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Nigeria’s Exposure to Commercial Loans Rises by $7.3bn in 3 Years

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  • Nigeria’s Exposure to Commercial Loans Rises by $7.3bn in 3 Years

Nigeria’s exposure to commercial foreign loans rose by $7.3 billion or 486.67 per cent in the last three years, data from the Debt Management Office (NBS) has shown.

From $1.5 billion as at June 30, 2015, commercial loans stood at $8.8 billion by June 30 2018.

The nation’s foreign debt component also posted an increase of $11.77 billion during the same period.

Nigeria’s external debt, the DMO stated, grew from $10.32 billion as at June 30, 2015 to $22.08 billion as at June 30, 2018.

This translated to a growth of 114.05 per cent in the last three years.

According to the DMO figures posted on its website, while multilateral debt accounts for $10.88 billion or 49.28 per cent of Nigeria’s foreign debt profile, the greatest chunk of the increases in the last three years were traceable to commercial loans.

Commercial foreign loans, which stood at $1.5 billion as of June 30, 2015 recorded a $8.8 billion increase as at June 30, 2018, an indication that in the past three years, Nigwria’s exposure to commercial foreign loans posted a $7.3 billion or 486.67 per cent rise.

The World Bank accounted for 38.36 per cent of the nation’s foreign debt portfolio, with a commitment of $8.47 billion, even as the country is exposed to other multilateral organisations, including the African Development Bank (AfDB’s) $1.32 billion and that of African Development Fund ($843.47 million).

Nigeria is also indebted to the International Fund for Agricultural Development (IFAD) to the tune of $159.44 million; the Arab Bank for Economic Development ($5.88 million); the EDF Energy (France) with a portfolio of $64.96 million and the Islamic Development Bank with a portfolio of $16.92 million.

However, Nigeria’s bilateral debt account for $2.39 billion or 10.87 per cent of the country’s external debt exposure.

Such bilateral agencies include the Export-Import Bank of China ($1.91 billion); Agence Francaise de Development ( $274.98 million), Japan International Cooperation Agency ($74.69 million); the EXIM Bank of India ($4.76 million); and Germany (KFW),$132.24 million).

The latest debt statistics point towards a marginal decrease in the domestic component of the country’s total public due to efforts to rebalance the local/foreign debt ratio in the ratio of 70:30.

The DMO stated that there was a decrease in the federal government’s domestic debt, from N12.59 trillion in December 2017 to N12.58 trillion in March 2017 and N12.15 trillion in June 2018.

The reduction in the FGN’s domestic debt stock, the DMO explained, arose from the redemption of N198 bn Nigerian Treasury Bills in December 2017 and another N639 billion between January and June 2018.

A total of $3 billion was raised through Eurobonds to refinance maturing domestic debt as part of the implementation of the debt management strategy for the purpose of substituting high cost domestic debt with lower cost external debt to reduce debt service costs for the government, the DMO said.

The implementation of the Public Debt Management Strategy, whose overall objective is to ensure that Nigeria’s debt is sustainable, the DMO noted, is already yielding positive results.

Meanwhile, the federal government has offered for subscription two-year savings bond at 11.36 per cent and three-year savings bond at 12.36 per cent, the DMO has said.

The offer circular pasted on the DMO website showed that the two-year bond will be due in September 2020 while the three-year bond mature in September 2021.

The DMO disclosed that the maximum subscription was N50 million at N1,000 per unit, subject to minimum subscription of N5,000 and in multiples of N1,000.

According to the DMO, the bond is fully backed by the full faith and credit of the federal government, with quarterly coupon payments to bondholders.

The savings bond issuance is expected to help finance the nation’s budget deficit as well as part of the federal government’s programme targeted at the lower income earners to encourage savings and also earn more income (interest), compared to their savings accounts with banks.

According to the circular, the offer closes on Friday.

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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