. Clothing and transportation costs are up, while food prices fluctuate.

With the phasing out of fuel subsidies and potential electricity price increases, Egyptians are bracing for further financial strain. The recent 300% rise in subsidized bread prices adds another layer of concern.

The situation underscores the balancing act between maintaining consumer confidence and attracting foreign investment.

Economists suggest potential stimulus measures, such as lowering interest rates or increasing public spending, to boost demand.

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MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again



Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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