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

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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

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Economy

Fuel Scarcity: FG Raises 14-Man Panel for Solution

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The Federal Government is meeting with operators in the midstream and downstream oil sector as part of measures towards developing strategic stock for Premium Motor Spirit, popularly called petrol, in key locations across the country.

It said the national strategic stocks would help in addressing the recurring fuel scarcity in Nigeria, as it also announced the constitution of a 14-man committee to find a lasting solution to the disruptions in the supply and distribution of petroleum products.

The Federal Ministry of Petroleum Resources stated that President Muhammadu Buhari, had approved the  constitution of a 14-man Steering Committee on Petroleum Products Supply and Distribution Management, which he would personally chair.

The ministry said the move was to find lasting solution to the disruptions in the supply and distribution of petroleum products across the country.

It said the committee had the Minister of State for Petroleum Resource, Chief Timipre Sylva, as Alternate Chairman, as the team would ensure transparent and efficient supply and distribution of petroleum products.

“Other terms of reference are to ensure national strategic stock management, visibility on the NNPC Limited refineries rehabilitation programme and ensure end-to-end tracking of petroleum products, especial PMS, to ascertain daily national consumption and eliminate smuggling,” the FMPR stated in a statement.

To ensure sanity in the supply and distribution across the value chain, Sylva directed the NMDPRA to ensure strict compliance with the government approved ex-depot and retail prices for PMS.

The ministry stated that other members of the committee include the Minister of Finance; Permanent Secretary, Ministry of Petroleum Resources; National Economic Adviser to the President; and Director-General, Department of State Services.

Others include the Comptroller-General, Nigerian Customs Service; Chairman, Economic and Financial Crimes Commission; and Commandant-General, Nigerian Security and Civil Defence Corps.

The Chief Executive, NMDPRA; Governor, Central Bank of Nigeria; Group Chief Executive Officer, NNPC Limited; Special Advisor (Special Duties) to the HMSPR; were also listed as members of the committee, while the Technical Advisor (Midstream) to the HMSPR would serve as secretary.

The Punch

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Economy

CBN Raises Interest Rate to 17.5%

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The Monetary Policy Committee of the Central Bank of Nigeria has voted to increase the benchmark interest rate by 100 basis points to 17.5 per cent.

The CBN Governor, Godwin Emefiele, disclosed this while reading the communiqué of the first MPC meeting of the year on Tuesday.

This is the fifth time the CBN would increase the interest rate despite advice from manufacturers and some key stakeholders.

The CBN said previous increases were beginning to yield results with the slight drop in the inflation rate recorded in December 2022.

However, the CBN stressed that there was a need to keep tightening its fiscal policy.

The CBN keeps the asymmetric corridor at +100/-700 basis points around the MPR.

The CBN also retained the CRR at 32.5 per cent while the liquidity ratio was kept at 30 per cent.

The apex bank had increased the MPR from 11.5 per cent earlier last year to 16.5 per cent across four consecutive rate hikes in 2022.

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Economy

Old Naira Notes: No going Back on January 31 Deadline, CBN Insists

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The Central Bank of Nigeria (CBN) has declared that it will not extend the January 31 deadline for N1,000, N500 and N200 notes to cease being legal tender despite pressure from Nigerians on the need for an extension of the deadline.

The apex bank also warned commercial banks in the country to desist from dispensing the old naira currency through their Automated Teller Machines (ATMs) or face sanction from the bank.

Addressing traders at the Katsina Central Market Thursday on the need to change their old currency, the CBN Director of Currency Operations, Ahmed Bello Umar, said there is no plan to extend the deadline.

The old notes are expected to be out of circulation by January 31 yet there is scarcity of the new notes as banks keep dispensing old notes to their customers across the country.

But Umar explained that the apex bank has enough new naira currency which have since been distributed across commercial banks for onward disbursement to their respective customers through ATMs.

He added that the management of the CBN has directed that from Friday last week, “all ATMs must carry only new notes. If the banks don’t have the new notes they should not load the old notes”.

He said: “The January 31 deadline is fast approaching and the CBN has no plan to extend the deadline. So, all those who have the old notes should please take them to their banks so that they will be exchanged or credited to their accounts.

“We are going round towns and cities in Nigeria to ensure that all the ATMs are loaded with new notes. And there is relaxation on the policy, they can dispense any of the notes either N1,000, N500 or N200 notes.

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