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States Raise Domestic Debt by N1.64tn in Three Years

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debt
  • States Raise Domestic Debt by N1.64tn in Three Years

The 36 states of the federation and the Federal Capital Territory increased their domestic debts by N1.64tn in the past three years, available data have shown.

According to statistics obtained from the Debt Management Office, the subnational governments raised their domestic borrowings from N1.71tn as of December 2014 to N3.35tn as of December 2017.

This shows that the subnational governments ramped up their domestic indebtedness by N1.64tn within a period of three years ending December 31, 2017. This shows an increase of 95.9 per cent in the local debts within the three-year period.

Within the same period, the domestic debt of the Federal Government rose from N7.9tn to N12.59tn. This means that within the timeframe, the domestic debt of the Federal Government rose by N4.69tn.

This means that the domestic debt owed by the Federal Government rose in the three-year period by 59.37 per cent.

Although the domestic debt of the Federal Government exceeds that of the subnational governments put together, the states grew their domestic debts by a higher percentage of 95.9 per cent compared to the 59.37 per cent for the central government.

The resort by the various tiers of government across the country to the debt market, experts argued, has had some negative impacts on the economy.

One of such impacts is the rise in interest rates. As a result of increasing rate of borrowing, the country has been spending much on servicing the domestic debts.

In the first nine months of 2017, for instance, the Federal Government spent a total of N1.24tn on domestic debt servicing.

Apart from the sheer increase in the cost of borrowing, another effect of the government’s increased presence in the domestic debt market is the crowding out of the private sector from the market.

The logic is simple: Those with resources are more comfortable lending to the government and its agencies than lending to the private sector, because the possibility of default is higher in the private sector.

The increasing involvement of the state governments in the domestic debt market has also raised concern in some circles. The Social Development Integrated Centre, a coalition of civil society organisations, for instance, has raised the alarm over the states’ increasing debts.

The Head, National Advocacy of the group, Vivian Bellonwu-Okafor, recently asked the National Assembly to come up with a legislation that would stipulate stringent conditions for states to borrow money.

According to the group, it is unpalatable for some states to be paying as much as N500m for debt servicing on a monthly basis.

Bellonwu-Okafor stated, “State-level debts have become a considerable source of worry to well-meaning Nigerians. As it is well-known today, many states in the country are insolvent and are barely surviving on monthly allocations from the Federation Accounts Allocation Committee.

“Worse off are infrastructural conditions, including public service delivery in these states. This is worrisome for while the process of contracting these loans have been poor and non-transparent, the management has been worse.”

The President, African Development Bank, Dr. Akinwumi Adesina, a former agriculture minister in Nigeria, said the quality of the management of debt was more important than the size of the debt.

He stated, “Now, the domestic debt is so high. In the case of Nigeria, the bulk of the debt is domestic debt at very high interest rates, which is where the challenge is. Nigeria’s debt to Gross Domestic Product ratio is not high for a country the size of Nigeria. That is not where the challenge is. It is that the state governments and the Federal Government over time have accumulated so much domestic debts and, trying to service them has been a real challenge.

“The most important thing is the quality of public expenditure and what has been invested in and what the revenue profile that allows you to implement that.

“That applies to whether it is Nigeria or any other country. That is what we have to keep our eyes on: making sure that you have sustainable debt situation through good public financial management.”

Beyond debt, however, some experts are calling for other forms of raising money to finance projects and development across the country.

The Director-General, Bureau of Pubic Enterprises, Mr. Alex Okoh, thinks that selling some assets may be healthier than borrowing, while his counterpart at the Fiscal Responsibility Commission, Mr. Victor Muruako, is of the view that harnessing internal sources and making government agencies efficient will release resources to the government.

Adesina, on the other hand, called for the deployment of pension funds and the Sovereign Wealth Fund in financing development projects.

He said, “What sense does it make if I take my SWF and I am investing it outside? I am making money on the fund but I don’t have power; I don’t have roads or rails; I don’t have anything. How can you compete? You can never compete. The places you are putting the money have those things. So, it makes absolute great sense to invest the SWF in assets.

“There should be regulatory conditions that say you must invest ‘X’ per cent of your portfolio in infrastructure in Africa. That is why I fully believe that the SWF can play a big role.”

So, rather than the SWFs investing outside where they are earning real negative returns, they should be invested within, Adesina added.

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

Access Holdings Plc Plans $1.8 Billion Capital Raise

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Access bank

Access Holdings Plc, the parent company of Nigeria’s leading bank, Access Bank Plc, has unveiled ambitious plans for a $1.8 billion capital raise aimed at fueling its expansion efforts over the next four years.

The strategic move comes as Access sets its sights on becoming one of the largest lenders on the African continent.

During a conference call with investors in Lagos, executives outlined the company’s intention to raise $1.5 billion, or the naira equivalent, through the issuance of shares, bonds, or other financial instruments.

Also, Access aims to generate up to 365 billion naira ($257 million) by selling shares to existing investors.

Bolaji Agbede, acting group chief executive officer, clarified that the current fundraising initiative primarily involves a rights issue.

The capital infusion is earmarked to support Access’s ambitious growth plan, which commenced last year.

The bank intends to expand its footprint into new markets, including Morocco, Egypt, and the United States, as part of a broader strategy to double the share of assets outside its home market by 2027.

With operations spanning 22 countries, including the United Arab Emirates and the UK, Access Bank is positioning itself for significant international growth.

The recent appointment of Bolaji Agbede as acting group CEO follows the passing of co-founder and former CEO, Herbert Wigwe, adding a layer of significance to the bank’s future direction.

Access’s acquisition of National Bank of Kenya Ltd. underscores its commitment to expanding its presence in East Africa’s largest economy.

As Access Bank charts its course for expansion, the $1.8 billion capital raise signals its determination to seize opportunities in a rapidly evolving financial landscape, both domestically and across the African continent.

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Finance

OPEC+ Production Cuts and Geopolitical Tensions Propel Oil Price to Over $87

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Crude oil - Investors King

Oil price surged past the $87 price level on Thursday on the back of production cuts by OPEC+ nations and escalating geopolitical tensions.

Brent crude oil, against which Nigerian oil is priced, rose by $1.39 or 1.6% to $87.48 a barrel, its highest level since October 27.

OPEC+, the alliance of major oil-producing nations, has remained resolute in its commitment to curtail output, effectively tightening the supply of crude in the market.

Despite calls for increased production to alleviate soaring prices, the alliance has opted to maintain its course, further buoying the market sentiment.

Simultaneously, geopolitical tensions have added fuel to the fire. Attacks on Russia’s energy infrastructure, particularly by Ukraine, have sparked concerns over potential disruptions to the global oil supply chain.

Despite diplomatic efforts to deter such actions, the situation remains precarious, contributing to market anxieties.

Analysts suggest that these price surges may have long-term implications for global economies, particularly for oil-importing nations heavily reliant on stable energy prices.

Furthermore, the impact of rising oil prices on inflation and consumer spending patterns remains a point of contention among economists and policymakers.

As the world watches with bated breath, the trajectory of oil prices hinges on a delicate balance between geopolitical developments, OPEC+ policies, and the broader economic landscape.

For now, the $87 threshold serves as a stark reminder of the volatility and interconnectedness inherent in the global energy markets.

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Insurance

Heirs Insurance Group Unveils Revolutionary Website for Seamless Insurance Experience

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Heirs Life Assurance- Investors King

Heirs Insurance Group has launched a website designed to revolutionize the insurance experience for its customers.

With a focus on simplicity, accessibility, and personalized service, the new website aims to streamline the process of obtaining insurance coverage and empower customers to make informed decisions about their insurance needs.

The website boasts a range of innovative features that make navigating insurance options easier than ever before.

From simple and intuitive navigation menus to personalized insurance recommendations, the website is designed to guide customers through every step of the insurance process quickly and efficiently.

According to Ifesinachi Okpagu, the Chief Marketing Officer of Heirs Insurance Group, the new website embodies the company’s commitment to delivering exceptional customer service.

“Today’s customers want simplicity, and this new website delivers on that request,” Okpagu said. “We are empowering customers to take control of their lives, their businesses, assets, and their most cherished people.”

One of the key features of the website is its personalized insurance experience, which takes customers through a short journey to help them identify the best insurance plan for their needs.

Whether customers are looking for coverage for their home, car, business, or loved ones, the website provides tailored recommendations to ensure they find the right insurance solution quickly and easily.

With its user-friendly interface and innovative features, the new website from Heirs Insurance Group sets a new standard for the insurance industry, making it easier than ever for customers to protect what matters most to them.

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