TheNewsGuru

Tag: Foreign Debt

  • Falling nature of Naira, other African currencies the cause of inflation, public debts

    Falling nature of Naira, other African currencies the cause of inflation, public debts

    The International Monetary Fund (IMF) has revealed that the falling nature of the Naira and other currencies in Nigeria and other is responsible Sub-Saharan African countrie is responsible for the push up in public debts across Africa.

    This revelation was made public on the IMF website on Monday evening.

    The fund noted that with an average depreciation of nine per cent since January 2022, sub-Saharan African currencies have weakened against the US dollar.

    The post read, “Most sub-Saharan African currencies have weakened against the US dollar, fanning inflationary pressures across the continent as import prices surge. This, together with a growth slowdown, leaves policymakers with difficult choices as they balance keeping inflation in check with a still-fragile recovery.

    “As the Chart of the Week shows, the average depreciation for the region since January 2022 is about 8 per cent. The extent varies by country, however. Ghana’s cedi and Sierra Leone’s leone depreciated by more than 45 per cent.”

    IMF further added that the depreciations were mostly driven by external factors, adding that lower risk appetite in global markets and interest rate hikes in the United States pushed investors away from the region towards safer and higher paying US treasury bonds.

    While noting the high import costs in 2022, the IMF added that the large budget deficits had compounded the effects of these external shocks by increasing the demand for foreign exchange.

    On the implications of weaker currencies, the Fund identified inflation and higher public debt.

    The post read, “When currencies weaken against the US dollar, local prices rise, as much of what people buy, including essential items like food, are imported. More than two-thirds of imports are priced in US dollars for most countries in the region.

    “A one percentage point increase in the rate of depreciation against the US dollar leads, on average, to an increase in inflation of 0.22 percentage points within the first year in the region. There is also evidence that inflationary pressures do not come down quickly when local currencies strengthen against the US dollar.

    “Weaker currencies also push up public debt. About 40 per cent of public debt is external in sub-Saharan Africa and over 60 per cent of that debt is in US dollars for most countries. Since the beginning of the pandemic, exchange rate depreciations have contributed to the region’s rise in public debt by about 10 percentage points of GDP on average by end-2022, holding all else equal.”

    Recall that  the Naira has been experiencing a free fall since 2015  when it started falling from N196.92 in June 2015 to N414.72 in June 2022 thus contributing to the Country’s high inflation rate.

    Checks show that in seven years, the naira depreciated by 52.52 per cent against the US dollar and other  currencies.

    The depreciation added N8.72tn to Nigeria’s external debt burden.

  • Nigeria’s foreign debt rises by 40% under Buhari — NBS

    The National Bureau of Statistics, NBS, on Tuesday said the nation’s total domestic and foreign debt stocks as at June 30 stood at about $15.1 billion and N14.1 trillion respectively.

    A review of the total foreign debt profile of the Federal and the 36 states governments and the FCT also shows a continuous rise since the assumption of President Muhammadu Buhari in office, from $10.718 billion in 2015, to $11.406 billion in 2016 and $15.047 billion in 2017.

    Out of the current total figure of $15.047 billion, the Federal Government accounts for $11.106 billion, or about 74 per cent, while the 36 states of the federation and the Federal Capital Territory, FCT, Abuja owe about $3.94 billion, or 26 per cent.

    The Federal and State government shares of the debt stock grew from $7.349 billion and $3.369 billion in 2015, to $7.84 billion and $3.568 billion in 2016, and $3.94 billion and $11.106 billion in 2017 respectively.

    The NBS gave further disaggregation of the country’s foreign debt to include $9.67billion as multilateral debt; $218.25million as bilateral (AFD) and $5.15billion from the Exim Bank of China credit to the Federal Government.

    Details of the debt figures show that the domestic debts figures of the 36 states of the federation and the FCT have continued to grow since 2015 under the present administration.

    From about N2.503 trillion in 2015, the NBS data showed the figure rose to N2.959 trillion in 2016 before reaching the latest point of N3.001 trillion in 2017.

    The Bureau also noted that out of the total N14.017 trillion national debt stock, the Federal Government accounts for about N11.058 trillion, or 78.66 per cent, against about N2.959 trillion, or 21.34 per cent by all the states and the FCT.

    Further breakdown of the Federal Government domestic debt stock by instruments show that about N7.56 trillion, or 68.41 per cent were in bonds; N3.28 trillion, or 29.64 per cent in treasury bills, while N215.99 million, or 1.95 per cent went into treasury bonds.

    Although the NBS did not provide the Federal Government domestic debt figures for 2015, figures obtained from the Debt Management Office, DMO, website on Tuesday showed that total domestic debt by instruments as at December 2015 stood at N8.836 trillion.

    This consisted Federal Government bonds N5.808 trillion, or 65.73 per cent; Nigerian treasury bills N2.773 trillion, or 31.38 per cent, and treasury bonds of N255.99 billion, or 2.90 per cent.

    Among the 36 states and the FCT, Lagos recorded the highest foreign debt profile, accounting for about 37 per cent of the states’ foreign debts, followed by Kaduna (six per cent), Edo (five percent), Cross River (four percent) and Ogun (three percent).

    On the domestic front, Lagos State again took the lead, with the highest domestic debt profile among its colleagues and the FCT, accounting for about 10.39 per cent of the total figure, followed by Delta (8.04 per cent), Awa Ibom (5,18 per cent), FCT (5.09 per cent) and Osun (4.90 per cent).

    TheNewsGuru.com reports that the Bureau on Tuesday, September 5 announced that the nation had slipped out recession.