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IMF Warns Nigeria, Others on Rising Chinese Debt

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debt
  • IMF Warns Nigeria, Others on Rising Chinese Debt

The International Monetary Fund (IMF) has warned Nigeria and other African nations taking loans from China to be careful.

The fund said non-Paris Club creditors, “create some instability or some vulnerabilities.” Therefore, African nations need to be cautious.

Tobias Adrian, the Financial Counsellor and Director, Monetary and Capital Market Department, IMF, who made the statement during a media briefing on Global Financial Stability Report in Washington Dc, said the ongoing trade dispute between the United States and China has helped lower monetary rate in developed economies, hence, presenting Nigeria and other low-income nations an opportunity to borrow at a lower cost.

He also noted that investment inflow to sub-Saharan Africa has been rising in recent years and expected to reach a record high in 2019.

He, however, called on governments in the region to ensure effective and efficient use of borrowed funds.

“Global financial conditions are favourable to countries such as Nigeria, at the moment. Issuing bonds in hard currency and the domestic currency is possible because of favourable global financial conditions. And of course, what is key is what countries such as Nigeria are doing with those borrowed funds. Undertaking structural reforms to develop the economy is also key at this point in time,” Adrian stated.

Speaking on external debt in Nigeria, Adrian said: “Both domestic and external debt markets are important for economic growth and development and both markets should be well developed; but of course, any borrowing has to be managed in a responsible manner. There are both costs and benefits.

“So, borrowing can be helpful for economic growth and investment, but it can also be dangerous when negative shocks arise. So, we have done a lot of work in the IMF on debt sustainability and debt management and we have a host of recommendations of how to manage debt in a responsible manner.”

Also, Mr Evan Papageorgiou, the Deputy Division Chief, Monetary and Capital Markets Department, IMF, advised the Nigerian government to ensure prudent debt management.

He said: “Nigeria has a large exposure to non-resident holders of domestic debt, particularly with central bank bills and then as we understand in the central bank bills, there are lots of higher redemptions or those that have to deal with more rollovers in the coming quarters, and so managing those risks, particularly with respect to local currency and the behaviour of non-resident investors is very important.”

Papageorgiou explained that non-Paris Club creditors, “creates some instability or some vulnerabilities.”

“Not that the debt itself creates problems. We examined some issues that debt has to be used for productive purposes, but usually debt that is given under non-Paris Club or multilateral types of agreements, more broadly in a lot of low-income countries, particularly a lot of African countries, the issue of debt vulnerabilities is becoming more prescient,” he 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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