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Annual Domestic Debt Servicing Goes up by N247bn

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  • Annual Domestic Debt Servicing Goes up by N247bn

The cost of servicing domestic debt has been on the increase in the past five years, as the Federal Government spent N1.48tn on the subject in 2017, Everest Amaefule reports

The Federal Government spent N247.46bn more in servicing the domestic component of its public debt in 2017 than it spent in 2016, investigation has shown.

According to statistics obtained from the Debt Management Office, the Federal Government spent a total of N1.23tn to service its domestic debt in 2016. However, by 2017, the cost of servicing the debt had gone up to N1.48tn.

This means that the cost of servicing the domestic component of the Federal Government’s debt commitment rose by N247bn within the one year period. This reflected an increase of 20.1 per cent in the cost of domestic debt service.

The DMO confirmed this increase in a report on Domestic Debt Servicing.

It said, “The FGN’s Domestic Debt service as at December 31, 2017, was N1, 476.22bn, compared to N1, 228.76bn in the corresponding period of 2016, representing an increase of N247.46bn or 20.14 per cent.

“This cost comprised principal repayment of N25bn and interest payment of N1, 451.22bn.

“By instrument-type, the debt service for FGN bonds was 66.57 per cent of the total debt service payment, while payments in respect of the FGN Savings Bond, Nigerian Treasury Bills, and Treasury Bonds were 0.03, 30.15 and 3.25 per cent, respectively.

“Further analysis showed that the FGN’s domestic debt service payments rose steadily from N794.10bn in 2013 to N1, 476.22bn in 2017, as a result of the growth in domestic debt stock with relatively higher interest rates.”

Between 2013 and 2014, the cost of domestic debt servicing rose from N794.10bn to N865.81bn. This meant that the cost of servicing rose by 71.71bn or 9.03 per cent.

By 2015, the cost of domestic debt servicing hit the trillion naira mark, rising from 1,018.13bn. This showed that cost rose by 152.32bn, reflecting 17.59 per cent increase. By 2016, the cost went up by 210.63bn, reflecting 20.69 per cent.

Thus, between 2013 and 2017, the cost of serving the Federal Government’s domestic debt went up by N682.12bn. This showed an increase of 85.89 per cent within a period of four years.

The increasing cost of debt servicing (domestic debt in particular) has been a major source of concern for many stakeholders and experts. The trend has also been similar for a number of Sub-Saharan African countries, especially those that depend on commodities for foreign exchange earnings.

The International Monetary Fund, for instance, in November, pointed out that the precarious situation of the country when it said that the nation was spending a high proportion of its revenues on debt servicing.

The Breton Woods financial institution said that the nation spent more than 50 per cent of its revenues on servicing on debts, a situation that did not give room for other necessary expenses.

Speaking at the presentation of the Regional Economic Outlook for Sub-Saharan Africa – Capital Flows and the Future of Work, Senior Resident Representative and Mission Chief for Nigeria, African Department, Amine Mati, said Nigeria was spending more than 50 per cent of revenues on debt servicing.

Mati said that although Nigeria’s debt to Gross Domestic Product remained low at between 20 and 25 per cent, the country spent a high proportion of its revenue on debt servicing as a result of low revenue generation.

He added that the debt servicing to revenue ratio was more than 50 per cent while for sub-Saharan Africa, the rate was about 10 per cent; a figure he said was too high and reminiscent of what the region went through in the period of following debt relief at the beginning of the 21st century.

Mati said, “Security issues are exacting a significant human toll in a number of countries. Debt to GDP ratio is increasing in the past five years. Public debt is diverting more resources towards debt servicing.

“The interest rate has gone up to where they used to be around the year 2000 before debt relief. Adjustment has relied on spending compression rather than revenues mobilisation. Meeting the Sustainable Development Goals will require stronger growth and more financing.”

For DMO, however, rising debt and rising cost of debt payment were necessities occasioned by precarious economic situation as typified by the recent recession that the country went through.

The Director- General of the Debt Management Office, Patience Oniha, said that it was important for the government to borrow especially given the nation’s low revenue generating capacity.

Oniha said, “We are borrowing to be able to increase Forex availability. Government needed to borrow in order to spend the country out of recession.”

Justifying this viewpoint, Oniha said that in 2016, the Federal Government borrowed N2.5tn which was approved by the National Assembly while it proposed to borrow N1.64tn in the current financial year.

In 2019, she added, the proposed debt of N1.5tn had gone further down. She added that the government had taken steps to diversify the economy and increase tax collection which, she said, was lower than in most countries of the Economic Community of West African States.

According to DMO boss, the government has also taken steps to reduce the incidence of high cost of debt servicing. One of such steps is the attempt to rebalance the nation’s sources of loans.

By this, the government has been making moves to borrow more from foreign sources as it plans to raise foreign debt component to 40 per cent of the public debt while reducing the domestic debt component to 60 per cent. The rationale is that domestic debts come with higher interest rates.

The second strategy is similar to the first one – borrow more money foreign sources and use it liquidate some domestic debt. This strategy will also grow the foreign debt component and reduce the local component.

How these strategy works in the long run remains to be seen as experts point out that there are also risks associated with increasing foreign debt component of public debt. One of such risks is the foreign exchange risk.

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.

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Banking Sector

FirstBank Holds Non-Oil Export Webinar Series, Creates Awareness of The Bank’s Export Solutions

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First Bank of Nigeria Limited, Nigeria’s premier and leading financial inclusion services provider, has announced the convening of its non-oil export webinar series. The Event is centered on deliberating opportunities that will enhance the country’s expansion of its drive towards diversifying the national economy, thereby reducing the reliance of oil as a mainstay of the country’s revenue.  

The first series of the virtual event is scheduled for 10am on Tuesday, 30th November 2021 via Zoom meeting. To register and be part of this transformational knowledge session, click on this link-https://www.firstbanknigeria.com/business/non-oil-export/ . Registration is Free!! 

The event is themed “Building Sustainable Non-Oil Export in Nigeria; Harnessing Opportunities within the AfCFTA Treaty & Agro Commodities” and will have the attendance of Mr. Segun Awolowo MD/CEO, Nigerian Export Promotion Council (NEPC); Dr Biodun Adedipe, Founder and Chief Consultant of B. Adedipe Associates Limited (BAA Consult)  amongst others, as guest speakers.  

The webinar series aims to facilitate sustainable exports as well as guide participants on ways of navigating the hurdles and challenges of exports in Nigeria. The webinar will explore market and economic trends, unique export opportunities and potentials within the non-oil export industry across the geopolitical zones in the country.  

The importance of exports in Nigeria remains a front burner conversation by individuals and organisations as it provides a means of increasing the markets for producers, and an opportunity to attract the much needed foreign exchange earnings to boost the national economy, which is critical to expanding its Gross Domestic Products. 

Speaking on the event, the Group Head, Marketing & Corporate Communications, Folake Ani-Mumuney said: “in recent years, the country has witnessed increased activities by the government towards diversifying the economy, thereby boosting the export potentials of the country – beyond the contribution of crude oil – which has been the mainstay of the national economy for many decades.  

Our forthcoming Non-oil Webinar series will expand discussions that are crucial to the growth of Nigeria’s export potentials as we unlock numerous opportunities that will promote the economic diversification drive of the government which is essential to the continued growth of the national economy, especially with the current business challenges posed by the pandemic.”

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Currency in Circulation Now N2.97 Trillion in October – CBN

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Currency in circulation hit N2.97 trillion in the month of October, according to the latest report from the Central Bank of Nigeria (CBN).

The currency in circulation rose by N129 billion from N2.84 trillion recorded in the month of September to N2.97 trillion in October. This was after the currency in circulation declined from N2.8 trillion in July to N2.78 trillion in August.

Currency in circulation stood at N2.74 trillion in June, N2.79 trillion in May, N2.79 trillion in April, N2.8 trillion in March, N2.78 trillion in February and N2.83 trillion in January.

The CBN said, “The currency in circulation increased by N465.47bn or 19.06 per cent to N2.91tn in 2020, compared with N2.44tn in 2019.

“In 2020, there were higher withdrawals by DMBs than deposits, due to the panic need to hold cash to deal with the emergencies and reduced banking hours due to restrictions to curb spread of the pandemic.”

The bank said to maintain public confidence and ensure integrity of circulated notes in the economy, it developed and unveiled a clean note policy and banknote fitness guidelines in 2018.

The guidelines outlined details of quarterly and yearly activities towards the achievement of this objective.

The CBN said it employed the “accounting/statistical/withdrawals and deposits approach” to compute the currency in circulation in the country.

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Banking Sector

2021 NCOY: FirstBank Partners Junior Achievement Nigeria, Reiterates Commitment to Innovation and Education

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For 11 years, Nigeria’s premier and leading financial inclusion services provider, First Bank of Nigeria Limited has partnered with Junior Achievement Nigeria (JAN) to host its annual flagship event; the National Company of the Year competition (NCOY), which convenes winners of the JA Company Regional Competitions across Nigeria to compete for the National Company of the Year Award.

This year, the event will bring together outstanding ‘student business teams’ across Nigeria to compete for prizes and an opportunity to represent the country at the national competition – JA African Company of the Year Competition (ACOY). The 2021 edition of the NCOY competition will be held virtually via Zoom meetings at 10am on Saturday, 27th November 2021.  Interested participants are to register via the link https://us06web.zoom.us/meeting/register/tZEtd-qvqz4pE90NXOHcy-tve6aEXpY_yYAE

The competition themed ‘Innovation with Grit’ will have 12 teams from 12 schools pitch their innovations to a team of 5 guests judges. The represented schools at the competition include: The Seer company from Alvana High School; Sonic Informatics company from Heritage Global Academy; Nexus Queens company from Queens School; JA Stars from Theological College of Northern Nigeria (TCNN); Amazing Amazon Students from Government Girls’ Secondary School, Abaji; KereTerra Company from Secondary School Etoi, Uyo and The Exploit thinkers from Taidob College.

Other teams competing include: Mystic Global Company from Rosa Mystica High School, Agulu;  PetraMech Tech from Petra Schools; The Amazing Inventors from Government Secondary School Tudun Wada; Blue crystal company from Methodist Girls school and the Artisans from Igbobi College.

Judges at the event include: Oludolapo Adigun, Group Head, Retail Banking Lagos & West First Bank of Nigeria Limited; Chidimma Juliana Okparah, Project Management Consultant (PMIEF); Sheila Ojei, Head of Communications Jobberman;  Gbenga Sesan, Executive Director of Paradigm Initiative and Simbo Olatoregun, Policy Programs Manager for Facebook in Africa. In attendance also is the Honourable Commissioner for Education Lagos State, Mrs. Folashade Adefisayo as a Special Guest.

The 2021 National Company of the Year Program will also feature SPARK Competition. SPARK as an initiative of First Bank of Nigeria Limited, is an acronym for Start Performing Acts of Random Kindness. SPARK reiterates the Bank’s commitment to institutionalise kindness in Nigeria by encouraging and amplifying a culture of kindness.

The SPARK competition will feature 15 finalist schools across Nigeria, whose CSR projects align with the Bank’s Corporate Responsibility and Sustainability pillars of Education, Welfare and Health, Financial inclusion and Responsible Lending and Procurement.

Speaking on the event, the Group Head, Marketing & Corporate Communications, Folake Ani-Mumuney said “FirstBank’s partnership under its Future First initiative with JA Nigeria Company programme has positively impacted over 100,000 people in different locations across the country in preparing and teaching them how to generate wealth, effectively manage it and how to apply entrepreneurial thinking to the workplace. Our commitment to fostering entrepreneurial development amongst youths is mainly the driving force behind our support of the National Company of the Year (NCOY) and Africa Company of the Year (ACOY) competitions in past 11 years”.

According to the Executive Director, JAN, ‘’the National Company of the Year Company competition provides our students with a platform to show how innovative they are while displaying their dexterity and grit especially as it relates to creating sustainable business solutions to problems in their immediate community. The students have learned critical skills during the implementation of the Company Programme and we are proud to celebrate them as they compete in the National competition. I would like to specially appreciate FirstBank Nigeria for their continued support and belief in the boundless potential of young Nigerians’’.

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