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

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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%.

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South Africa: Petrol, diesel prices to rise on Wednesday. Here’s why

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Following an increase in the price of oil due to the crisis between Iran and Israel, petrol and diesel prices will be raised in South Africa on Wednesday.

The cost of unleaded petrol will go up by 25 cents per gallon for both 93 and 95. Depending on the sulphur concentration, diesel’s wholesale price will increase by either 20 or 21 cents per litre.

Illuminating paraffin’s wholesale price will increase by 21 cents per litre, and the maximum retail price of LP gas will rise by 36 cents per kilogramme.

Fuel prices dropped to their lowest points since February 2022, when Russia’s invasion of Ukraine disrupted supply chains and limited the import of Russian crude oil, sending oil prices to multi-year highs. This was at the beginning of October.

The Department of Mineral and Petroleum Resources stated on Monday that the average price of Brent Crude oil rose from $72.82 per barrel to $75.07 over the last month, following several months of pressure on the price of oil.

“The main contributing factor is the continued conflict in the Middle East and the stand-off between Iran and Israel,” the department said in a statement.

Investors are worried that an Israeli strike on Iran’s oil infrastructure will not only remove Iranian crude from the market but also incite a larger confrontation including other oil exporters in the region.

Since oil is priced in dollars, the rand exchange rate also affects fuel prices in South Africa.

According to the department, the rand averaged R17.53/$ over the previous month, down from R17.68 in September. However, this was insufficient to offset the rising price of oil.

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Fitch upgrades Egypt’s credit rating to ‘B’

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Fitch, a credit rating agency has upgraded Egypt’s rating from “B-” to “B” citing tighter monetary circumstances and the country’s improved financial standing thanks to a number of foreign investments and assistance.

“Egypt’s external finances have been bolstered… FX buffers have recovered, and we have somewhat greater confidence that the more flexible exchange rate policy will prove more durable than in the past,” Fitch said, as it also assigned Egypt a stable outlook.

As it attempts to recover from a protracted economic crisis that has resulted in record inflation, a growing debt load, and significant currency devaluations over the last two years, the North African country has been looking for significant investments.

In order to stabilise its economy, Egypt obtained a $8 billion loan package from the International Monetary Fund (IMF) this year, along with a $35 billion real estate investment package from Abu Dhabi and about $1 billion from the EU.

The IMF insisted that the loan amount was suitable, despite Egyptian President Abdel Fattah al-Sisi’s suggestion last month that his government should reevaluate the agreement in light of the country’s growing regional concerns.

Fitch also cautioned on Friday that Egypt faces a significant risk from a further escalation of the regional conflict.

Yemen’s Houthi attacks on Red Sea ships have caused trade to be rerouted from the Suez Canal, which has negatively impacted tourism and Egypt’s revenue stream. There are also dangers associated with the larger Middle East conflict.

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