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IMF Warns Nigeria, Others as Global Debt Hits $184tn

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IMF cuts Nigeria's 2016 Economic Growth To -1
  • IMF Warns Nigeria, Others as Global Debt Hits $184tn

The International Monetary Fund said on Wednesday that global debt had reached an all-time high of $184tn in nominal terms, the equivalent of 225 per cent of Gross Domestic Product in 2017, warning of “a legacy of excessive debt”.

The IMF, which released the new data on global debt on its website, put total debt in Nigeria at 34 per cent of the nominal GDP of $376bn as of December 2017, with private debt accounting for 36.6 per cent of the debt.

With Nigeria listed among the low-income developing countries, it said public debt continued to grow in 2017 and, in some cases, reached levels close to those seen when countries sought debt relief.

The Washington-based fund said, “With financial conditions tightening in many countries, which includes rising interest rates, prospects for bringing debt down remain uncertain. The high levels of corporate and government debt built up over years of easy global financial conditions constitute a potential fault line.

“So, as we close the first decade after the global financial crisis, the legacy of excessive debt still looms large.”

According to the data, on average, the world’s debt now exceeds $86,000 in per capita terms, which is more than two and a half times the average income per-capita.

The Washington-based fund said, “The most indebted economies in the world are also the richer ones. The top three borrowers in the world — the United States, China, and Japan — account for more than half of global debt, exceeding their share of global output.

“The private sector’s debt has tripled since 1950. This makes it the driving force behind global debt. Another change since the global financial crisis has been the rise in private debt in emerging markets, led by China, overtaking advanced economies. At the other end of the spectrum, private debt has remained very low in low-income developing countries.”

The IMF said global public debt, on the other hand, had experienced a reversal of sorts.

It added, “After a steady decline up to the mid-1970s, public debt has gone up since, with advanced economies at the helm and, of late, followed by emerging and low-income developing countries.

“For 2017, the signals are mixed. Compared to the previous peak in 2009, the world is now more than 11 percentage points of GDP deeper in debt. Nonetheless, in 2017 the global debt ratio fell by close to 1½ per cent of GDP compared to a year earlier.”

It said the last time the world witnessed a similar decline was in 2010, although it proved short-lived.

“However, it is not yet clear whether this is a hiatus in an otherwise uninterrupted ascending trend or if countries have begun a longer process to shed more debt. New country data available later in 2019 will tell us more about the global debt picture,” the IMF said.

According to it, there has been a retrenchment in debt build-up among advanced economies, while emerging market economies continued to borrow in 2017, although at a much slower rate.

“Overall, the picture of global debt has changed as the world has changed. The data show that a big part of the decline in the global debt ratio is the result of the waning importance of heavily-indebted advanced economies in the world economy,” the fund 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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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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