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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 and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Banking Sector

Unity Bank’S Boss Reaffirms Commitment To Going Above And Beyond

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The Managing Director/CEO of Unity Bank Plc, Mrs. Tomi Somefun has commended the lender’s frontline staff for effectively translating its Customer Service Charter thereby forging a culture of responsiveness and exceptional partnership to demonstrate unwavering commitment to customers.

In a message commemorating this year’s Customer Service Week, Mrs. Somefun celebrated with staff in customer service roles and expressed deep appreciation to the bank’s clients for their continued trust and loyalty, which have propelled the bank’s growth and success.

“This year’s theme “Above and Beyond” supports our mission at Unity Bank which enables us to reflect on our collective journey so far where our customers are at the centre of our business,” she said.

Somefun further stated that the Bank is continually investing in innovation as well as revamping existing systems, noting that new tools and strategies would be rolled out in the coming months to further enrich customer experiences. “Whether it’s through improved digital platforms or personalized services, we are committed to enhancing the way you bank with us,” she added.

While acknowledging the essential role frontline staff play in creating lasting relationships with customers, Somefun said that through dedication, resilience, and professionalism, Unity Bank Customer Service has demonstrated that it embodies the “Above and Beyond” theme of this year’s celebration.

“Day after day, our staff go beyond the call of duty, ensuring that every customer interaction is handled with care and excellence. They are the reason our customers continue to choose Unity Bank.”

Also speaking, the Bank’s Chief Customer Service Officer, Elfrida Igebu said that, “Throughout the week, we have seen firsthand what it means to go the extra mile. Our commitment to exceeding expectations, personalizing experiences, and showing genuine empathy has set us apart and created lasting connections with our customers.”

She noted that the different activities lined up to celebrate the customer service week “have strengthened the team’s professional capabilities and reinforced the bonds that make us a united team.”

From October 7 – 11, the Bank lined up several activities to celebrate customers and the exceptional teams in its over 200 branches nationwide, rewarding outstanding staff members, while reflecting on the theme of this year’s event – Above and Beyond.

The Bank has continued to prioritize the customer over the past few years through its increased focus on digital strategy. For instance, over the past four years, it has maintained its commitment to customer service excellence by introducing innovative digital products such as the multilingual USSD banking *7799#, and mobile banking solution, UniFi which have boosted customers’ access to the Bank’s services, while facilitating convenience.

These electronic banking channels are constantly updated with new and exciting features to put the customers first and make their banking experiences top-notch in the industry.

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Banking Sector

Sowore Sues GTBank Over Five-Year Account Freeze, Demands N100 Million in Damages

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GTBank -Investors King

Former presidential candidate of the African Action Congress (AAC), Omoyele Sowore, has launched a legal battle against Guaranty Trust Bank (GTB) for freezing his bank accounts for five years.

In a suit filed by his lawyer, Inibehe Effiong, at the Federal High Court in Lagos, Sowore stated that the freezing of his bank accounts was not only illegal but also a violation of his human rights.

Sowore revealed that his bank accounts were frozen without due process by the bank, leaving him financially frustrated.

As a result, the human rights activist is demanding N100 million in damages from GTBank, according to the suit.

Sowore is requesting that the bank immediately unfreeze his accounts and pay the damages. Effiong described the account freezing as unlawful stating “the arbitrary freezing of my client’s accounts without due process is not only illegal but also a blatant violation of his fundamental rights.”

The suit reads, “A Declaration that the Respondent’s act of freezing and restricting the Applicant’s accounts with Account Numbers: (1) 0169510647 (Current Account); (2) 0169510867 (Savings Account); (3) 0169510850 (Current Account); (4) 0171422811 (MasterCard/Visa Debit Account Type) and Account Name: Sowore Omoyele Stephen respectively, all domiciled with the Respondent; Guaranty Trust Bank Ltd is unlawful, unconstitutional, null and void, and a breach of the Applicant’s right to property guaranteed by the provisions of Section 44 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and Article 14 of the African Charter of Human and Peoples Rights (Ratification and Enforcement) Act LFN 2010.

“An Order of this Honourable Court directing the Respondent to lift the restriction placed on the Applicant’s accounts with the aforementioned account numbers.

“An Order of perpetual injunction restraining the Respondent, whether by itself, its agents, privies, or servants, from unlawfully interfering with the Applicant’s accounts.”

Sowore is seeking N100 million as general damages for the unlawful freezing of his accounts, as well as the cost of prosecuting the suit.

He further said since 2019, his accounts have been rendered inoperable by the bank, with no formal explanation offered.

Despite several complaints, the Respondent has refused to lift the restrictions. A demand letter dated April 23, 2024, was also served on the Respondent, but to no avail.

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Banking Sector

Zenith Bank Enhances Customer Online Experience with Revamped Digital Channels

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Zenith Bank - Investors King

Zenith Bank, one of Nigeria’s foremost financial institutions, has successfully restored full operational services across its electronic transaction channels, ensuring that customers can now enjoy seamless access to digital banking services.

This restoration follows temporary disruptions caused by a routine upgrade of the bank’s technology infrastructure, which aimed to optimize service delivery but impacted e-channel services recently.

In a post shared on Thursday through its social media platforms, the leading lender confirmed that all services across its electronic channels have been fully reinstated.

Reiterating its commitment to providing quality digital services, the bank assured customers of exceptional service with its newly enhanced technology infrastructure, designed to deliver seamless and innovative financial solutions.

The announcement stated:

“We are pleased to inform you that access to our digital channels has been restored, allowing you to perform transactions conveniently via your preferred platform. We appreciate your patience during the IT infrastructure upgrade and sincerely apologize for any inconveniences you experienced.

“Rest assured, we are dedicated to providing you with exceptional service, and the new IT infrastructure we have implemented will enable us to do so moving forward.

Thank you for choosing to bank with us.”

Important Reminder

Zenith Bank will NEVER call, SMS, or email you requesting your card details, PIN, token codes, mobile/internet banking login details, or any other account-related information.

“We will also NEVER ask you to click on a link to update your bank information or activate your account. If you receive such messages, please DO NOT respond,” the bank stated.

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