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Nigeria Spends N3.18 Trillion on Debt Servicing, Personnel Cost in Six Months

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FG Spends N1.57 Trillion on Debt Servicing in Six Months

President Muhammadu Buhari led administration spent a total sum of N3.18 trillion on debt servicing and personnel cost in six months, according to Mr. Clem Agba, the Minister of State for Budget and National Planning.

The minister’s special assistant on Media, Ojeifo Sufuyan, disclosed this in a presentation made available to the press on Sunday.

He said the Federal Government spend N1.57 trillion on debt service and another N1.61 trillion on personnel cost, including pensions in the first six months of the year.

The minister also disclosed that as of the end of June 2020, only N444.75 billion out of the N9.97 trillion appropriated for the year had been released for capital expenditure, largely due to the budget revision exercise.

This amount, he said rose to around N1 trillion by July 2020.

Nigeria has been struggling with its huge debt servicing cost since the global pandemic eroded the nation’s revenue generation in the first half of the year, bringing its debt service to revenue ratio rose to 99 percent this year. Indicating that Africa’s largest economy spends most of its revenue on debt servicing, leaving nothing for capital projects and infrastructural growth.

The minister said, “Crude oil prices declined sharply in the world market, with Bonny Light crude oil price dropping from a peak of $72.2 per barrel on January 7, 2020 to below $20 per barrel in April 2020.

“In effect, the $57 crude oil price benchmark on which the 2020 budget was based became unsustainable.

“Another key development in the international crude oil market is the massive output cut by OPEC and its allies (OPEC+) to stabilise the world oil market, with Nigeria contributing about 300,000 barrels per day of production cuts.

Agba added, “The impact of these developments is about 65 per cent decline in projected net 2020 government revenues from the oil and gas sector, with adverse consequences for foreign exchange inflows into the economy.”

The International Monetary Fund had said Nigeria must up its tax collection efficiency to address its revenue shortage and drive growth across key sectors.

That was before the unemployment number showed that 21.8 million Nigerians are now jobless, up from 20.9 million people posted in the third quarter of 2018.

Also, the combined share of unemployed and underemployed citizens rose to 55.7 percent in the second quarter of 2020, up from about 44.3 percent in the third quarter of 2018.

Poor revenue generation amid rising debt cost, high inflation rate of 12.56 percent, low job creation and weak wage growth continues to weigh on Nigeria’s economic outlook in the second half of the year.

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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