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N3.57tn Borrowed in 21 Months to Finance Budget Deficit –FG

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  • N3.57tn Borrowed in 21 Months to Finance Budget Deficit

The Federal Government said on Tuesday that it borrowed N3.57tn between June 2015 and March 2017 to finance budget deficits.

The government said this in response to an enquiry which sought to know what use it had put the funds being borrowed in the last two years from both external and local sources.

The enquiry, which was addressed to the Minister of Finance, Mrs. Kemi Adeosun, under the Freedom of Information Act, sought to ascertain the specific projects that the borrowed funds were used to execute.

The minister, however, referred the enquiry to the Debt Management Office for response.

In its response, the DMO hinted that the domestic borrowing was not tied to any specific projects but warehoused in the Consolidated Revenue Fund Account with the Central Bank of Nigeria for funding budget deficit, while the foreign loans were tied to specific projects.

The response from the government signed by Director, Policy, Strategy and Risk Management Department, DMO, Mr. Joe Ugoala, read in part, “In the case of domestic borrowing, kindly be informed that funds raised through the issuance of FGN securities in the domestic capital market are remitted into a pool – the Consolidated Revenue Fund Account maintained in the Central Bank of Nigeria for the purpose of funding the appropriated budget deficit.

“It is important to note that these borrowings from both external and domestic sources are mainly used to fund development of infrastructure and human capital in the various sectors of the economy, as listed in the appropriation acts.”

Statistics obtained from the DMO showed that the Federal Government’s domestic component of the national debt rose from N8.39tn as of June 2015 to N11.97tn by March 2017. This means that the domestic debt of the Federal Government rose by N3.57tn within the period.

According to the 2016 Appropriation Act, the Federal Government budget deficit for 2016 amounted to N2.22tn, while the deficit for 2017 amounted to N2.36tn. For 2015, the budget deficit stood at N755bn or 0.79 per cent of the Gross Domestic Product.

On monthly basis, the Federal Government uses a number of instruments to borrow money from the debt market. These include FGN Bonds, the Nigerian treasury bills and the Nigerian treasury bonds. It recently added a new instrument to the pack, the FGN Savings Bond.

Of the Federal Government’s domestic debt of N11.97tn as of March 31, FGN Bonds accounted for N8.18tn or 68.31 per cent; Nigerian treasury bills accounted for N3.6tn or 30.08 per cent; Nigerian treasury bonds, N190.99bn or 1.6 per cent; while the FGN savings bond accounted for N2.07bn or 0.02 per cent.

The nation’s domestic debt stood at N19.16tn as of March 31, 2017.

As of March 31, 2015, the country’s total debt stood at N12.06tn. This means that within a period of two years, the nation’s debt stock had increased by 58.84 per cent.

Within the period of two years, the country’s external debt rose from $9.46bn to $13.81bn. This means that within the two-year period, the country’s external debt rose by $4.35bn or 45.98 per cent.

The external debt component, however, has been affected by exchange rate variations as the last two years have witnessed significant changes in foreign exchange rates.

According to the DMO, the official exchange rate of N306.35 to $1 was used in calculating the country’s external debt for March 31, 2017, while the official rate of N197 to $1 was used in determining the foreign debt for March 31, 2015.

The domestic debt component of the states stood at N2.96tn as of March 31, 2017, up from the figure of N1.69bn as of March 31, 2015.

This means that within the period of two years, the domestic debt of the states rose by N1.27tn or 75.15 per cent.

With drying revenues from oil and gas, the government in the last two years has increasingly depended on borrowing even to carry out routine responsibilities.

Although foreign debts are seen as cheaper than domestic debts, the government has increasingly depended on local debts as foreign donors place more stringent conditions on its path.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

NAIC Pays N1.7bn Claims to Farmers

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The Nigerian Agricultural Insurance Corporation (NAIC) said it paid a total of N1.7 billion claims to over 5,000 farmers in the past two years.

NAIC, which is the only federal government owned insurance company authorised to offer agric insurance services to farmers at subsidised rate, said a breakdown of the paid claims showed that it paid N856 million to insured farmers in 2019 and N848 million in 2020.

Commenting on the development, NAIC Managing Director, Mrs. Folashade Joseph, said the claims were paid to the farmers to cover losses incurred in the course of doing business.

Joseph, enjoined agricultural investors and lending institutions to continue to partner NAIC by taking agricultural insurance cover that will enable them remain firm in business despite unforeseen circumstances from weather conditions and other risks in order to realise the food security agenda of President Muhammadu Buhari.

She said the above-mentioned amount was shared among five million farmers who suffered various setbacks in their farms as a result of natural course.

According to her, the NAIC Agric Insurance Scheme was launched in 1987 by federal government to restore the confidence and productivity of Nigerian farmers who suffered losses as a result of natural disaster such as flood, drought, pest and diseases.

The NAIC boss explained that the essence of the sensitisation campaign embarked by the corporation was to let the farmers know and understand exactly what NAIC does, the importance of insurance, and make them understand how insurance works, how they can access NAIC products and services, how to process their claims, as well as what insurance stands to do for them.

“Agribusiness is evolving fast and so many risks are being thrown up, many new participants are coming into the business of agriculture, and the risks are on the increase if you look at them across the value chain, there is no so many participants so we need to keep sensitising the farmers and let them know we are serving them, and we need to know from them how to serve them,” she explained.

Speaking further, she said, “our assurance to farmers is that when they are insured and they suffer losses covered by any of the policies they purchased, including natural disasters and whatever, they will get paid for their losses, and that is the purpose of insurance and setting up NAIC.

“Our motor is ‘Plowing the Farmer Back to Business, Plowing the Farmers into Prosperity’, and we settle claims.”

She said NAIC currently deals with thousands of farmers (Small, Medium, and Large scale farmers) across the country, adding that the corporation serves farmers with investment as little as N100, 000, and at the same time serves multinational farmers.

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Banking Sector

UBA Organises Capacity Building Forum

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As part of its commitment to support the growth and sustainability of micro, small and medium-scale enterprises (MSME) in the continent, the United Bank for Africa (UBA) Plc, is set to organise the next edition of its UBA Business Series.

The UBA Business Series which is a monthly event, is an MSME Workshop as well as a capacity building initiative of the bank where business leaders and professionals share well-researched insights on best practices for running successful businesses, especially in the face of the difficult operating environment that dominates the African business landscape.

Through this initiative, UBA has been assisting with essential tips to help businesses re-examine their models and strategies and ensure that they stay afloat and remain thriving, a statement from the bank explained.

The topic for the next edition of the series is, “Managing Performance for Business Growth,” and it will be held today, via Microsoft Teams.

At this session, the Managing Director, Secure ID Limited, Mrs Kofo Akinkugbe, will be sharing useful tips and insights on the key strategies of performance management to boost business growth.

Akinkugbe is the founder of SecureID Nigeria, a MasterCard, VISA and Verve certified Smartcard Personalization Bureau and Digital Technology company. She currently serves as the Managing Director/CEO, Secure Card Manufacturing, – a Smartcard manufacturing plant producing high security identity cards and documents for the Banking, Telecoms and Public sectors across Africa and beyond.

UBA’s Head, SME Banking, Sampson Aneke said of Akinkugbe, “with her vast experience garnered over the years from various sectors, she will help business owners understand how performance management strategies can be effectively implemented to ensure business growth.”

He emphasised UBA’s commitment and deep passion for small businesses, which according to him, remains the engine of any developing economy adding, “We know small businesses are the backbone of the economy in every country. In many climes, businesses with fewer than 100 employees account for 98.2 per cent of all businesses. This no doubt captures the importance of SMEs to a thriving economy which is why UBA is committed to seeing them flourish.”

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Banking Sector

CBN to Extend Credit Risk Management System to OFIs

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In an effort to curb growing bad debt, the Central Bank of Nigeria has said it will extend its Credit Risk Management System to Other Financial Institutions (OFIs) operating in Nigeria to protect them from bad debtors.

According to the apex bank, this is important following the successful implementation of the credit risk system in other lending institutions operating in Nigeria.

The bank disclosed this in a circular titled ‘Credit Risk Management System: Commencement of enrolment of all Development Finance Institutions, Microfinance Banks, Primary Mortgage Banks and Finance Companies’ and signed by Kelvin Amugo, the Director, Financial Policy and Regulation Department, on Monday.

In part, the circular read, “As part of efforts to promote a safe and sound financial system in Nigeria, the CBN introduced the CRMS to improve credit risk management in commercial, merchant and non-interest banks as well as to prevent predatory borrowers from undermining the banking system.

“With the successful implementation of the CRMS in deposit money banks, it has become expedient to commence the enrolment of Other Financial Institutions on the CTMS platform.

“Accordingly, all DFIs, MfBs, PMBs and FCs are required to report all credit facilities (principal and interest) to the CRMs and to update same on monthly basis.

“OFIs shall note the Bank Verification Numbers and Tax Identification Numbers are the only basis for regulatory renditions”.

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