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Infrastructural Development Depends on Government Guarantees – DMO

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Debt Management Office
  • Infrastructural Development Depends on Government Guarantees – DMO

The issuance of guarantees to lenders by government for infrastructure projects is very critical to the development of the country’s infrastructural base, the Debt Management Office has said.

The DMO said the Economic Growth and Recovery Plan of the Federal Government expected the private sector to play a major role in the development of infrastructure, of which for the private sector to play such role, it would require a lot of financing from both domestic and international sources.

“The nature of infrastructure projects is such that lenders would require commitments from the government that awards contracts or grants concessions, usually in the form of guarantees,” it said.

The position of the debt office was contained in a presentation made by the DMO Director-General, Patience Oniha titled, ‘Financing Nigeria’s Infrastructure Development – The Role of the Debt Management Office’.

The DMO advised the government on the policies and procedures for the management of guarantees and other contingent liabilities, saying the guarantees enabled the private sector to access financing for the development of infrastructure and at lower costs.

The report noted, “The DMO appraises projects that require FGN guarantees and puts structures in place to support such projects, while also ensuring that the exposure of the government as guarantor is minimised.

“It has been deepening the Federal Government of Nigeria securities market by introducing new borrowing instruments to provide additional options for financing the government’s operations.

“The DMO has also continued to diversify the investor base for FGN securities to ensure that the government’s financing plans are successfully executed while lowering the cost of borrowing.”

In 2017, the DMO introduced: the FGN Savings Bond for retail investors; the sovereign sukuk for ethical and non-interest investors, and a green bond.

These products provide new sources for financing infrastructure and also provide opportunities for more Nigerians to participate in national development, while earning income on their investments. According to him, the DMO has, over the years, worked with stakeholders to develop Nigeria’s capital market.

By resuscitating the bond market, the debt office said it provided an avenue for other issuers such as sub-nationals, corporates and supranational institutions, to raise long-term funding for developmental projects.

The DMO recently said its activities and that of other operators, had facilitated the establishment of standard and transparent primary issuance systems, of which a vibrant and liquid secondary market had also been created.

Oniha said, “The transformational role expected of the private sector by the ERGP requires access to long-term funding from both domestic and external capital markets. The DMO, through its activities has provided this access and also established benchmarks to guide transactions by other issuers.

“The DMO has the mandate for the efficient management of Nigeria’s debt portfolio at sustainable levels. This is done in various ways, including: negotiating for favourable borrowing terms; servicing debts to avoid default; and eveloping strategies to minimise cost and risk.

“By these activities, the DMO ensures that the Federal Government has continued access to financing, and that borrowing costs are well managed, thereby providing more resources for developmental projects.”

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.

Banking Sector

Peter Obaseki Retires as Chief Operating Officer of FCMB Group Plc

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FCMB

The Board of Directors of FCMB Group Plc has announced the retirement of Mr. Peter Obaseki, the Chief Operating Officer of the financial institution, with effect from March 1, 2021. He was also an Executive Director of the Group.

His retirement was approved at a meeting of the Board of the Group on February 26, 2021. This has also been announced in a statement to the Nigerian Stock Exchange (NSE) by the financial institution.

The Chairman of FCMB Group Plc’s Board of Directors, Mr Oladipupo Jadesimi, thanked Mr. Obaseki for his valuable service and excellent support to the Board for many years.

FCMB Group Plc is a holding company divided along three business Groups; Commercial and Retail Banking (First City Monument Bank Limited, Credit Direct Limited, FCMB (UK) Limited and FCMB Microfinance Bank Limited); Investment Banking (FCMB Capital Markets Limited and CSL Stockbrokers Limited); as well as Asset & Wealth Management (FCMB Pensions Limited, FCMB Asset Management Limited and FCMB Trustees Limited).

The Group and its subsidiaries are leaders in their respective segments with strong fundamentals.

For more information about FCMB Group Plc, please visit www.fcmbgroup.com.

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Banking Sector

COVID-19: CBN Extends Loan Repayment by Another One Year

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Central Bank Extends One-Year Moratorium by 12 Months

The Central Bank of Nigeria (CBN) has extended the repayment of its discounted interest rate on intervention facility by another one-year following the expiration of the first 12 months moratorium approved on March 1, 2020.

The apex bank stated in a circular titled ‘Re: Regulatory forbearance for the restructuring of credit facilities of other financial institutions impacted by COVID-19’ and released on Wednesday to all financial institutions.

In the circular signed by Kelvin Amugo, the Director, Financial Policy and Regulation Department, CBN, the apex bank said the role-over of the moratorium on the facilities would be considered on a case by case basis.

The circular read, “The Central Bank of Nigeria reduced the interest rates on the CBN intervention facilities from nine per cent to five per cent per annum for one year effective March 1, 2020, as part of measures to mitigate the negative impact of COVID-19 pandemic on the Nigerian economy.

“Credit facilities, availed through participating banks and OFIs, were also granted a one-year moratorium on all principal payments with effect from March 1, 2020.

“Following the expiration of the above timelines, the CBN hereby approves as follows:

“The extension by another 12 months to February 28, 2022 of the discounted interest rate for the CBN intervention facilities.

“The role-over of the moratorium on the above facilities shall be considered on a case by case basis.”

It would be recalled that the apex bank reduced the interest rate on its intervention facility from nine percent to five percent and approved a 12-month moratorium in March 2020 to ease the negative impact of COVID-19 on businesses.

To further deepen economic recovery and stimulate growth, the apex bank has extended the one year-moratorium until February 28, 2022.

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Finance

MTN Nigeria Generates N1.35 Trillion in Revenue in 2020

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MTN Nigeria Grows Revenue by 15.1 Percent from N1.169 Trillion in 2019 to N1.35 Trillion in 2020

Despite the COVID-19 pandemic and challenging business environment, MTN Nigeria realised N1.346 trillion in revenue in the financial year ended December 31, 2020.

The leading telecommunications giant grew revenue by 15.1 percent from N1.169 trillion posted in the same period of 2019.

Operating profit surprisingly jumped by 8.5 percent from N393.225 billion in 2019 to N426.713 billion in 2020.

This, the telecom giant attributed to the surge in finance costs due to increased borrowings from N413 billion in 2019 to N521 billion in 2020.

MTN Nigeria further stated that the increase in finance costs was the reason for the decline in growth of profit before tax to 2.6 percent.

MTN Nigeria grew profit before tax by 2.6 percent to N298.874 billion, up from N291.277 billion filed in the corresponding period of 2019.

The company posted N205.214 billion profit for the year, a 0.9 percent increase from N203.283 billion recorded in the 2019 financial year.

Share capital remained unchanged at N407 million. While Total equity increased by 22.3 percent from N145.857 billion in 2019 to N178.386 billion in 2020.

MTN Nigeria’s market price per share increased by 61.8 percent from N105 to N169.90.

While market capitalisation as at year-end also expanded by 61.8 percent to N3.458 trillion, up from N2.137 trillion.

The number of shares issued and fully paid as at year-end stood at 20.354 million.

MTN Nigeria margins were affected by Naira devaluations and capital expenditure due to the new 4G network coverage roll-out.

Margins were adversely affected by the effect of naira devaluation and expenses associated with new sites’ roll-out to boost 4G network coverage in FY’20.

“On the former, we note that MTNN expanded the scope of its service agreement with IHS Holding Limited and changed the reference rate for converting USD tower expenses to NAFEX (vs CBN’s official rate previously). Thus, over the full-year period, the company’s operating margin contracted by 1.9 ppts YoY to 31.7%,” CardinalStone stated in its latest report.

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