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Nigeria’s Domestic Debt Refinancing Strategy



  • Nigeria’s Domestic Debt Refinancing Strategy

Obinna Chima examines the federal government’s public debt restructuring plan by way of refinancing maturing treasury bills with cheaper and longer term external debt.

Badly weighed down by the debilitating effect of Nigeria’s huge debts and rising debt servicing cost brought about by high domestic interest rate, the federal government last week sought a way out by approving the issuance of dollar-backed treasury bills as it extended the maturity period from between 91 and 364 days to two and three years respectively.

Clearly, since the 2006 debt forgiveness by the Paris Club, successive administrations have deliberately pursued a strategy of financing more than 50 per cent of annual fiscal deficits from the domestic market.

Hence, Nigeria’s debt profile has in the recent past largely favoured local sources of borrowing which in the first quarter of 2017 constituted 80.8 per cent of the federal government’s total debt with 24.3 per cent of these in form of treasury bills.

Debt refinancing is a term used for the process of converting original debt into new debt. This is often done for the purpose of consolidating debts and allowing easier and more efficient payment.

One of the main objectives of debt refinancing is the overall lowering of interest rates, which becomes possible once debts have been consolidated.

By having debt refinanced, the country would change its short-term loans into long-term loans.

This therefore extends the period of time during which the country would have to service its debt.

Extending such payment terms,, explained, lowers the amount due per month. This lessens the amount that goes to debt servicing, improves cash flow and enables smooth operations.

Throwing more light on the policy initiative, Minister of Finance, Mrs. Kemi Adeosun, said the council approved a memo restructuring the issuance of treasury bills using dollar instruments subject to the approval of the National Assembly.

According to her, the extension of the tenor of Treasury bill from the current 91 and 364 days to two and three year period would provide the government with relief from the pressure to repay the debt.

She also said the new initiative would reduce government borrowing to $3 billion, create more room for banks to lend money to private investors and consequently force down interest rates.

She explained that issuing the Treasury bills in dollar instrument was not synonymous with paying interest in dollars but would instead, provide the government with the opportunity to obtain a bond in the international capital market and pay the debt in a cheaper way.

She insisted that it should not be construed as transacting the Treasury bill in dollars.

Adeosun explained: “We are not issuing dollar denominating treasury bills. No, we are not. What we are doing is that the naira treasury bill, when it matures, we will then issue bonds in the capital market, international capital market. We are not issuing dollars’ TB at all – erratic dollar bonds.

“You will recall that when we went to the capital market about three times this year, our average cost of borrowing was longer than 7 per cent. But with Treasury bills, we are paying up to 18 per cent. So, what we are doing is simply substituting the maturing naira debt with cheaper dollar denominating debt. We are not dollarising the economy.

“In terms of the impact on naira, it’s going to be positive because it means that $3 billion will be coming into our foreign reserve. It will actually increase our foreign reserves.

“We are not issuing Treasury bills in dollars. Nigerian government doesn’t transact in dollars at all. We are not paying anybody in dollars. What we are simply doing is that as the Nigerian government treasury bills mature, we are now going to pay off by proceeds of dollar denominating bond, a three year-bond.

“What we are saying is that in the long run because we are coming into recovery, we need a little bit more time to repay. Instead of saying we are paying back in 91 days, we say, ‘let’s be realistic, we need two to three years to pay off this money.’ So, we are taking dollar denominating long term bonds. It is cheaper than the naira loans and we refer them to the Treasury bill. We are not dollarising our economy in any way.

“Also, if you look at the debt profile, 80 per cent of them is in naira. That stretches a challenge to the economy. Because government borrows heavily, there is no room for the private sector to get loans. Also, there is no incentive for the bank to lend to the private sector.

“What we think we need to do to create jobs and get the economy moving is for private sector lending to be commenced from this $3 billion dollars but we will not take from the domestic market. Our strategy is to restructure our debt in the international market.

“When the National Assembly resumes, we need a resolution to do this. We borrow less because it is cheaper to pay back. It makes it cheaper and we refer them to the economy.

“So, we are taking dollar denominating bond which is cheaper and we refer them to the Treasury bills.”

Analysts’ Position

To analysts at Afrinvest West Africa Limited, the move by the federal government is positive, but stressed that the jury was still out on its likely impact on yields and lending rates

They further explained that the initiative, if approved, would be positive for the economy given the prevailing high servicing cost of debt – estimated at 66.6 per cent of revenue in the first half of 2017 – which has raised debt sustainability questions.

“Notwithstanding the recent monetary policy tightening course of most advanced central banks, interest rates still remain at very low level in most developed markets and the FGN could take advantage of the huge demand for high yield emerging market bonds to raise capital at relatively cheaper rate.

“For instance, Nigeria’s recently issued $300 million 5-year diaspora bond was priced at an effective yield of 5.6% while a similar local currency (LCY) bond with same tenor was issued at a yield of 16.2%.

“Apparently, debt servicing burden could ease by reducing LCY leverage for FCY borrowings but this also comes with a downside risk of increased fiscal balance exposure to Naira volatility.

“We note that Nigeria’s $13.8 billion external debt as of first quarter 2017 is mostly comprised of concessionary multilateral and bilateral loans (up to 78.3%); there is still scope for more commercial FCY borrowings.”

Furthermore, Afrinvest pointed out that increasing fiscal deficit over the years had crowded out private sector borrowers with local commercial banks shunning risk assets for high yield and risk free treasury securities. This, they said reflected in the 3-year average private sector credit growth which was estimated to have fallen below three per cent in real terms (ex-naira devaluation impact). “However, whilst we are convinced the proposed plan by the FEC will lower government borrowing cost, the jury is still out on likely impact on domestic interest rate, the yield curve and private sector credit expansion,” they added.

Nevertheless, the pessimism was based on the fact that: “The CBN’s policy instruments – open market operations (OMO) and discount window rates – are more potent drivers of yield curve movement and lending rates than the FGN’s borrowing cost.

“Risk assessment of the real economy, to a large extent, determines credit policies of banks. Hence, our view is that the FGN’s debt refinancing will at best achieve a lower borrowing cost in the interim without necessarily moderating domestic interest rate environment or buoying loans to private sector.

“More importantly, the monetary policy authority will necessarily need to signal a departure from its current hawkish stance by guiding OMO rates downward before interest rate environment normalises and becomes attractive for corporate issuers.

“Finally, domestic and external macroeconomic conditions have to sufficiently improve for the CBN to ease monetary policy while structural reforms must be deepened to de-risk real sector lending.”

Also, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, described it as a good policy initiative that would help to lower interest rate and take the economy out of recession.

Rewane explained: “Take the $3 billion and convert to naira and pay off the treasury bills. In all, it will give you about N1trillion. N1trillion is about 20 per cent of our outstanding debt stock. If you retire N1trillion of treasury bills, the demand for treasury bills will go down and interest will go down.

“And when the interest rate of treasury bills goes down, the interest rate on public debt would also go down and that would help reduce the cost of borrowing, for even the private sector.”

Responding to the question on the implication of the initiative of the FEC on the country’s total debt stock, the economist clarified: “You are not increasing your debt. You are using $3 billion debt to pay off. So, the total debt stock will not increase. The structure is going to change. So, you are using debt, which is of lower cost and longer maturities to take out the short term debt. That is the best thing that can happen to Nigeria.”

In addition, Ecobank Nigeria’s analyst, Mr. Kunle Ezun, expects that if the policy is implemented in no distant time, interest rate on treasury bills would crash.

But he argued that the policy divergence between the fiscal and monetary policy authorities might be an impediment.

“The fiscal policy authorities are focused on how quickly they can crash interest rate, but if the central bank continues to hold monetary policy tight and keeps things the way they are now, then it will be difficult for the fiscal authorities to achieve that result. But over time, this might force the CBN to tweak its monetary policy.

“For the exchange rate, this initiative will be good because when the dollar comes in; it will be converted and used to augment our reserves. So, that will be a plus to the reserves. So, if you have enough buffers, it means that the CBN can keep doing what they are doing,” Ezun added.

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

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Top Five Tech Growth Sectors Forecast to Quadruple Over Next Few Years



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Five key tech sectors will enjoy a combined growth of more than 400% over the next five years, according to market reports.

These innovation pacesetters – nanotechnology, AI, Digital Twins, genomics and other biotech life sciences – attracted a combined $892.63 billion of investment in 2020, set to rocket to $2.44 trillion by 2025.

Paul Stannard, Chairman of the Vector Innovation Fund (VIF) – an international alternative investment vehicle for advancing enabling technologies globally – said:

“These top five tech growth sectors are the ones currently lighting up investment opportunities, and we have specifically aligned our investment pipeline to them. They hold the key to solving major global challenges relating to sustainability, healthcare, energy, food resources and equal and fair distribution of innovation worldwide.

“Most tech sectors are growing, but these game-changers attracting that $2+ trillion investment won’t be companies enhancing things that already exist, like simply making your TV screen sharper.

“We are backing tech companies that transform how we deal with healthcare and future pandemics, sustainable clean energy, food production and combine these opportunities with AI and machine learning.

“Our fund’s first key target is health tech, which has enjoyed record levels of investment in the wake of COVID, so we would focus on potential nanomedicine breakthroughs such as reversing degenerative diseases and cancers or creating a multi-vaccine to protect us from a range of diseases.

“And while funds like ours can supply management expertise, our target companies are also those showing the skill to commercialise and monetise their offering to a willing market.

“What we have seen with the pandemic as well as Climate Change is a global realisation that we must also accelerate investment in enabling technologies supporting environmental, social & corporate governance (ESG) and the UN’s Sustainable Development Goals (SDG) principles where impact can deliver better outcomes for everyone.”

The Top Five tech growth sectors highlighted by market reports are:

  1. Artificial Intelligence has the most far-reaching potential, and the market is forecast to grow 16-fold from $62.35 billion in 2020 to $997.77 billion by 2028 at a 40.2% CAGR,  being the catalyst for accelerating almost all tech sectors and has already shown how it can enhance food science, lower retail and banking costs, and develop medical advances such as remote patient monitoring and more intelligent clinical diagnosis.

AI is transforming future healthcare, food, energy, transport, construction, aviation, and many other sectors. Combining AI with nanotechnologies, for instance, allows platform technologies to re-invent the industries over this decade.

According to data gathered by, in the last quarter of 2020, there was a massive surge in investment in AI technology companies totalling $73.4 billion, which was a $15 billion increase on the start of 2020. In the first half of 2021, we have seen 4,080 investment deals in AI technology companies, according to the investment monitoring platform Pitchbook. The average investment deal flow value has increased nearly three-fold in 2020.

  1. Nanotechnology is set to grow its market from $54.2 billion in 2020 to $126.8 billion by 2027, which has enabled significant advances in medicine, electronics, environmental solutions, and materials, with the potential to improve drug delivery procedure and storage, and renewable energy. For example, COVID-19 accelerated both vaccine and virus testing and also drove specific developments such as nanotech material masks that filter out 99.9% of bacteria, viruses, and particulates.

According to the investment monitoring platform, Pitchbook, in 2020, $5.56 billion was invested in nanotechnology companies. In the first half of 2021, there has already been $7.72 billion of investment in nanotechnology companies, from 775 deals, with the average deal size value increasing three-fold in just the last six months.

Paul Sheedy, a co-founder of the World Nano Foundation (WNF), said: “The COVID pandemic is fuelling an investment trend behind the nanoscale tech that is already being billed as the ‘COVID Decade’ and driven by the fear of human and economic devastation from another pandemic.

“And that risk is high: there are only ten clinically approved solutions to over 220 viruses known to affect humans, and we can expect at least two new viruses to spill from their natural hosts into humans annually, but nanotech and biotech can help counter this threat.”

  1. Biotechnology is the biggest and most mature market here, forecast to grow from $752.88 billion in 2020 to $2.44 trillion by 2028 at a 15.83% CAGR through significant effects on agriculture, improving the nutritional value and preservation of foods, minimising waste, and healthcare advances – the last being highlighted by the record-breaking speed of the Pfizer COVID vaccine development last year.

According to Nature magazine, global biotech funding in 2020 had its best year ever: 73 life science firms alone raised a collective $22 billion. Private fund-raising also mushroomed by 37% on the previous year – already a stellar year. This is being further fuelled with the COVID-19 mitigation market and the advent of a surge of investment in pandemic protection and preparedness using multi vaccines, autoimmune treatments and early intervention testing. Pitchbook has recorded 3,800 deals in biotechnology companies in the first half of 2021, totalling $34.48 billion in investment in these companies. Again, the average investment level is nearly three times what it was the previous year, and post valuations of invested biotech companies have doubled from 2020.

  1. Digital Twins are a new up and coming high growth tech sector, forecast to grow 15-fold from $3.1 billion in 2020 to $48.2 billion by 2026 at a 58% CAGR, with the technology already widely used in the construction, energy, healthcare, automotive, and aerospace sectors, and new fields opening up all the time.

According to Pitchbook, last year, there was $103.8 million of capital invested from just 53 investors into the Digital Twins technology start-ups. One company, Cityzenith, has added over 5000 new investors in the last 18 months, raising $10 million to date.

Cityzenith uses its Digital Twin SmartWorldProOS™ software platform to enable architects, planners, and energy providers to track, manage, and reduce emissions and energy waste from individual buildings, infrastructure, and even whole cities and has just reported major contract wins and seen its share price rocket 161% in early 2021. The company is partway through a $15 million Regulation A+ investment raise to scale up its international commercial opportunities.

The Digital Twin sector is an interesting space with tremendous growth opportunities for nimble, fast-moving start-ups who have the opportunity to compete with major conglomerates in this dynamic field such as Microsoft, Siemens, Phillips and Bentley.

  1. Genomics is a market set to grow from $20.1 billion in 2020 to $62.9 billion by 2028 through its key role in healthcare innovation and tailoring care to an individual patient while providing more data on diseases and human genetics. The World Health Organisation reports that gene sequencing was critical to the rapid development of COVID-19 tests and other tools used to manage the virus outbreak.

According to Pitchbook, investment capital in genomics companies has more than doubled in value per deal in 2021 over the previous year. So far in 2021, post-investment valuations have also more than doubled against the whole of 2020.

Paul Stannard added: “The accelerated innovation since the COVID-19 pandemic is astonishing – some experts say we witnessed ten years’ growth in the last 18 months of the outbreak – giving us a glimpse of even greater possibilities, especially when some of these pacesetters, such as nanotech, genomics and Digital Twins are able to advance, accelerate and complement each other.

“If it is backed by astute and enlightened investment, our future is looking bright!”

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African Private Equity, Venture Capital Association (AVCA) and APO Group to Drive Trade and Investments Across Africa



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African Private Equity and Venture Capital Association (AVCA), the pan-African industry body which promotes and enables private investment in Africa, today announced its collaboration with APO Group, the leading Pan-African communications consultancy and press release distribution service. The collaboration is aimed at driving trade and investment across Africa.

Over the past two decades, AVCA has empowered and connected fund managers, institutional investors, policymakers, and entrepreneurs through pioneering research, advocacy, and international networking events. Earlier this year, AVCA appointed a new CEO to lead the next chapter of the Association’s life as investors, fund managers and businesses navigate various economic, political, and social challenges. AVCA will be working very closely with the regional and local associations (e.g., SAVCA, EAVCA, PEVCA, AMIC, etc.) to support the policymakers and governments working hard to improve the ease of doing business in Africa.

APO Group works with companies in all 54 African countries. Its powerful global media channels facilitate the delivery of African stories to new audiences around the world, creating awareness and opening up business opportunities. The Company has unparalleled knowledge and expertise connecting the worlds of African business and communications. It also has a diverse, multinational client base that includes more than 300 of the world’s leading companies.

Speaking about the collaboration, the newly appointed AVCA Chief Executive Officer, Ms. Abi Mustapha-Maduakor, said: ‘”This strategic partnership with APO Group could not be happening at a better time in AVCA’s journey. By leveraging our research, advocacy and networking strengths with APO’s deep insight and knowledge of the continent’s business and political environment, AVCA will continue to shine a light on the vast investment opportunities in Africa, while delivering greater value for the investors, entrepreneurs and changemakers who are committed to building a thriving private investment ecosystem on the continent.”

As the Pan-African industry body championing and promoting private investment into Africa, AVCA is defined by one mission: to drive Africa’s growth story. “With the deep knowledge of key markets in Africa and wide-reaching network across the continent, we believe APO is the right communications partner for AVCA as we begin to implement our strategic vision for the next decade and broaden our reach across the private investment industry in Africa”, Abi added.

Commenting on the partnership, APO Group Founder and Chairman, Nicolas Pompigne-Mognard said: ‘’We are excited to collaborate with AVCA as both organisations share a similar vision in driving trade and investment and helping to stimulate African economies. At APO Group, we believe in a holistic approach to enhance the visibility of our partners. To this end, we have created strategic collaborations across the continent to build stronger footholds, helping them increase international exposure’’.

APO Group is the strategic partner of Getty Images in Africa and has established partnerships with the African Union of Broadcasting (AUB), Bloomberg, Thomson Reuters, CNBC Africa, Channel TV (Nigeria), and Africanews, a subsidiary of Euronews. APO Group content is available to AUB members in Africa, and also members of their sister associations around the world, including the European Broadcasting Union (EBU), the Arab States Broadcasting Union (ASBU), and the Asia-Pacific Broadcasting Union (ABU).

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Herbert Wigwe Wins Banker of the Year at African Banker Awards 2021



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Herbert Wigwe, the Group Managing Director and the Chief Executive Officer of Access Bank Plc, has won African Banker of the Year at the just concluded African Banker Award 2021.

The CEO won for the second consecutive year following series of creative acquisitions and continental strategies deployed at deepening banking transactions in Africa.

Through his strategic move, Access Bank is now present in South Africa following its acquisition of Grobank. As a result of its rapid growth in the last decade, Access Bank has become one of the largest retail banks in Africa with over 40 million customers.

Below is a Complete List of African Banker Award Winners 

Sustainable bank of the year
Commercial International Bank (CIB) Egypt

Infrastructure deal of the year
Tanzania Standard Gauge Railway $1.46bn loan facility
Nedbank | Standard Chartered | TDB

Deal of the year – Equity
Privatisation of Afam Power Plc and Afam Three Fast Power Ltd

Deal of the year – Debt
African Export-Import Bank, COVID-19 Support Facility
MUFG Bank, Mitsubishi UFJ Financial Group

Award for financial inclusion
Trust Merchant Bank, DRC

African Banker Icon
Charlie Robertson, Chief Economist, Renaissance Capital

Finance Minister of the year
H.E Mohammed Benchaâboun, Minister for Economy and Finance, Morocco

Award for Innovation for Financial Services
Bank of Industry, Government Enterprise Empowerment Programme

Energy deal of the year
Nkhotakota Solar Power Plant in Malawi / 7.5 MW Solar PV Power Plant in Burundi
African Trade Insurance Agency (ATI)

Agriculture deal of the year
USD 400m Revolving Trade Finance Facility in favour of ETC Group
African Export-Import Bank (Afreximbank)

African SME Bank of the Year

Best Regional Bank in Africa
North: Attijariwafa Bank, Morocco
West: Banque de Développement du Mali
East: Equity Bank, Kenya
Central: BGFI, Gabon
Southern: Mozabanco, Mozambique

Investment Bank of the Year

Central Bank Governor of the Year
H.E. Lesetja Kganyago, Governor Reserve Bank of South Africa

Lifetime Achievement
Felix Bikpo

African Bank of the Year
Standard Bank Group

African Banker of the Year
Herbert Wigwe, Group CEO, Access Bank

For more on the African Banker Awards, please visit: www.africanbankerawards.comAfr

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