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British pound drops to weakest level in nearly 40 years against the US dollar

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A bleak economic outlook and the most recent surge in the value of the US dollar has caused the pound to decline to its lowest point in over four decades.

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Sterling dropped as much as 1% to $1.141, a low last reached by Margaret Thatcher’s government in 1985.

The economic picture is difficult, just like then. Double-digit inflation and the potential for a protracted economic downturn are two concerns that Britain is currently battling. The Bank of England has issued a more than one-year recession warning.

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The Plaza Accord, a deal to devalue the US currency, was signed by the world’s richest countries the previous time the sterling-dollar exchange rate fell this low. Sterling’s decline is being exacerbated and the rise of the dollar against certain important peers is adding to it.

The predicted slowdown in economic growth and a growing trade deficit is putting pressure on the Sterling, which has fallen more than 15% this year and this month had its largest decline since 2016.

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Concerns about Prime Minister Liz Truss’ economic program are another factor putting pressure on the currency. Further disquiet is being generated by plans to reconsider the BOE mandate as it faces its most difficult inflation issue since gaining independence.

Nevertheless, the pound is still more valuable compared to the euro than it was for the majority of the Brexit negotiations and the whole of the financial crisis.

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The UK’s general economic problems are reflected and made worse by the pound’s decline, which feeds off the fragility of both the nation and the currency. The Bank of England’s desire for swift interest rate increases has been dampened by the possibility of an impending recession, which has haunted the pound all year.

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Nigeria’s Fuel Subsidies Surpassed $1 Billion In August As It Supplied More Petrol

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The cost of Nigeria’s fuel subsidies rose to 525.714 billion naira ($1.22 billion) in August, bringing the total spent this year to 2.568 trillion naira, according to figures submitted to the government by the Nigeria National Petroleum Corp, NNPC.

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The ballooning costs of keeping petrol prices low in Africa’s most populous nation are straining the budget and draining revenue from the Nigerian National Petroleum Corp (NNPC).

In April, Nigeria’s parliament approved a 4-trillion-naira petrol subsidy for this year after the government in January reversed a pledge to end its subsidies to avert protests in the run-up to presidential elections in February 2023.

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NNPC has not submitted any money to the federal government this year due largely to subsidy costs. August’s bill compared with 448.782 billion naira in July, according to a document NNPC submitted on Friday to the Federation Account Allocation Committee.

Part of the increased cost was down to a bigger daily supply of petrol, which rose to 71.8 million litres, up nearly 10% from July, according to information submitted at the same meeting by regulator Nigerian Midstream and Downstream Petroleum Regulatory Authority.

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Oil production in August averaged 1.18 million barrels per day, well below the nation’s OPEC quota of 1.8 million bpd, due in large part to theft from pipelines that has curtailed production.

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Experts Criticize Budget 2022 Performance As Buhari Presents 2023 Budget

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Experts are exposing performance shortcomings in the 2022 budget as the two chambers of the National Assembly gather ready to receive the president’s proposed budget for the 2023 fiscal year next month.

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Mrs. Zainab Ahmed, the Minister Of Finance, Budget, and National Planning, revealed that N19.76 trillion in total spending is anticipated for the 2023 fiscal year.

Depending on the decision the federal government makes on the payment of fuel subsidies, the budget deficit for the fiscal year 2023 might range between N11.30t and N12.4t.

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However, experts have kept finding problems with how the 2022 budget has performed. One of the crucial elements blamed for the 2022 budget’s subpar performance is the ratio of debt service to revenue.

Within the first four months of 2022, according to BudgIT, a civic-tech organization that is a pioneer in advocating for openness and accountability in Nigeria’s public finance management, the debt service-to-revenue ratio reached alarming proportions.

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According to reports, the nation’s current debt service, which was N1.94 trillion from January to April 2022, is greater than 100% of the country’s revenue, which was N1.64 trillion during the same time period.

Nigeria’s national debt increased to N41.6 trillion in the first quarter of 2022 from N39.56 trillion at the end of December 2021, placing tremendous pressure on debt servicing.

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According to budget performance data examined by The Guardian, the prorated prediction for gross oil and gas revenue for the entire year 2022 was N9.37 trillion, but as of April 30, 2022, only N1.23 trillion had been realized—a performance of just 39%.

According to the reports, oil revenue underperformed because of severe shortfalls in oil output, including shutdowns brought on by pipeline vandalism and crude oil theft, as well as high fuel subsidy costs caused by higher landing costs for imported goods.

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Non-oil taxes also performed on average 92.6 percent below expectations, significantly falling short of targets. According to experts, the performance of the budget during the past year has been less than ideal.

After carefully examining two federal ministries—the Ministry of Industry, Trade, and Investments and its counterpart, the Ministry of Finance, Budget, and National Planning—they came to their conclusion.

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Prof. Sheriffdeen Tella, an Economics Professor at Olabisi Onabanjo University, claimed in his submission that the trade and industry sector had not performed better than other sectors and that the oil subsector, which typically dominates trade, had not performed well despite the opportunity because Nigeria was unable to meet OPEC crude oil allocations.

According to Tella, the non-oil industry was unable to fill the gap because of the global economy’s weak growth.

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Osun, Bayelsa Ranked Least Among Indebted States As Lagos Tops List In Nigeria

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Lagos, Delta, and Ogun State led the list of states in Nigeria with the highest domestic debt stock as of the end of June 2022, accounting for Lagos, Delta, and Ogun State led the list of states in Nigeria with the highest domestic debt stock as of the end of June 2022, accounting for over 25% of the total domestic debts of the 36 states of the federation, including the Federal Capital (Abuja).

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This is according to data released by the Debt Management Office, DMO, on the state on Nigeria’s debt stock as of the second quarter of 2022.

The aggregate domestic debt stocks of the entire states in the country rose to N5.28 trillion as of June 2022, representing a N438.44 billion increase when compared to N4.84 trillion recorded as of the previous quarter.

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Also, when compared to the corresponding period of the previous year, the states’ domestic debts rose by N1.16 trillion from N4.12 trillion recorded as of June 2021.

Meanwhile, Nigeria’s total public debt stock surged to a record high to stand $103.31 billion as of the period under review.

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A further breakdown of the data showed that domestic debts accounted for 61% (or $63.25 billion) of total debt, while external debts accounted for 39% of the debt stock. Interestingly, total debt stock increased by $16.74 billion in the last one year.

Delta, Oyo, and Abuja recorded the highest year-on-year increase in terms of percentage growth, while Lagos, Delta, and Ogun State recorded the highest increase in terms of actual value.

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The southwestern region of the country topped the list with the highest domestic debt stock with an aggregate debt of N1.53 trillion, largely driven by the likes of Lagos and Ogun State.

Meanwhile, the region saw its domestic debt increase by N68.46 billion in the last three months and by N460.32 billion in the last one year.

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The South-south region followed with an aggregate N1.25 trillion in domestic debt as of June 2022, a figure that was driven by the debt numbers of Delta and Rivers State.

North Central recorded an aggregate domestic debt stock of N718.87 billion, followed by North-east with N663.39 billion.

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Also, North-west recorded a domestic debt stock of N581.26 billion, while southeastern region recorded the least debt stock at N539.44 billion.

Top states by domestic debt

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Below is the breakdown of the top states in the country with the highest domestic stock as of June 2022.

Lagos State – N797.3 billion

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Lagos State recorded the highest domestic debt stock as of June 2022, accounting for 15.1% of the total domestic debt owed by the 36 states of the federation including Abuja. Lagos State saw its domestic debt increase marginally by 2.16% on a quarter-on-quarter basis from N780.48 billion recorded as of March 2022 to N797.31 billion in June 2022.

On a year-on-year basis, domestic debts of the country’s economic hub rose by 49.4% from N533.81 billion recorded as of the corresponding period of 2021.

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Delta State – N378.88 billion

Delta State, a major oil-producing state in the country recorded a total of N378.88 billion as domestic debt stock as of June 2022, which accounts for 7.2% of the total states’ domestic debt stock to stand as a distant second on the list.

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The domestic debt profile of Delta State increased by 131.8% on a quarter-on-quarter basis from N163.48 billion, while based on a year-on-year comparison, domestic debt stock increased by 84% from N205.92 billion recorded as of June last year.

Ogun State – N241.78 billion

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Ogun State, a neighbouring state of Lagos, ranks third on the list of states with the highest domestic debt as of June 2022, accounting for 4.6% of the total. Ogun State saw its domestic debt stock rise by 55.4% compared to N155.57 billion recorded as of the corresponding period of 2021.

However, it declined marginally by 0.08% when compared to the previous quarter (N241.98 billion).

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Rivers State – N225.51 billion

Rivers State recorded a total domestic debt stock of N225.51 billion as of June 2022, representing 4.3% of the total states’ domestic debts. The debt stock of Rivers State increased by 5.8% on a year-on-year basis from N213.17 billion recorded as of June 2022, however, it remained unchanged in the past three months.

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Imo State – N210.39 billion

Imo State ranked fifth on the list with a total domestic debt stock of N210.39 billion as of June 2022, contributing 4% to the total states’ debt profile. The domestic debt stock of Imo State increased by 40.7% on a year-on-year basis from N149.51 billion recorded as of June 2021.

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On a quarter-on-quarter basis, the domestic debt stock of Imo State increased by 2.83% from N204.61 billion recorded as of March 2022.

Others include Akwa Ibom – N203.95 billion, Cross River – N176.09 billion, Oyo – N159.91 billion, Osun – N150.53 billion
Bayelsa – N150.43 billion.

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