- Moody’s Highlights Benefits, Risks in China Loans to Nigeria, Others
China’s increased lending to governments in Sub-Saharan Africa has the potential to support economic growth, but also amplifies credit risks for countries with already high debt burdens and deteriorating external positions, Moody’s Investors Service has said in its latest report.
The report titled: “Sovereigns – Africa, China’s lending supports growth, exacerbates fiscal and external pressures in Sub-Saharan Africa,” noted that unless African investment financed by Chinese loans generates substantial economic gains that boost debt servicing capacity of countries in the continent, the credit implications of such lending include higher debt burdens, weaker debt affordability and weaker external positions.
According to Moody’s Assistant Vice President – Analyst and co-author of the report, David Rogovic, “China’s willingness to renegotiate existing loans and the terms of these renegotiations will influence credit trajectories in Sub-Saharan Africa in the coming years.”
Chinese lending to African governments rose nearly tenfold to more than $10 billion a year between 2012 and 2017, from less than $1 billion in 2001.
Much of the lending has focused on infrastructure projects, including the power, transport, and communication sectors.
Angola (B3 stable), Republic of the Congo (Caa2 stable), and Zambia (Caa1 stable) are among the most indebted to Chinese creditors.
In Ghana (B3 stable), Angola, Zambia , and Nigeria (B2 stable), interest payments already absorb more than 20 per cent of revenue.
Zambia’s external position is particularly fragile, given its very low foreign exchange reserves.
A further increase in China’s lending – or even maintaining the current pace of lending – should go some way to addressing Africa’s financing gap, the report stated.
However, it noted that lack of transparency over the conditions attached to Chinese lending and a lack of reform and governance requirements, compared with those required by multilateral official creditors, may limit the long-term benefits.
“In some cases, where Chinese lenders have provided liquidity relief, this has come with higher resource concessions, which reduce future export earnings.
“Even if debt restructuring alleviates immediate liquidity pressure, the loss of natural resources revenue or other assets is credit negative,” it added.
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.
OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.
Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”
Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.
Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.
Experts have started predicting $75 a barrel by April.
“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting
Oil Prices Rise to $64.32 Amid Expected Output Extension
Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.
Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.
“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.
Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.
“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.
Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.
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