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Domestic Debt Servicing Gulped N474.06bn in First Quarter – DMO

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Forex Weekly Outlook March 6 - 10
  • Domestic Debt Servicing Gulped N474.06bn in First Quarter – DMO

The size of Federal Government’s loans has reflected on the debt servicing expenses as it spent N474.06bn to service domestic debts in the first three months of this year.

Statistics obtained from the Debt Management Office in Abuja on Wednesday showed that the country also spent $127.92m to service foreign debts in the first quarter of the year.

At the official exchange rate of N306.35 to a dollar, the cost of servicing the foreign loans amounted to N39.19bn in the first quarter of the year.

This means that the Federal Government spent N434.87bn more on servicing its domestic debts than on foreign debts in the first three months of the year.

As reported by Investors King on Tuesday, the nation’s total debt stood at N19.16tn as of March 31, 2017.

The Federal Government’s domestic component of the total debt stood at N11.97tn as of the end of March. The country’s external debt (for both the federal and state governments) stood at $13.81bn in the period, while the states’ domestic debts rose to N2.96tn.

For some years now, the Federal Government has been saying that it will move to borrowing less from domestic sources because of high interest rates and because it has crowded out private sector operators from the debt market.

However, it has not been able to achieve this as it continues to borrow from the domestic market every month, using a variety of instruments. In fact, a new borrowing instrument, FGN Savings Bond, was recently introduced into the market.

The World Bank had recently said that lower earnings had endangered the capacity of the Federal Government to sustain debt servicing even though the nation’s debt profile remained low in comparison to the Gross Domestic Product.

Our correspondent reported that the servicing of Federal Government’s domestic debt gulped N1.23tn in 2016.

The DMO statistics showed that the highest interest payment of N839.79bn was made on debt acquired using the instrument of FGN Bonds.

Similarly, N335.58bn interest was paid on loans borrowed with the instrument of Nigeria Treasury Bills, while debts incurred with Treasury Bonds incurred a servicing obligation of N29bn in the year 2016.

A principal value of N25bn of Treasury Bonds was also repaid within the year.

The N1.23tn paid in servicing the domestic debt of the Federal Government was spread throughout the 12 months of the year.

The Federal Government had in 2015 spent N1.02tn to service its domestic debt. This comprised of N25bn repayment of the principal and N993.13bn interest payment within the year.

This means that in one year, between 2015 and 2016, the cost of serving the Federal Government’s domestic debt rose by N208.76bn.

In a report on the cost of the domestic debt, the DMO attributed the increasing cost of debt servicing to an equally increasing domestic debt profile and an increasing interest rate.

The report stated, “The Federal Government’s domestic debt service as of end of December 2015 amounted to N1.02bn, compared to N865.81bn in the corresponding period of 2014, and representing an increase of N152.32bn or 17.59 per cent.

“This amount comprised principal repayment of N25bn and interest payment of N993.13bn. By instrument type, FGN bonds debt service accounted for 62.41 per cent of the total debt service payment, while payments in respect of the Nigerian Treasury Bills and Treasury Bonds were 31.83 and 5.76 per cent, respectively.

“The trend analysis shows a continued rise in FGN’s domestic debt service payments from 2011 to 2015, which was attributed to the increase in the domestic debt stock, as well as the higher interest rates, which led to the rise in the cost of borrowing in the domestic debt market.”

In another document titled: ‘Nigeria’s Debt Management Strategy 2016-2019’, the DMO said at least 30 per cent of the nation’s domestic debt would fall due within a one-year period.

It stated, “The implied interest rate was high at 10.77 per cent, due mainly to the higher interest cost on domestic debt. The portfolio is further characterised by a relatively high share of domestic debt falling due within the next one year.

“Interest rate risk is high, since maturing debt will have to be refinanced at market rates, which could be higher than interest rates on existing debt. The foreign exchange risk is relatively low given the predominance of domestic debt in the portfolio.”

It added that the main risks to the existing public debt portfolio were high refinancing risk, given that more than 30 per cent of the domestic debt would mature within one year; and high interest rate risk arising from the high proportion of domestic debt due for re-fixing in the coming year, and therefore, exposed to changes in interest rates.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Insurance

Heirs Insurance Group Unveils Revolutionary Website for Seamless Insurance Experience

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Heirs Life Assurance- Investors King

Heirs Insurance Group has launched a website designed to revolutionize the insurance experience for its customers.

With a focus on simplicity, accessibility, and personalized service, the new website aims to streamline the process of obtaining insurance coverage and empower customers to make informed decisions about their insurance needs.

The website boasts a range of innovative features that make navigating insurance options easier than ever before.

From simple and intuitive navigation menus to personalized insurance recommendations, the website is designed to guide customers through every step of the insurance process quickly and efficiently.

According to Ifesinachi Okpagu, the Chief Marketing Officer of Heirs Insurance Group, the new website embodies the company’s commitment to delivering exceptional customer service.

“Today’s customers want simplicity, and this new website delivers on that request,” Okpagu said. “We are empowering customers to take control of their lives, their businesses, assets, and their most cherished people.”

One of the key features of the website is its personalized insurance experience, which takes customers through a short journey to help them identify the best insurance plan for their needs.

Whether customers are looking for coverage for their home, car, business, or loved ones, the website provides tailored recommendations to ensure they find the right insurance solution quickly and easily.

With its user-friendly interface and innovative features, the new website from Heirs Insurance Group sets a new standard for the insurance industry, making it easier than ever for customers to protect what matters most to them.

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Banking Sector

Safaricom, Access Holdings Forge Partnership to Revolutionize Remittance Corridor in Africa

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Access bank

Safaricom, the leading telecommunications company in Kenya, has entered into a strategic partnership with Access Holdings, spearheaded by Aigboje Aig-Imoukhuede.

The collaboration aims to revolutionize the remittance corridor between East and West Africa, marking a significant step towards enhancing financial inclusion and empowering millions of individuals across the continent.

The partnership comes on the heels of Access Holdings’ recent acquisition of the National Bank of Kenya Limited, signaling the company’s ambitious expansion into the East African market.

Leveraging Safaricom’s extensive network and expertise in mobile money through M-Pesa, which currently dominates the mobile money market in Kenya, the alliance seeks to create seamless and efficient channels for remittance transactions.

Aigboje Aig-Imoukhuede, the driving force behind Access Holdings, expressed enthusiasm about the collaboration, highlighting its potential to transcend traditional boundaries and foster greater economic connectivity between East and West Africa.

He highlighted the fusion of collective expertise and resources between the two entities, underlining their shared commitment to driving financial inclusion and empowerment across the continent.

The partnership holds promise for addressing the challenges faced by millions of Africans in accessing affordable and reliable remittance services.

By connecting more than 60 million customers and 5 million businesses across eight countries, the collaboration aims to facilitate over $1 billion in daily transaction value, significantly boosting the flow of remittances within and outside Africa.

With the first phase of the collaboration focusing on key markets such as Nigeria, Kenya, Ghana, and Tanzania, stakeholders anticipate a transformative impact on the remittance landscape, paving the way for greater intracontinental trade and economic integration in line with the objectives of initiatives like the African Continental Free Trade Area (AfCFTA).

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Banking Sector

EFCC Urged to Repatriate Recoveries to NDIC for Depositors’ Relief

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The Nigeria Deposit Insurance Corporation (NDIC) has made a fervent plea to the Economic and Financial Crimes Commission (EFCC) to expedite the repatriation of recovered funds to its coffers to facilitate the timely reimbursement of depositors affected by bank failures.

During a recent meeting between the Managing Director of NDIC, Bello Hassan, and the Executive Chairman of the EFCC, Ola Olukoyede, at the NDIC headquarters in Abuja, Hassan stressed the importance of enhanced collaboration between the two agencies in recovering depositors’ funds lost due to bank failures.

Hassan emphasized that the return of recoveries made by the EFCC on behalf of the NDIC would significantly contribute to the prompt reimbursement of affected depositors.

He commended the EFCC for its unwavering efforts in combating corruption and financial crimes, highlighting its crucial role as a key member of the Taskforce on Implementation of the Failed Banks Act chaired by the NDIC.

The NDIC boss also highlighted the existing partnership between the two organizations, which led to the establishment of the NDIC Help Desk at the EFCC in 2022.

He disclosed that several high-profile cases referred to the EFCC were currently under investigation.

In response, Olukoyede reiterated the EFCC’s commitment to collaborating closely with the NDIC to combat financial crimes and safeguard the integrity of the Nigerian banking sector.

He pledged to intensify efforts to repatriate recovered funds promptly, acknowledging the interconnectedness between criminal activities and bank failures.

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