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Experts Express Worry As Nigeria’s External, Domestic Debts Hit N39.556trn

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Naira Dollar Exchange Rate - Investors King

Financial experts have raised concerns over Nigeria’s external and domestic debts which have, as at December 31, 2021, risen to N39.556 trillion ($95.779 billion), from N32.915 trillion ($86.392 billion) it was on December 31, 2020.

Investors King gathered that a recent disclosure by the Debt Management Office (DMO), revealed that Nigeria’s public debt stock for December 31, 2021 includes new borrowings by the Federal Government and the sub-nationals.

While addressing newsmen, Director General of the DMO, Patience Oniha revealed that total public debt stock to Gross Domestic Product (GDP) as at December 31, 2021, stood at 22.47 percent, while the Debt-to-GDP ratio still remains within Nigeria’s self-imposed limit of 40 percent.

“This ratio is prudent when compared to the 55 percent limit advised by the World Bank and the International Monetary Fund (IMF) for countries in Nigeria’s peer group, as well as, the ECOWAS Convergence Ratio of 70 percent.

“The Federal Government is mindful of the relatively high Debt-to-Revenue Ratio and has initiated various measures to increase revenues through the Strategic Revenue Growth Initiative and the introduction of Finance Acts since 2019”, she added. Oniha further noted that revenue generating agencies need to be more prudent in their spending so as to free money for the Federal Government to meet various needs.

“We make it look like borrowing is a crime and we give it the toga it doesn’t deserve. We’ve seen debt levels rising not only in Nigeria but all over. COVID-19 is a result of the upward trajectory. All governments borrow.  But we need to increase revenue generation”, she added.

She also recalled that the 2021 Appropriation and Supplementary Acts included total new borrowings (from domestic and external sources) of N5.489 trillion to partly finance the deficit.

“Borrowings for this purpose and disbursements by multilateral and bi-lateral creditors account for a significant portion of the increase in the debt stock. Increases were also recorded in the debt stock of the States and the FCT”, she said.

Reacting to this development, Chairman, Manufacturers Association of Nigeria (MAN), Apapa branch, Frank Onyebu noted that interest payment on the nation’s debt is almost more than what is available for development.

“No country can develop that way. Sometime ago there were reactions that the borrowing was too much, but some other people were of the view that the country has not borrowed enough, now it has gone out of control”, he lamented.

According to him, the Federal Government needs to restrategise and get technocrats who know how to manage the nation’s economy.

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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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