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Fitch upgrades Nigeria’s credit outlook to positive, cites economic reforms

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Fitch, a global rating agency, has reviewed Nigeria’s outlook to positive from stable.

A credit rating is a measure of how likely a company or government entity can pay back its debts, based on an independent assessment of its financial health.

Fitch, in a statement on May 3, said the positive outlook partly reflects reforms implemented over the past year to support the restoration of macroeconomic stability and enhance policy coherence and credibility.

 

“Exchange rate and monetary policy frameworks have been adjusted, fuel subsidies reduced, coordination between the ministry of finance and the Central Bank of Nigeria (CBN) improved, central bank financing of the government scaled back and administrative efficiency measures are being taken to raise the currently low government revenue, as well as oil production,” Fitch said.

 

Fitch said the reforms have lessened distortions stemming from previous “unconventional monetary and exchange rate policies,” leading to the return of sizeable inflows to the official foreign exchange (FX) market.

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“Nevertheless, we see significant short-term challenges, notably, inflation is high and the FX market has yet to stabilise, and the durability of the commitment to reform is to be tested,” the credit agency said.

“The CBN has stepped up efforts to reform the monetary and exchange rate framework following last year’s unification of the multiple exchange rate windows, and the large differential between the official and parallel market rates has collapsed.

 

“Average daily FX turnover at the official FX window has risen sharply from 2H23, and there has been clearance of USD4.5 billion of the backlog of unpaid FX forwards (the validity of the outstanding USD2.2 billion is being assessed by CBN), and weekly sales of FC to bureaux de changes (BDCs) have resumed (having been suspended since 2021).”

‘RETURN OF SIZEABLE NON-RESIDENT INFLOWS’

Fitch said increased formalisation of FX activity and monetary policy tightening has contributed to a notable rise in foreign portfolio investment inflows and a fast appreciation of the naira at the official FX window.

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According to the company, this followed the 71 percent “post-liberalisation depreciation between June 2023 and mid-March 2024”.

 

However, the credit rating agency said the exchange rate remains volatile.

Fitch said the continued lack of clarity on the size of net FX reserves is a constraint on Nigeria’s sovereign’s credit profile.

‘FURTHER MONETARY POLICY TIGHTENING ANTICIPATED’

In March, the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR), which benchmarks interest rates, from 22.75 percent to 24.75 percent.

 

Fitch said it expects further increases in the CBN monetary policy rate in the second half of 2024 and “strengthening of monetary policy transmission, after the recent resumption of open market operations at rates closely aligned to the MPR”.

“We project inflation, which rose to 33.2% yoy in March due partly to exchange rate pass-through and rising food prices, to average 26.3% in 2024 and 18.2% in 2025, still well above our projected ‘B’ median of 4.5%,” Fitch said.

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In December 2023, Moody’s, a US-based rating agency, also revised its outlook for Nigeria from stable to positive.

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‘People are starving’ – Bago tackles NAHCON over ‘poor treatment’ of pilgrims in Saudi Arabia

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Umaru Bago, governor of Niger state, has tackled the National Hajj Commission of Nigeria (NAHCON) over alleged poor treatment of pilgrims in Saudi Arabia.

 

In a series of tweets on Sunday, Bago alleged that the commission is not providing enough food for pilgrims in the Arabian country.

 

The governor asked NAHCON not to force Arabian food on Nigerians, adding that some people are “falling sick”.

 

“NAHCON has no business in chartering flights; it is not their business to feed the pilgrims because of the food,” he said.

 

“For example, I am from Niger State. If you allow me to feed pilgrims, I will be able to trans-ship foods that people are locally used to, to Saudi Arabia to feed my own pilgrims.

 

“I will be able to get a Kitchen that will feed my pilgrims from what they are used to, not to come and give them slices of bread or boil egg and people are starving.

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“We have different cultures; you cannot force the Arabian Cuisine on our people and that is why they are falling sick.”

 

The governor said the private sector should drive operations of pilgrimage.

“If NAHCON must exist, then they should strictly be a regulator but as I have told you, I am leading committees of Governors to the NGF, from there we go to the NEC. I will propose this motion, and we will send a bill to the National Assembly where issues of this NAHCON should be reviewed,” Bago said.

 

The Niger state governor said it is ridiculous that pilgrims got only $400 after subsidy was paid by the federal government.

“What is $400? Somebody paid N8 million to you, NAHCON, and you come and give them a stipend of $400 to run themselves for 1 month? There is no reason why Hajj operations should last beyond 2 weeks,” Bago said.

“You bring pilgrims for 40 days; you leave them here, some 45 days, it’s ridiculous, because of racketeering in airlifting, in handling of cargo and other things.”

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The Niger state governor said the federal government is “too big to be worried” about Hajj operations, as it is the business of the local governments.

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Dangote accuses IOCs of manipulating crude oil prices, frustrating refinery’s survival

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Devakumar Edwin, vice-president, oil and gas at Dangote Industries Limited (DIL), has accused international oil companies (IOCs) in Nigeria of doing everything to frustrate the survival of Dangote Oil Refinery and Petrochemicals.

 

Edwin said the IOCs are deliberately frustrating the refinery’s efforts to buy local crude by jerking up crude oil prices above the market price, thereby forcing it to import crude from countries as far as the United States, with its attendant huge costs.

 

Edwin spoke to journalists at a one-day training programme, organised recently by the Dangote Group.

 

He also lamented the activity of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in granting licences indiscriminately to marketers to “import dirty refined products into the country”.

 

“The Federal Government issued 25 licences to build refinery and we are the only one that delivered on promise. In effect, we deserve every support from the Government,” the vice-president said.

 

“It is good to note that from the start of production, more than 3.5 billion litres, which represents 90 per cent of our production, have been exported. We are calling on the Federal Government and regulators to give us the necessary support in order to create jobs and prosperity for the nation.

 

“While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) are trying their best to allocate the crude for us, the IOCs are deliberately and willfully frustrating our efforts to buy the local crude.

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“It would be recalled that the NUPRC, recently met with crude oil producers as well as refinery owners in Nigeria, in a bid to ensure full adherence to Domestic Crude Oil Supply Obligations (DCSO), as enunciated under section 109(2) of the Petroleum Industry Act (PIA).

 

“It seems that the IOCs’ objective is to ensure that our Petroleum Refinery fails. It is either they are deliberately asking for ridiculous/humongous premium or, they simply state that crude is not available. At some point, we paid $6 over and above the market price.

 

“This has forced us to reduce our output as well as import crude from countries as far as the US, increasing our cost of production.

 

“It appears that the objective of the IOCs is to ensure that Nigeria remains a country which exports crude oil and imports refined petroleum products.

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“They (IOCs) are keen on exporting the raw materials to their home countries, creating employment and wealth for their countries, adding to their GDP, and dumping the expensive refined products into Nigeria – thus making us dependent on imported products.”

 

Edwin further said the strategy of the multinationals has been adopted in every commodity, making Nigeria and sub-Saharan Africa face unemployment and poverty, adding that “they create wealth for themselves at our expense”.

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“This is exploitation — pure and simple. Unfortunately, the country is also playing into their hands by continuing to issue import licences, at the expense of our economy and at the cost of the health of the Nigerians who are exposed to carcinogenic products,” he added.

 

“In spite of the fact that we are producing and bringing out diesel into the market, complying with ECOWAS regulations and standards, licences are being issued, in large quantities, to traders who are buying the extremely high sulphur diesel from Russia and dumping it in the Nigerian Market.

 

“Since the US, EU and UK imposed a Price Cap Scheme from 5th February 2023 on Russian Petroleum Products, a large number of vessels are waiting near Togo with Russian ultra-high sulphur diesel and, they are being purchased and dumped into the Nigerian Market.

 

“In fact, some of the European countries were so alarmed about the carcinogenic effect of the extra high sulphur diesel being dumped into the Nigerian Market that countries like Belgium and the Netherlands imposed a ban on such fuel being exported from its country, into West Africa, recently.”

 

Edwin said it is sad that the country is giving import licences for “such dirty diesel to be imported into Nigeria when we have “more than adequate petroleum refining capacity locally.”

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‘NMDPRA’S INDISCRIMINATE LICENSING MADE US EXPAND TO FOREIGN MARKETS’

According to the vice-president, the decision of the NMDPRA to grant licences indiscriminately for the importation of dirty diesel and aviation fuel has made the Dangote refinery to expand into foreign markets.

 

He said the refinery has recently exported diesel and aviation fuel to Europe and other parts of the world because the refinery meets international standards as well as complies with stringent guidelines and regulations to protect the local environment.

 

“The same industry players fought us for crashing the price of diesel and aviation fuel, but our aim, as I have said earlier, is to grow our economy,” Edwin said.

 

“Recently, the government of Ghana, through legislation has banned the importation of highly contaminated diesel and PMS into their county. It is regrettable that, in Nigeria, import licences are granted despite knowing that we have the capacity to produce nearly double the amount of products needed in Nigeria and even export the surplus. Since January 2021, ECOWAS regulations have prohibited the import of highly contaminated diesel into the region.”

 

Edwin appealed to the federal government and the national assembly to urgently intervene for speedy implementation of the PIA and to ensure the interests of Nigeria and Nigerians are protected.

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BREAKING: Dangote accuses IOCs of manipulating crude oil prices, frustrating refinery’s survival

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Devakumar Edwin, vice-president, oil and gas at Dangote Industries Limited (DIL), has accused international oil companies (IOCs) in Nigeria of doing everything to frustrate the survival of Dangote Oil Refinery and Petrochemicals.

 

Edwin said the IOCs are deliberately and wilfully frustrating the refinery’s efforts to buy local crude by jerking up high premium price above the market price, thereby forcing it to import crude from countries as far as United States, with its attendant high costs.

 

More to follow…

 

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