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FG,States, LGs Share N2.27tn in Five Months

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  • FG,States, LGs Share N2.27tn in Five Months

The Federation Accounts Allocation Committee shared a total sum of N2.27tn among the three tiers of government in the first five months of this year.

An analysis of the FAAC distribution by our correspondent in Abuja on Friday also showed that the N2.27tn distributed between January and May this year represented an increase of N600bn over the N1.69tn, which the committee allocated to the federal, state and local governments in the corresponding period of 2016.

The committee, headed by the Minister of Finance, Mrs. Kemi Adeosun, is made up of commissioners of finance from the 36 states of the federation; the Accountant General of the Federation, Mr. Ahmed Idris; and representatives of the Nigerian National Petroleum Corporation.

Others are representatives of the Federal Inland Revenue Service; Nigeria Custom Service; Revenue Mobilisation, Allocation and Fiscal Commission; as well as the Central Bank of Nigeria.

The Federation Account is currently being managed on a legal framework that allows funds to be shared under three major components of statutory allocation, Value Added Tax distribution and allocation made under the derivation principle.

Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments, 20.60 per cent.

The framework also provides that VAT revenue be shared thus: Federal Government, 15 per cent; states, 50 per cent; and local governments, 35 per cent.

Similarly, extra allocation is given to the nine oil producing states based on the 13 per cent derivation formula.

A breakdown of the N2.27tn shared in the first five months of this year showed that in January, the three tiers of government got N430.16bn, out of which the Federal Government took N168bn; states, N114.28bn; and local governments, N85.4bn.

In February, the federation generated N514bn, out of which the Federal Government’s share was N200.6bn; the states, N128.4bn; and local governments, N96.52bn.

However, in March, revenue generation dipped to N466.9bn. From this amount, the Federal Government got N180.5bn; state governments, N116.5bn; and local governments, N87.5bn.

The allocation declined further by N52.07bn from N467.8bn in March 2017 to N415.73bn in April, with the Federal Government receiving N163.89bn; states N117.59bn; while the local government councils got N87.77bn.

In the month of May, the committee shared the sum of N462.4bn among the three tiers of government as statutory allocation, with the Federal Government receiving N147.7bn; states, N74.9bn; and local government councils, N57.8bn.

Speaking on the allocations to the three tiers of government, some finance and economic experts said that while the country had been badly hit by the decline in oil production and revenue as a result of the activities of militants in the Niger Delta, there were a lot of untapped resources at the states, which could be developed for economic prosperity.

Those who spoke to our correspondent on the issue were the Head of Banking and Finance Department, Nasarawa State University, Keffi, Uche Uwaleke; a former Managing Director of Unity Bank Plc, Mr. Rislanudeen Muhammed; and a former Managing Director, Nigeria Deposit Insurance Corporation, Mr. Ganiyu Ogunleye.

Uwaleke, an Associate Professor of Finance, told our correspondent that diversification of the economy would help address the socioeconomic challenges facing the country, adding that once the federating units were given the powers to control their resources, it would help promote competition.

He said with competition, the federating units would come up with innovative ways of stimulating their respective economies.

Uwaleke said, “Restructuring is the panacea for many of the socioeconomic challenges facing the country. This much came to the fore in the last national conference put together by the previous administration.

“The seemingly endless crises in the Niger Delta region will substantially abate if the country is restructured in a way that allows greater control of resources by the federating units. The present economic recession is a direct consequence of the drastic fall in government revenue, which has been blamed in part on militancy in the Niger Delta.”

In his comments, Muhammed said there was a need to come up with initiatives that would make all the states compete for economic development.

He stated, “Nigeria has huge economic potential outside the oil sector, which are largely untapped due to the so called Dutch Disease that has for years made us lazy and always relying on mono product commodity called oil as a source of income, notwithstanding the fact that oil constitutes only 10 per cent of our Gross Domestic Product.

“Economic restructuring will make all the states compete for development and uplifting the lives of their people. There are potential for growth in non-oil export in most states, and virtually all the states have one form of economic competitive advantage or the other.”

Ogunleye, on his part, said there was a need to diversify the economy, as it held the key to the economic development of the people.

He stated, “Restructuring is a necessity and I think that is what people have been advocating over the years, but the challenge is that it is either there is no serious commitment to it or the political will to implement it is lacking.

“Otherwise, when you talk about diversification, it’s almost the same thing as restructuring the economy. Over the years, we relied on oil revenue and now we can appreciate the risks of relying on one source of revenue.

“We are not a manufacturing country and so most of the things we use in this country are imported, so certainly there is a need to restructure the country in such a way that we can develop manufacturing capacity.”

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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Banking Sector

Guaranty Trust Holding Plans N500 Billion Share Offering

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Guaranty Trust Holding Company Plc (GTCOPLC) has announced plans to raise up to N500 billion through a new share offering, according to a preliminary prospectus filed with the Securities and Exchange Commission (SEC).

This move aims to support the company’s ambitious growth and expansion strategy.

GTCOPLC’s proposed offering will involve the subscription of ordinary shares of 50 kobo each, although the exact number of shares and the price range are yet to be determined.

The offering includes a concurrent filing of a preliminary universal shelf registration statement, allowing the company to issue various types of securities, potentially raising up to $750 million in multiple currencies.

Purpose of the Offering

The funds raised from this offering will primarily be allocated towards:

  1. Business Growth and Expansion: GTCOPLC plans to invest significantly in technology infrastructure to enhance its current operations. Additionally, the company intends to establish new subsidiaries and make selective acquisitions of non-banking businesses.
  2. Recapitalization of Guaranty Trust Bank Limited: Part of the proceeds will be used to strengthen the capital base of its banking subsidiary.

Target Investors and Structure

The offering is structured to attract both institutional and retail investors. It will be divided into two main tranches:

  • Nigerian Tranche: An institutional and retail offering aimed at eligible investors within Nigeria.
  • International Tranche: A private placement targeting qualified institutional buyers outside Nigeria.

Listing and Trading

GTCOPLC has also filed an application with the Nigerian Exchange Limited (NGX) to list and admit the new ordinary shares for trading on the NGX Official List.

The company anticipates opening the offering by July 2024.

Financial Strategy

The universal shelf registration will enable GTCOPLC to issue a variety of securities over time, with a total value of up to $750 million (or its equivalent in Nigerian Naira).

This approach provides the company with flexibility to raise capital in different markets during the programme’s validity period. The current proposed offering will be the first issuance under this new programme.

Regulatory Compliance

GTCOPLC emphasized that this notice does not constitute an offer of securities for sale in the United States or to U.S. persons, as defined under Regulation S of the U.S. Securities Act of 1933.

The offered shares have not been, and will not be, registered under the U.S. Securities Act or any state securities laws, and cannot be sold in the United States without proper registration or an applicable exemption.

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China Maintains One-Year Policy Loan Rate at 2.5%, Avoids Excessive Liquidity

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China’s central bank, the People’s Bank of China (PBOC), has decided to keep the key interest rate steady for the tenth consecutive month.

On Monday, the PBOC announced that the rate on one-year policy loans, known as the medium-term lending facility (MLF), will remain at 2.5%.

This decision aligns with the forecasts of a Bloomberg survey, reflecting the bank’s priority to maintain financial stability amid a fragile economic recovery.

The central bank also took measures to manage liquidity, withdrawing a net 55 billion yuan ($7.6 billion) from the banking system.

This action aims to prevent excessive liquidity, which could lead to further depreciation of the yuan. By maintaining a cautious stance on monetary easing, the PBOC underscores its focus on currency stability over lowering borrowing costs.

This move comes as China grapples with mixed economic signals. While exports exceeded expectations in May, inflation rose less than anticipated, and factory activity saw an unexpected contraction according to an official survey.

Despite these challenges, the PBOC’s restraint reflects a strategic choice to prioritize the strength of the yuan, even as calls for a rate cut grow louder.

Last week, the onshore yuan weakened to its lowest level since November, driven by a wide interest rate gap between the US and China.

The PBOC’s decision to hold rates steady is seen as an effort to prevent further devaluation of the yuan, which remains a “powerful currency” according to financial authorities.

Sufficient market liquidity has also influenced the central bank’s decision to refrain from outright rate cuts.

This is evidenced by the declining borrowing costs of popular debt instruments, such as one-year AAA-rated negotiable certificates of deposits, which have dropped to around 2%, compared to the MLF’s 2.5%.

The influx of funds from savings to wealth management products and other higher-yielding assets has bolstered the financial system’s liquidity, allowing the PBOC to adopt a more conservative stance.

China’s economy has experienced a patchy recovery, with government bond sales accelerating to boost infrastructure spending amidst a prolonged property slump.

Despite these efforts, the central bank remains cautious, opting for stability over aggressive monetary easing.

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Banking Sector

Fidelity Bank Launches N127.1bn Public Offer and Rights Issue on June 20

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Fidelity Bank Plc, Nigeria’s sixth-largest bank, is set to open its public offer and rights issue to investors on Thursday, June 20, 2024.

In preparation for this significant financial event, Fidelity Bank will host a “Facts Behind the Offer” presentation at the Nigerian Exchange Group (NGX) on the same day.

This presentation is expected to provide detailed insights into the bank’s strategy and the opportunities presented by the public offer and rights issue.

Under the rights issue, Fidelity Bank will offer 3.2 billion ordinary shares of 50 kobo each at N9.25 per share. These shares will be available to existing shareholders in the proportion of 1 new ordinary share for every 10 ordinary shares held as of January 5, 2024.

In addition to the rights issue, the bank will also offer 10 billion ordinary shares of 50 kobo each to the general investing public at N9.75 per share. This dual approach is part of the bank’s comprehensive strategy to raise a total of up to N127.1 billion.

The acceptance and application period for the rights issue and public offer will commence on Thursday, June 20, and close on Monday, July 29, 2024.

This timeline provides investors ample opportunity to participate in the bank’s capital expansion.

Fidelity Bank has engaged Stanbic IBTC Capital as the lead issuing house for the combined offer. The joint issuing houses include Iron Global Markets Limited, Cowry Asset Management Limited, Afrinvest Capital Limited, FSL Securities Limited, Futureview Financial Services Limited, Iroko Capital Market Advisory Limited, Kairos Capital Limited, and Planet Capital Limited.

These firms will play a crucial role in managing the offer and ensuring its success.

The bank’s initiative to raise N127.1 billion is seen as a strategic move to bolster its capital base and ensure compliance with the CBN’s revised capital requirements, which were introduced on March 28, 2024.

This capital raise is expected to enhance the bank’s capacity to support its growing customer base and expand its operations across Nigeria and beyond.

In recent years, Fidelity Bank has demonstrated robust financial performance and growth, positioning itself as a key player in Nigeria’s banking sector.

The successful completion of this public offer and rights issue will further solidify its standing and enable it to pursue new opportunities in the competitive financial landscape.

Investors and stakeholders are keenly anticipating the outcome of this capital-raising exercise, which is poised to mark a significant milestone in Fidelity Bank’s journey toward sustained growth and stability.

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