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Nigeria Has Enough Capacity to Repay N21.7tn Debt – Adeosun

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  • Nigeria Has Enough Capacity to Repay N21.7tn Debt – Adeosun

The Minister of Finance, Mrs. Kemi Adeosun, has said that the country has enough capacity to repay its debt obligations, which currently stand at about N21.7tn.

Adeosun stated this in an interview with some journalists in Abuja on Monday.

She said that the government was not worried about the country’s rising debt as the debt to Gross Domestic Product ratio was still low compared to other countries.

The minister stated that unlike previous government that borrowed to pay salaries, the focus of the administration of President Muhammadu Buhari was to invest massively in infrastructure.

She said as of the time that Buhari took over the mantle of leadership in 2015, oil prices were very low and as such, the government was constrained in allocating funds for capital projects without having to borrow.

According to her, with over N2.5tn pumped into infrastructure in the last three years, the country will start seeing the benefits of the borrowed funds.

Adeosun said, “I am not worried at all (about rising debt). Our borrowing is sustainable and well managed. Firstly, we took a decision to reflate the economy. Our borrowing is a true reflection of our economy.

“When your income has gone down, the only place you can go is to borrow. It was a strategic decision. We borrowed and invested heavily in infrastructure and then increased our revenue so that we could pay back the debt.

“It was a deliberate decision. We looked at our budget in terms of size and increased it from N4tn to N7tn so that we could focus on developing our infrastructure.”

She explained that the government’s borrowing was a deliberate policy to stimulate economic activities and take the country away from recession.

She added, “It was a very deliberate policy. It was deliberate because if we do not invest in our capital projects, we cannot grow. If all that the government does is to pay salaries, we will be running at a loss every year. So, it was a strategic decision to tie that money to capital projects.

“One of the differences between our style of borrowing and the previous era when oil prices were at the highest is that in May 2011, the debt was N2.5tn and oil price at that time was $111 to a barrel. By May 2015 when we came in, our debt had risen to N12tn; meaning that in that period when oil prices were highest, the debt doubled but capital releases were very low.

“So, if we should be worried about debt accumulation, it should have been that time. And we should be asking, why were capital releases so low and debt doubled when oil price was so high at over $100 per barrel?

“Yes, there has been acceleration in debt, but there has also been acceleration in capital releases and capital spending.”

Adeosun said if the government continued to get the major projects in power, transport and agriculture off the ground, the economy would continue to experience growth.

She added, “We will have no problem managing our debts because they are sustainable. As the economy grows, we will get everyone to pay their tax so that we will be able to service the debts. If you compare us with any of our neighbouring countries, you will see that we are better than any of our neighbours. We will like to keep it that way.

“There is no sense having no debt, no road, no power and no growth prospect. With the kind of young people that we have and the kind of jobs we want to create, we need to build infrastructure and we cannot use oil money alone to fund our debt.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Economy

Citigroup Sees $60 Per Barrel Crude Oil in the Next 12 Months

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Citigroup Says Crude Oil Will Reach $60 Per Barrel in a year

Despite the current economic downturn and the projected second phase of COVID-19, Citigroup, a New-York based financial service company, has said oil price could hit $60 per barrel in the next 12 months.

Citigroup disclosed this on Thursday during a virtual EMEA Media Summit titled – ‘Navigating the Future: What’s Next in a Post-COVID-19 World’.

“After a substantial underperformance in the last six months relative to several other commodities, crude will eventually bounce back to around $60 per barrel over the next 12 months,” Max Layton, European Head of Commodities Strategy, Citigroup said while giving a presentation on the outlook for commodities in the second half of 2020, and into 2021.

This means Brent crude oil would rise by at least 50 percent from the current level of $42 per barrel in the next 12 months.

“It’s going to be a function of the demand and supply but recently we have been seeing a spike in the demand for some of the commodities,” said Atiq Rehman, Head of EMEA Emerging Markets, Citigroup.

“A lot of these economies are heavily commodity-dependent, and perhaps, in the past have been guilty of not diversifying when they come under pressure. I think perhaps, this recent moves will push them to diversify away from simply commodities,” Grant Carson, Head of TRUK And Non-Presence Countries, Citigroup, stated citing Russian as one of the countries that have recorded success in diversifying away from crude oil.

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Economy

Oil Sustains $42 Price Level as OPEC Output Drops to Over Two-Decade Low

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OPEC Oil Output Drops to Over Two-Decade Low in June

Crude oil sustained $42 per barrel price level following a recent survey conducted by Reuters that showed the Organisation for the Petroleum Exporting Countries (OPEC) managed to cut oil production to over two-decade low in the month of June.

According to the survey, OPEC’s 13 members pumped 22.62 million barrels per day in June, 1.92 million barrels per day below May’s revised figure. The lowest since May 1991.

OPEC and allies, together referred to as OPEC plus, had agreed to cut oil production by 9.7 million barrels per day in the month of April to rebalance the global oil market and prop up prices amid COVID-19 pandemic.

OPEC’s share of the 9.7 million barrels per day production cut was 6.084 million bpd but OPEC delivered 6.523 million bpd cut in the month of June despite the inconsistencies from Nigeria, Angola and Iraq.

In June, Saudi Arabia reduced production by 1.13 million barrels per day to 7.53 million bpd. While Kuwait and the United Arab Emirates met their quota but struggle to fulfill the extra cuts.

Nigeria, Iraq and Angola continue to struggle in the month of June. However, their performance improved compared to May as Nigeria attained 77 percent compliance level, up from 19 percent in May.

While Iraq and Angola achieved 70 percent and 80 percent compliance level, respectively. Nigeria and Iraq have pledged to cut more in July despite their economic challenges. Angola, however, said it would not be able to cut extra oil production until October.

Brent crude oil, against which Nigerian oil is measured, rose to $42.48 per barrel on Friday as at 2:58 pm Nigerian time.

UKOilDaily

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Economy

Nigeria Labour Congress Says No Fuel Increase Amid COVID-19 Pandemic

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No Fuel Increase During COVID-19 Pandemic, Says Nigeria Labour Congress

The Nigeria Labour Congress (NLC) on Thursday rejected the new fuel price announced by the Petroleum Products Price Regulatory Agency (PPPRA) on Wednesday.

In a statement issued by Ayuba Wabba, the President, NLC, the labour demanded instant reversal to the old price, saying the move will kill businesses and worsen the nation’s poverty level at a time when nations are looking to ease economic burden of their citizens and mitigate negative impacts of COVID-19.

The PPPRA had raised the value band of Premium Motor Spirit, commonly referred to as Petrol, to between N140.80 and N143.80 per litre on Wednesday because of the recent increase in crude oil prices.

Nigeria Labour Congress argued that “PPPRA contradicted itself when it said that the latest price increase described as an “advisory” was meant to regulate a product that government claims had been de-regulated.

“That this new hike in the pump price of petrol was announced without the approval of the board of the PPPRA and the oversight ministry speaks volume of the arbitrariness and public contempt in the operations of PPPRA. We find this deeply disturbing.

“It is also very embarrassing that the PPPRA boss, while trying to defend the indefensible, appeared to be out of sorts and ready to clutch at any available straws to sell his ice block merchandise to Eskimos.

“Apart from contradicting himself that PPPRA is still trying to regulate a deregulated product through ‘advisories’, the PPPRA went on to exert more nails on the coffin of his polemics when he argued that PPPRA was just like the Central Bank of Nigeria, CBN, and the National Insurance Commission, NAICOM, that would always act to protect the public interest.

“That was how far the niceties went. The rest of the statement by the PPPRA boss was about how PPPRA plans to protect investors and increase their profit.”

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