VenturesNow

Nigeria’s socio-economic progress hampered by debt servicing— IMF

Published

4 weeks ago

October 28, 2024

According to the International Monetary Fund (IMF), Nigeria devotes the majority of its income to paying off its debt, leaving little money for important economic initiatives.

Davide Furceri, Division Chief of the IMF’s Fiscal Affairs Department, emphasised the necessity for Nigeria to implement more efficient revenue mobilisation strategies to alleviate this financial burden during the Fiscal Monitor press briefing at the ongoing IMF/World Bank Annual Meetings in Washington, DC.

Furceri pointed out that the government’s capacity to fund social and economic initiatives is severely limited by Nigeria’s debt service-to-revenue ratio, which is approximately 60%.

He emphasised that even while the debt service-to-GDP ratio has decreased from about 100% to 60%, the nation still needs to focus on expanding its tax base in order to significantly lower the portion of its income that is used for debt repayments.

He said, “There is a need to grow the revenue-to-GDP ratio. For a country Like Nigeria, the Debt Service-to-Revenue is about 60 per cent. What that means is that a larger part of the revenue of the country goes into debt servicing. What we recommend for countries like Nigeria, if they can improve their revenue mobilisation, they will be able to reduce the portion of the revenue that goes into debt servicing.

“It is important to broaden the tax base to have more revenue and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.”

He urged the government to enhance its fiscal operations to increase revenue and called for the establishment of an open and effective tax collection system.

Furthermore, according to forecasts in the IMF’s Fiscal Monitor Report, which was made public on Thursday, Nigeria’s debt-to-GDP ratio is predicted to decrease from its current level of 50.7% to 49.6% by 2025.

It stated that the Central Bank of Nigeria’s overdrafts and the Asset Management Corporation of Nigeria’s obligations are included in the nation’s public debt.

“The overdrafts and government deposits at the Central Bank of Nigeria almost cancel each other out, and the Asset Management Corporation of Nigeria debt is roughly halved.” The report noted.

According to other forecasts, the debt-to-GDP ratio will decrease to 48.5% in 2026 and 48.2% in 2027, then slightly increase to 48.8% in 2028 and 49.1% in 2029.

The IMF underlined that in addition to increasing revenue, the government must put in place targeted social safety nets to protect disadvantaged populations from the effects of environmental issues and inflation.

Nigeria’s public debt stock, which comprises both domestic and foreign debt, increased by 24.99% from N97.34 trillion (US$108.23 billion) in Q4 2023 to N121.67 trillion (US$91.46 billion) in Q1 2024.

In the first quarter of 2024, the entire amount of external debt was N56.02 trillion (US$42.12 billion), while the total amount of domestic debt was N65.65 trillion (US$49.35 billion).

In the first quarter of 2024, the proportion of external debt (measured in naira value) to total public debt was 46.05%, whilst the proportion of domestic debt (measured in naira value) to total public debt was 53.95%.

VenturesNow

Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.

VenturesNow

Dangote refinery begins petroleum sales to West Africa

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

In an indication to traders that the activities of its mega-refinery might soon disrupt regional fuel markets, Nigeria’s private Dangote Petroleum Refinery has started exporting refined petroleum products to neighbouring West African nations.

According to a Bloomberg story on Tuesday, a tanker had transported a consignment of petrol from the Dangote Petroleum Refinery to seas off the coast of Togo, a nearby West African nation. The article cited data from Vortexa, Kpler, Precise Intelligence, a port report, and a ship-tracking tool.

According to the source, a CL Jane Austen recently departed west after loading over 300,000 barrels from Dangote.

Recall that Mustapha Abdul-Hamid, the chairman of the Ghana National Petroleum Authority, stated last month that the nation is thinking of purchasing petroleum products from the Dangote refinery in order to reduce the approximately $400 million it spends each month on more costly exports from Europe.

Speaking at the OTL Africa Downstream Oil Conference in Lagos, the chairman of NPA, Ghana, said that by eliminating freight expenses, buying from Nigeria instead of Europe will lower the cost of other products and services.

“If the refinery reaches 650,000bpd a day capacity, all that volume cannot be consumed by Nigeria alone, so instead of us importing as we do right now from Rotterdam, it will be much easier for us to import from Nigeria and I believe that will bring down our prices,” Hamid said.

Two weeks ago, it was announced that the refinery would start exporting fuel to Namibia, Angola, and South Africa. Four more African nations—Niger Republic, Chad, Burkina Faso, and Central Africa Republic—had also begun talks with the refinery, it was said.

According to a very reliable source who spoke directly to one of our reporters, the management of the refinery with a capacity of 650,000 barrels per day was in the advanced stages of negotiations with the nations to begin lifting petroleum.

“I can confirm to you that talks are actually at the advanced stage with Ghana, Angola, Namibia, and South Africa, while the initial discussion is coming up with Niger, Chad, Burkina Faso, and the Central African Republic,” the source said.

The petroleum product shipment is currently floating off the coast of Lome, which is a well-liked location for ship-to-ship transfers, according to the source.

Furthermore, the final destination of the cargo of the CL Jane Austen is uncertain.

Despite being off Togo, the region is frequently utilised for ship-to-ship transfers, thus the gasoline may eventually be transported elsewhere.

“While the shipment is tiny in the context of the global gasoline market, it signals the ramp-up of Dangote’s production and the potential to export significant volumes of gasoline beyond Nigeria, which could upend regional markets.”

Last month, the refinery sent its first shipment of petrol by sea to Lagos, a neighbouring commercial centre.

Under the regulatory statute, the Federal Government last month terminated the state-owned oil company’s monopoly on purchasing gasoline from the plant for domestic use, but it has permitted the ongoing importation of fuel from the US and Europe.