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Domestic Debt Servicing Gulped N923.3bn in Three Months –DMO

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  • Domestic Debt Servicing Gulped N923.3bn in Three Months –DMO

The Federal Government spent a total of N923.3bn on servicing domestic debts in the first three months of the year, statistics obtained from the Debt Management Office have shown.

A breakdown of the statistics shows that the Federal Government spent a total of N643.63bn on the payment of interest, while N279.67bn was expended on the redemption of matured Nigeria Treasury Bills between January and March 2018.

Interest rate on FGN Bonds gulped a total of N411.8bn in the first quarter of the year, while interest payment on the Sukuk Bond added up to N8.17bn.

Similarly, the Federal Government paid N223.42bn as interest on the NTBs and N241.87m as interest on FGN Savings Bonds.

The cost of servicing the debt is a reflection of the country’s rising debt profile, especially domestic debt although efforts are being made to reduce the domestic debt commitment in favour of more foreign loans.

In accordance with this strategy, the World Bank only last week announced that it would support seven projects in the country this year with a loan of $2.1bn, while plans to borrow from other foreign sources are on.

In the first quarter of 2017, the Federal Government spent a total of N449.06bn on the payment of interest on loans, while it paid N25bn on the redemption of matured treasury bonds.

This means that the government spent N194.57bn more on interest in the first quarter of this year than it paid in the first quarter of 2017.

In percentage terms, the interest paid on domestic debt in the first quarter of this year was 40.61 higher than what the Federal Government paid as interest in the first quarter of 2017.

A breakdown of the interest paid on domestic debt servicing in the first three months of 2017 showed that interest payment on the NTBs consumed N102.31bn.

Similarly, interest payment on FGN Bonds gulped a total of N346.51bn, while interest payment on treasury bonds consumed N241.41m.

In a document entitled: ‘Nigeria’s Debt Management Strategy 2016-2019’, the DMO stated that at least 30 per cent of the nation’s domestic debt would fall due within a one-year period.

It said, “The implied interest rate was high at 10.77 per cent, due mainly to the higher interest cost on domestic debt. The portfolio is further characterised by a relatively high share of domestic debt falling due within the next one year.

“Interest rate risk is high, since maturing debt will have to be refinanced at market rates, which could be higher than interest rates on existing debt. The foreign exchange risk is relatively low given the predominance of domestic debt in the portfolio.”

Rather than refinancing local debts falling due, the DMO has had to take some foreign loans to redeem some maturing local debts, which it believes come with higher interest rates.

The servicing of Nigeria’s domestic debt gulped N1.23tn in 2016, while it consumed a total of N1.48bn in 2017.

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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Economy

NLNG Boosts Cooking Gas Production to 1.5 Million Metric Tonnes Annually

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cooking gas cylinder

Nigeria Liquefied Natural Gas Limited (NLNG) has announced a significant milestone in its operations, boosting its annual production of liquefied petroleum gas (LPG), commonly known as cooking gas, to over 1.5 million metric tonnes.

This surge in production underscores NLNG’s commitment to meeting the rising demand for clean cooking energy in Nigeria.

The entirety of NLNG’s 1.5 million tonnes production is now being sold domestically within Nigeria.

Moreover, the company has initiated a landmark shift by starting to supply LPG in naira, moving away from the traditional practice of trading in United States dollars.

This move aligns with calls from stakeholders in the oil and power sectors advocating for naira transactions, especially amidst the challenges posed by currency fluctuations.

During a panel session at the 7th Nigeria International Energy Summit in Abuja, NLNG’s General Manager of Finance, Fatima Adanan, highlighted the company’s dedication to enhancing LPG penetration across the country.

Adanan emphasized NLNG’s vision to make Nigeria a better place by promoting the use of cleaner energy sources like gas.

While NLNG’s production surge is commendable, Adanan acknowledged that Nigeria’s LPG requirements surpass the current output, necessitating imports to bridge the gap.

However, NLNG remains committed to expanding its production capacity to meet the nation’s energy needs and drive increased adoption of LPG as a cleaner cooking fuel.

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Economy

CBN Raises Benchmark Interest Rate by 400 Basis Points to 22.75%

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 400 basis points to a record 22.75%.

The decision made by the Monetary Policy Committee (MPC) comes amidst rising inflationary pressures and growing uncertainty in Africa’s largest economy.

Nigeria’s inflation rate rose to 29.90% in January 2024, the highest in over two decades while the nation’s unemployment rate quickened to 5% in the third quarter of 2023. Suggesting that the rising costs have continued to drag on both new job creation and the existing ones.

This coupled with a series of policy adjustments implemented by President Bola Ahmed Tinubu has plunged economic productivity and eroded consumer spending as citizens grapple with high fuel prices, electricity tariffs, a record-high foreign exchange rate, and insecurities.

Therefore, it is surprising that the Monetary Policy Committee (MPC) led by the CBN will further increase borrowing costs by 400 basis points at a time when job creation is paramount.

While the economy reportedly grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, this growth is yet to crystalise as businesses and citizens have taken to the street protest against the harsh economic situation.

Economic experts have started questioning the data from the National Bureau of Statistics (NBS) given its lack of correlation between the data and economic reality.

 

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Economy

President Tinubu Unveils Geometric Power Plant in Aba After 20-Year Wait

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Geometric Power Plant

After two decades of anticipation, President Bola Tinubu, through his representative Vice President Kashim Shettima, inaugurated the long-awaited Geometric Power Plant in Aba, a significant milestone in the city’s quest for reliable electricity supply.

The event, which also saw the commissioning of three rehabilitated roads by Abia State Governor Alex Otti, symbolizes the culmination of years of perseverance and determination to transform Aba’s power landscape.

Addressing the audience, Vice President Shettima hailed the project as a testament to the power of visionary leadership and unwavering commitment to progress.

He said the Geometric Power Plant exemplifies the transformative impact of strategic infrastructure investments on local communities.

Governor Otti echoed similar sentiments, emphasizing the importance of the power project in positioning Aba as a hub for national and international business ventures.

He commended the efforts of Geometric Power Limited while urging them to uphold transparency and avoid exploiting consumers.

The inauguration of the Geometric Power Plant comes amidst growing concerns over Nigeria’s power infrastructure and the need for sustainable solutions to address electricity shortages.

The project, with a capacity of 188MW, holds promise for significant improvements in power supply across Abia State, benefitting nine out of seventeen local government areas.

The Managing Director of Geometric Power Limited, Ben Caven, underscored the scale of investment involved, totaling $800 million.

He highlighted the comprehensive nature of the project, which includes the installation of new power substations and a 27km natural gas pipeline, signaling a comprehensive approach to enhancing Aba’s energy infrastructure.

In conclusion, the inauguration of the Geometric Power Plant represents a transformative moment for Aba, offering renewed hope for economic growth and prosperity powered by reliable electricity supply.

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