The executive board of the International Monetary Fund authorized a $3 billion, three-year loan package for Ghana on Wednesday, allowing for an immediate payout of roughly $600 million and maybe providing a way out of the biggest economic crisis the West African nation has experienced in a generation.
The Extended Credit Facility loan, intended to assist Ghana address immediate policy and funding issues, must be implemented successfully, according to the IMF, which stated in a statement that achieving prompt debt restructuring agreements with external creditors would be vital, as per a report by American news agency, Reuters.
The Fund also stated that the new loan would create a framework for completing its debt restructuring and would aid in securing additional external finance from development partners.
“Congratulations to Ghana for a strong program of reforms to revitalize growth and reduce the country’s debt burden,” IMF Managing Director Kristalina Georgieva said in a video posted to Twitter.
According to Georgieva, the G20’s long-stalled common framework for developing nation debt relief has made significant progress with the official bilateral creditors’ promise to help Ghana make its debt manageable.
Recall that since 2022, Ghana has relentlessly sought a $3 billion relief fund from the International Monetary Fund. However, the IMF held off on disbursing the loan, insisting that the country come up with a sustainable debt restructuring plan before it could release such an amount.
This back and forth between the West African gold coast and the global lender constituted a roadblock for Ghana’s economic recovery from one of the worst economic crises the country has faced in decades. Ghana’s inflation hit its highest point in the last year, and its Cedi was ranked as the worst-performing currency in the world.
The country’s administration, through this tumultuous period strongly believed that the $ 3 billion loan from the IMF would help mitigate this crisis, while the people disagreed, citing that the last thing the country needs is to incur more debts.
Additionally, in a separate report, Ghana relayed its plans to restructure its debt, seeking a $10.5 billion reduction in the amount of external debt service from 2023 to 2026. Although Ghana’s debt is now unsustainable, the nation hopes to reduce its risk of financial distress to a “moderate” level by 2028, according to the fund.
After its already fragile finances collapsed amid the economic effects of COVID-19 and Russia’s invasion of Ukraine, Ghana is restructuring its debt. It concluded an internal debt swap earlier this year and is now requesting relief from foreign debt under the Common Framework program of the Group of 20.
The World Bank is slated to contribute $1.6 billion in budget and balance-of-payments support to Ghana, which the IMF estimates has a $15 billion funding deficit in its balance of payments from 2023 to 2026. According to the IMF, Ghana must aim to reduce its public debt-to-GDP ratio from 88.1% by the end of 2022 to 55% by 2028 since the nation has a medium “debt carrying capacity.”
Oil and gas would no longer be Nigeria’s primary sources of income, according to Dr. Ngozi Okonjo Iweala, Director General of the World Trade Organization (WTO). She made this statement on Monday, May 15, at the Presidential Banquet Hall, State House in Abuja, during the 2023 Governors Induction for New and Returning Governors.
She claims that because the oil and gas industry is no longer as lucrative as it once was, the new and re-elected governors must look into alternative revenue sources.
“We need to start preparing now for a time when our oil and gas will no longer serve us as the main sources of revenue. States heavily dependent on FAAC allocation will be particularly hit,” the WTO director general said.
“It is important that you governors start now to diversify your revenue sources. We ought to be seeking to double our growth rate and sustain that higher growth until we attain upper middle-income status,” she added.
Nigeria’s Finance Minister, Dr. Zainab Ahmed, had said during a public presentation and breakdown of the 2023 Appropriation Act in January 2023, that the total revenue available to fund the 2023 budget is estimated at N10.49 trillion, and the government expects 22% of the projected revenues from oil-related sources, while 78% is anticipated from non-oil sources.
Similar remarks were made by billionaire industrialist Tony Elumelu, who was also in attendance, he noted that Nigeria has to move beyond oil and gas. He used Singapore as an illuminating example. He stated: “Look at Singapore, a country with 6 million people, no oil, no abundance of natural resources, just human resources and purposeful leadership. Today, the per capita gross domestic product (GDP) stands at $55,000, up from $500 in 1965, making the country one of the most developed countries in the world.”
Dr. Ngozi Okonjo Iweala’s comments are in line with the current turn of events in Nigeria’s oil and gas sector. For the past year, Nigeria has continually experienced a decline in its daily oil output. By extension, the revenue generated from oil has also decreased, as crude oil theft and vandalism continue to pose an insoluble problem for the Nigerian government.
As recently as a few days ago, the Organization of the Petroleum Exporting Countries (OPEC) reported that Angola has surpassed Nigeria to grab the top spot among oil-producing African countries. And even a month prior when Nigeria lead Africa in crude oil production at 1.268 million barrels per day (bp/d) in March, it fell behind its OPEC quota of 1.8 million bp/d and its 2023 budget benchmark of 1.6 million bp/d.
On the flip side, the much-anticipated launch of Dangote Group’s refineries, the refinery built by Nigeria’s richest man Aliko Dangote is a few days from becoming a reality. This project is anticipated to support attempts by the federal government to make the nation independent in the local refining of crude oil in order to conserve the limited foreign currency needed in the importation of petroleum products. The Dangote Refinery, the biggest single-train refinery in the world, will have a daily capacity of up to 650,000 barrels.