Economy

Nigeria’s External Debt Rises to $40bn Under Buhari

Published

2 years ago

October 25, 2022

Eric

Nigeria’s total external debt has risen from $10.32bn on June 30, 2015, to $40.06bn as at June 30, 2022, according to The Punch.

This shows that there has been an increase of 288.18 per cent in seven years, according to the external debt stock reports by the Debt Management Office.

A breakdown shows that in 2015, 36 states had $3.27bn external debt while the Federal Government had $7.05bn.

By 2022, states’ external debt rose to $4.56bn, while the Federal Government’s external debt increased to $35.5bn.

The debts included loans from multilateral sources such as the World Bank, the African Development Bank and the International Monetary Fund.

They also included bilateral loans from China, France, Japan, Germany and India, as well as commercial sources including Eurobonds and Diaspora bonds.

Nigeria’s external debt ballooned as the naira lost value, increasing Nigeria’s debt service burden and worsening its ability to service debt. The International Monetary Fund recently said that the long-term rate of the depreciation of the naira equated to a loss of 10.6 per cent of its value annually since 1973.

According to the IMF, this rate was 1.5 times higher than the long-term rate of the currencies of other emerging markets and developing economies at 7.2 per cent and sub-Saharan Africa at seven per cent over the same time period.

The IMF said, “Its exchange rate underwent more persistent depreciation. Nigeria’s long-term rate of currency depreciation (on average 10.6 per cent annually since 1973) was 1.5 times higher than both EMDE (7.2 per cent) and SSA (seven per cent). Given limited availability of long-term data, it is difficult to estimate the exact reasons.”

The Bank of America recently said Nigeria’s local currency unit was set to weaken further next year as its current exchange rate to the dollar was well above fair value.

According to a report by Bloomberg, the bank said, “Three indicators, the widely-used black-market rate, the central bank’s real effective exchange rate, and our own currency fair value analysis shows the naira is 20 per cent overvalued.

“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”

During a workshop on tax expenditure organised by the ECOWAS Commission in Abuja, financial experts advised that Nigeria and other West African Countries should move away from reliance on foreign assistance to the financing of developmental projects in the region.

According to them, over-dependence on financial aid and external loans might affect long-term prosperity of the entire region.

The Special Advisor to the Director (Custom Union and Taxation in ECOWAS), Gbenga Falana, while emphasising that the debt profile of most of the countries in the sub-region was mounting, stressed the need for West African countries to look inwardly and finance local projects through effective domestic resource mobilisation.

Reacting, the Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that high external debt would impose a huge debt service on the economy.

He said, “This will impose a huge debt service on the economy, particularly at a period when we have low revenue from oil sales. If the revenue from oil sales does not improve, then the government will be struggling to meet that debt service obligation to foreign lenders.”

However, he noted that Nigeria could service its foreign debt at the current level, but a constant increase in debt without a corresponding increase in foreign currency earnings could put the country in a difficult position.

The Punch

Economy

FG Dismisses Dangote Petroleum As Inferior, Says Refinery Not Yet Licenced, Completed

Published

1 week ago

July 19, 2024

Eric

By Eric Elezuo

A Federal Government of Nigeria petroleum regulatory agency, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, (NMDPRA), has dismissed petroleum products from the Dangote Refinery as inferior, in the guise of those f4om Watersmith and Aradel, making a case for superiority of imported ones.

The revelation was made by the Chief Executive Officer of NMDPRA, Mr. Farouk Ahmed, while responding to questions from a section of the press, a video of which is trending online, adding that the refinery is only 45% completed, and yet to be licenced for operation by the Nigerian government.

Earlier, the Vice President of Dangote Industries Limited, Devakumar Edwin, had alleged that most fuel products imported into Nigeria are substandard, blaming International Oil Companies (IOCs) of frustrating Dangote’s quest for production.

In the short video, which lasted a little over a minute, Mr. Ahmed debunked theories attached to the functionality of the Dangote Refinery, saying it does not have the capacity to ‘feed’ the nation of its petroleum needs, as it stands. He however, refuted arguments that some elements within the oil and gas sector were trying to scuttle the Dangote Refinery.

A transcript of the NMDPRA’s boss short response is as follows:

“It about concerns of supply of petroleum products acros the nationwide, and the claim that we are trying to scuttle Dangote. That is not so. Dangote Refinery is still in the pre-commissioning stage. It has not been licenced yet. We haven’t licenced them yet. I think they are about 45 per cent completed, or completion rather.

“We cannot rely on one refinery to feed the nation, because Dangote is requesting that we suspend or stop imports, especially of AGO and DPK, and direct all marketers to his refinery. That is not good for the nation in terms of energy security, and it is not good for the market because of the monopoly.

“Dangote Refinery, as well as some modular refineries like Watersmith Refinery and Aradel Refinery, are producing between 650 and 1,200 PPM. Therefore, in terms of quality, their products are inferior to imported ones,” he stated.

It will be recalled that only last Sunday, the President, Dangote Industries Limited, Aliko Dangote, while hosting senior journalists from across various media concerns, revealed that the Nigeria National Petroleum Company Limited (NNPCL) owns only 7.2% of stakes in the refinery, and not 20 percent as widely circulated. He also revealed that the refinery is set to begin fuel supply in August 2024.

Many stakeholders and respondents have alleged that there’s no love lost between the government of the day and the Dangote Group, and that explains the hiccup situation surrounding the takeoff the $19 billion refinery.

Economy

NNPC Reacts to Owning Only 7.2% Stake in Dangote Refinery

Published

1 week ago

July 18, 2024

Eric

The Nigerian National Petroleum Company (NNPC) Limited has explained why it holds only a 7.2% equity in the $19 billion Dangote Refinery, instead of the widely speculated 20%.

A statement released on Sunday by Femi Soneye, the Chief Corporate Communications Officer of NNPCL, addressed the company’s recent decision regarding its investment in the Dangote Refinery.

Soneye said that the decision to reduce their investment was carefully considered and communicated several months ago to Aliko Dangote.

Dangote mentioned to newsmen on Sunday that NNPC no longer holds a 20% stake in the refinery.

He explained that this change occurred because NNPCL failed to pay the balance of their share, which was due in June.

Reacting, NNPC said:

“NNPC Limited periodically assesses its investment portfolio to ensure alignment with the company’s strategic goals.

“The decision to cap its equity participation at the paid-up sum was made and communicated to Dangote Refinery several months ago,” NNPC said.

Nairametrics

Economy

IMF in Latest Forecast, Downgrades Nigeria’s Earlier Growth Projection

Published

1 week ago

July 17, 2024

Eric

The International Monetary Fund (IMF) has revised downward Nigeria’s economic growth projection by 0.2 percentage point amid weaker than expected activity in the first quarter of the year.

The Nigeria’s growth forecast was revised downward by 0.2 from the earlier projection in April.

This in turn has led to a downward revision of economic growth for sub-Saharan Africa.

The IMF announced this development in its World Economic Outlook (WEO) update released on Tuesday.

The report read: “The forecast for growth in sub-Saharan Africa is revised downward, mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year.”

The Bretton Wood institution raised alarm that some near-term risks have gained prominence from the previous outlook.

It added: “Overall, risks to the outlook remain balanced, as in the April 2024 WEO, but some near-term risks have gained prominence. These include upside risks to inflation that stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.

“Risks of persistent inflation in the services sector are tied to both wage and price setting, given that labor accounts for a high share of the costs in that sector. Higher nominal wage growth, which in some cases reflects the catch-up of real wages, if accompanied by weak productivity, could make it difficult for firms to moderate price increases, especially when profit margins are already squeezed.

“This could lead to further stickiness in wage and price inflation. The escalation of trade tensions could further raise near-term risks to inflation by increasing the cost of imported goods along the supply chain.

“Bumpiness along the remaining disinflation path could destabilize the return to price stability if short-term expectations spike upward as a result of disappointing inflation data.”

IMF equally held its global growth expectations for 2024.

The Fund expects the world economy to grow 3.2 percent this year, unchanged from its April forecast.

“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia, particularly in the technology sector,” it stated.

For 2025, it expects global growth of 3.3 percent.

The Washington-based lender also warned that the prospect of interest rates staying elevated longer in the face of escalating trade tensions and increased policy uncertainty.