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World Bank knocks Nigeria, Others for Rising Debts

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  • World Bank knocks Nigeria, Others for Rising Debts

The World Bank has raised the alarm over rising debts in African countries, including Nigeria.

While releasing ‘Africa’s Pulse’, a biannual analysis of African economies in Washington on Wednesday, the World Bank’s Chief Economist Africa, Albert Zeufack; Lead Economist, Africa, Punam Chuhan-Pole; and Research Manager, Michael Toman, said the continent had been showing positive growth but warned that its debt was increasing in at a very high rate.

The World Bank team spoke to journalists across African countries through video conference.

According to the team, the rising debt is led by some oil exporting nations, which have seen more than 50 per cent rise in debts recently.

Zeufack stated that the problem of Africa’s debt was not concessional loans secured from the World Bank, but commercial loans that countries in the region had gone ahead to secure.

According to him, such commercial loans come with exchange rate risks, global financial condition risks and commodity price risks.

Speaking specifically on Nigeria, Chuhan-Pole said although the country’s debt remained low going by the debt to Gross Domestic Product ratio, interest payment had been high.

“Interest payment as a share of government revenue is quite high. It raises issue of sustainability,” she stated.

Generally on the continent, she said, “The rate at which countries are accumulating debts is very high. Our countries need to pay attention to the rate at which debts are rising.”

The Debt Management Office recently put the country’s debt profile at N21.73tn as of December 31, 2017, up from N12.2tn as of June 30, 2015.

Our correspondent reported that the Federal Government had spent a total of N3.72tn to service local debt in the past three years.

The Federal Government spent a total of N1.48tn on actual debt servicing in 2017.

With a total of N1.23tn and N1.02tn spent in 2016 and 2015, respectively, on domestic debt servicing, these add to a total of N3.72tn spent on domestic debt servicing in the last three years.

According to the World Bank, Sub-Saharan Africa’s growth is projected to reach 3.1 per cent in 2018, and to average 3.6 per cent in 2019 to 2020.

The growth forecasts are premised on expectations that oil and metals prices will remain stable and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.

Zeufack said, “Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels.

“African governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”

The report stated that it was necessary for African countries to embrace new technologies in order to address access to electricity, which is needed for production on the continent.

The World Bank said a combination of solutions, including national grid, mini-grid and off-grid technologies, were needed to address both availability and affordability of electricity in the region.

Welcoming Nigerian participants to the conference, the Acting Head of the World Bank Office in Nigeria, Mr. Khairy Al-Jamal, said the global financial institution would continue to work with the country and other development partners on a range of critical reforms for restoring macroeconomic resilience to further strengthen economic growth.

He noted, “The World Bank is committed, through a varied range of the Nigeria portfolio, to support the Federal Government with programmes aimed at improving infrastructure, both physical and economic; improving human capital; and enacting social policies that will increase opportunities for the poor and the vulnerable.

“Particularly, through a Country Partnership Framework, we continue to support the government in implementing reforms to tackle macroeconomic imbalances and boost investment in agriculture, power, water, transport, education and health sectors.

“Nigeria continues to take strides in economic and regulatory reforms; for instance, the implementation of the Economic Growth and Recovery Plan. The report recognises Nigeria as one of the few Sub-Saharan countries, which are undertaking significant regulatory reforms to lower barriers in mini-grid investment.”

Al-Jamal said the bank would continue to work with the Nigerian government to enable it to collect sufficient revenue, spend its resources well, adopt the policies that would enable private sector investments and improve governance overall.

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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Federal Government Set to Seal $3.8bn Brass Methanol Project Deal in May 2024

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Gas-Pipeline

The Federal Government of Nigeria is on the brink of achieving a significant milestone as it prepares to finalize the Gas Supply and Purchase Agreement (GSPA) for the $3.8 billion Brass Methanol Project.

The agreement to be signed in May 2024 marks a pivotal step in the country’s journey toward industrialization and self-sufficiency in methanol production.

The Brass Methanol Project, located in Bayelsa State, is a flagship industrial endeavor aimed at harnessing Nigeria’s abundant natural gas resources to produce methanol, a vital chemical used in various industrial processes.

With Nigeria currently reliant on imported methanol, this project holds immense promise for reducing dependency on foreign supplies and stimulating economic growth.

Upon completion, the Brass Methanol Project is expected to have a daily production capacity of 10,000 tonnes of methanol, positioning Nigeria as a major player in the global methanol market.

Furthermore, the project is projected to create up to 15,000 jobs during its construction phase, providing a significant boost to employment opportunities in the country.

The successful execution of the GSPA is essential to ensuring uninterrupted gas supply to the Brass Methanol Project.

Key stakeholders, including the Nigerian National Petroleum Company Limited and the Nigerian Content Development & Monitoring Board, are working closely to finalize the agreement and pave the way for the project’s advancement.

Speaking on the significance of the project, Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo, emphasized President Bola Tinubu’s keen interest in expediting the Brass Methanol Project.

Ekpo reaffirmed the government’s commitment to facilitating the project’s success and harnessing its potential to attract foreign direct investment and drive economic development.

The Brass Methanol Project represents a major stride toward achieving Nigeria’s industrialization goals and unlocking the full potential of its natural resources.

As the country prepares to seal the deal in May 2024, anticipation grows for the transformative impact that this landmark project will have on Nigeria’s economy and industrial landscape.

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IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%

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IMF global - Investors King

Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

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South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty

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South Africa's economy - Investors King

South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

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