Business News
Nigeria considers request for debt relief as debt stock climbs
Ministers of Finance from African countries have requested for debt relief from bilateral, multilateral and commercial partners to cushion the negative impact of the coronavirus.
There were news reports that the Ministers of Finance from African countries have requested for debt relief from bilateral, multilateral and commercial partners to cushion the negative impact of the coronavirus pandemic gradually gaining momentum in the continent. Some of the organisations they are seeking debt relief from include; International Monetary Fund (IMF), the World Bank Group, European Union (EU) and other key commercial partners.
The debt relief being requested is expected to grant African countries more fiscal space and flexibility in combating COVID-19. We note this was one of several decisions reached by the Economic Commission for Africa after its second virtual meeting.
For Nigeria in particular, this appears like positive news as it is coming at a time when the Debt Management Office (DMO) recently announced that the Nation’s debt stock was up 4.5% q/q to N27.4 trillion at the end of Q4 2019 from N26.2 trillion at the end of Q3 2019. Breakdown of the data revealed that domestic debt stood at N18.3 trillion (67.1% of total debt stock) while foreign debt stood at N9.1 trillion (32.9% of total debt stock). The Federal Government’s share of the total debt stock was N21.7 trillion comprising; N7.5 trillion external debt and N14.2 trillion domestic debt.
In recent times, Nigeria’s debt profile has gained widespread attention, owing to slower growth in governemnt revenue when compared to the increase in debt stock. This has resulted in a deterioration in debt servicing cost/revenue ratio, one of the key indicators to assess debt sustainability. The country’s debt service to revenue ratio remains precariously high at c.60%.
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This is expected to deteriorate further, owing to the outbreak of COVID-19 which is expected to reduce non-oil revenue as economic activities slow down, but more importantly, the sharp downturn in oil prices is expected to undermine oil revenue. The rather gloomy picture on government revenues has made key credit rating agencies to downgrade the country’s external debt rating, making it more expensive for the government to raise finance via the issuance of Eurobonds.
In our opinion, the debt relief will come in handy for Nigeria and other African countries in this period of crisis. The global economy is currently experiencing a synchronised slowdown with expectations of a global recession. Oil-based economies in West Africa like Nigeria and Angola are prime victims of the slump in global crude prices.
On the other hand, tourism-based East African countries have seen a slump in tourist visits as several countries continue to impose bans on airspace movement. Thus, we think the debt relief could not have come at a better time than now.
That said, we do not believe a debt relief should stop the Federal government from articulating a workable plan to diversify the Nigerian economy away from oil. The heavy dependence on oil revenue means oil prices will remain an extraneous and unpredictable factor in the country’s revenue plan. Tourism, Agriculture and Mining are all sectors that hold tremendous opportunities.
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Business News
Oil price gains likely to halt over demand uncertainty, as US-China tension intensifies
The rising tension between the US and China is weighing on the global markets. For political reasons, the leadership of each country is blaming the other for the coronavirus pandemic.
Crude oil prices, which have been on a steady increase for 3 consecutive weeks, seem to be coming to an end primarily due to the rising tension between the United States and China, and caution over the prospect for a global recovery in oil demand.
This is compounded by the disclosure of the world’s second-largest economy, China, that it is uncertain about its GDP growth target for 2020 because of the coronavirus outbreak.
The Brent crude, now $34.60 per barrel, sold for $36.41 about 4 days ago. The American WTI, which sells for $32.84 per barrel, sold for almost $34 per barrel a few days ago. Also, the Bonny light crude, selling for $33.01 per barrel, sold for $34.46 per barrel about 4 days ago.
With China’s oil demand climbing back to about 13 million barrels per day, which is about 90% of the pre-pandemic level, oil traders are holding out hopes of a quick rebound elsewhere with the global easing of lockdown.
(READ MORE:Here are 7 oil producing countries that have been most affected by COVID-19)
The output cut by OPEC+ and top oil-producing countries and more than 2.2 million barrels per day production shut in by U.S, have meant that the supply side of the equation is doing just fine.
However, the rising tension between the US and China is weighing on the global markets. For political reasons, the leadership of each country is blaming the other for the coronavirus pandemic. The Chinese Foreign Minister, Wang Yi, warned that the US leaders were potentially pushing towards a new cold war, which is having a negative impact on investors.
Although the US crude inventories fell by 5.6 million barrels last week, the gasoline stocks actually increased.
According to Commerzbank, “After weeks of rising, US gasoline demand was down again for the first time. Demand for oil products also remains subdued elsewhere. With concerns on the demand side remaining we regard the latest price rally on the oil market to be excessive.”
Despite assurances from the Trump administration’s officials, a V-shaped recovery is extremely unlikely.
There also appears to be a belief that the US and other countries will not avoid the second wave of infections after reopening the economy.
According to Rystad Energy, “A second wave is not such a remote possibility and a new round of lockdowns could send oil prices back to much lower levels very quickly and the markets know it. Therefore, lower prices this morning are not a surprise and they are not necessarily the result of a market event, they are rather a correction of the consecutive boosts that oil has seen over the last days.”
The data firm still believes that oil prices will stabilize at the $30-$35 range with the potential to be $40 later in the year, if and when demand improves and approaches the pre-covid-19 levels.
Economy & Politics
Lagos to shut down Marine Beach bridge for emergency repairs
The closure will allow the Federal Ministry of Works to carry out emergency repairs on the bridge, in line with the government’s vision of providing a better transportation system in the state.
Lagos state government has announced that the Apapa Marine Beach bridge will be closed for five months, from Wednesday 27th May, to Wednesday 21st October, 2020.
The closure will allow the Federal Ministry of Works to carry out emergency repairs on the bridge, in line with the government’s vision of providing a better transportation system in the state.
LASG has announced the partial closure of Marine Beach Bridge by Total Gas, inwards Apapa for five months, effective from Wednesday 27th May, to Wednesday 21st October, 2020, for repair work towards providing a seamless transportation system@jidesanwoolu @dr_oladeinde#LASG pic.twitter.com/xbB1YFvRkL
— The Lagos State Govt (@followlasg) May 24, 2020
In a statement from the Lagos state Ministry of Transportation, the Commissioner, Dr. Frederic Oladeinde, noted that the repairs were long overdue, and necessary to ensure safety of Lagosians, given the number of motorists that use the route.
READ MORE: Nigerians knock Fashola over comments on “bad roads”
The Commissioner noted that the repairs included bearing and expansion joint replacement and would be executed in two phases, taking one lane of the bridge at a time.
“The first phase will involve handling the lane inbound Apapa while the second phase will be designated to work on the lane that conveys vehicles outside the axis,” he said.
Alternative routes
Oladeinde noted that alternative routes around the bridge had been improved to make them motorable, and ease movements for road users.
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To manage the construction period, the statement noted that Traffic Management Authorities would be hard at work to ameliorate the expected traffic issues and supervise other arrangements.
“Motorists inwards Wharf road will be diverted to the other section of the bridge outwards Apapa, a contraflow of 200metres has been put in place for vehicles to realign with a proper direction inwards Ajegunle or Wharf road, Apapa, while Motorists descending to Total Gas under bridge will drive without any hindrance,” it read.
The Commissioner called for the understanding and cooperation of motorists and road users during the period to ensure a smooth flow of plans.
Oladeinde appealed to all vehicle owners and residents of the area to cooperate with the traffic management officers deployed to the area@jidesanwoolu @dr_oladeinde#LASG #ForAGreaterLagos
— The Lagos State Govt (@followlasg) May 24, 2020
Economy & Politics
Fayemi set to activate digital economy with N5billion broadband infrastructure
Governor Fayemi plans to activate Ekiti state’s digital economy, this would help generate healthy competition within the ICT sector
Ekiti state government has concluded plans to create a digital hub, with the laying of a 606-kilometer broadband infrastructure.
The project is expected to lift the state from 16% internet penetration to 90% and is estimated to be worth N5 billion, with the Federal Government contributing N1.1 billion of the total sum.
Digital economy: Ekiti to lay 606km broadband infrastructure – https://t.co/Ot67wFn6yL pic.twitter.com/ligXcgeQDM
— Government of Ekiti State (@ekitistategov) May 24, 2020
This plan is part of the memorandum of Understanding (MoU) which the state Governor signed with O’odua Infraco Resources Limited, a consortium that develops high speed and efficient Fibre Optic Cable (FOC) Open Access Network (OAN) across the South-West region of Nigeria.
According to the Managing Director of O’odua Infraco Resources Limited, Mr Sammy Adigun, the project will be officially flagged off in October and completed within 14 months.
(READ MORE: What Nigeria stands to gain from new National Broadband Plan)
This decision is a follow-up to the recent crash of Right of Way charges from N4,500 to N145 per meter for broadband infrastructure, and in line with one of the five pillars of Governor Kayode Fayemi’s development plan for Ekiti state.
The Governor noted that these decisions would help generate healthy competition within the ICT sector, thus activating Ekiti state’s digital economy and digital education.
Fayemi noted that the project execution, as well as the broadband policy in the state would be coordinated and supervised by a Digital Infrastructural Committee, made up of various relevant government institutions critical to the implementation of the project.
READ MORE: NCC, Infracos to boost broadband infrastructure with N265 billion
“For us the roadmap is first the fibre connectivity itself, the second is the adequate data center infrastructure, the third is the e-learning programme which will cover our educational institutions, then our safe city, our security programme will also be included.
“With our geographical land information system (GIS), we would digitalize all our land records, and of course, commercial investment as well as digitalisation of our government assets and our health education initiative,” Fayemi explained.
