- CBN Keeps Interest Rate at 14%
The Monetary Policy Committee left interest rate unchanged on Tuesday following two consecutive rises in consumer prices and concerns over global slowdown.
The Central Bank of Nigeria led committee kept Monetary Policy Rate at 14 per cent. While the Cash Reserve Ratio and Liquidity Ratio were left at 22.5 per cent and 30 per cent, respectively.
Mr. Godwin Emefiele, the CBN Governor, said the committee decision was based on the current situation. Suggesting that rising interest rate at this time could hurt economic growth despite inflation number rising to 11.44 per cent in December.
Still, the inflation rate is expected to increase in the near-term before moderating towards the third quarter of the year. While this was attributed to election spending and continued disruptions to the food supply in the insurgency prone areas, the MPC also noted that external shocks due to BREXIT negotiations, slowing growth in China and policy normalization in advanced economies are some of the factors expected to affect consumer prices in the first half of 2019.
Despite the International Monetary Fund lowering Nigeria’s growth projection for 2019 to 2 per cent on slower than expected global expansion, the CBN maintained its 2.28 per cent prediction, a 0.8 per cent higher than the 2.2 per cent predicted by the World Bank.
The MPC, however, highlighted unstable global oil market, security issues in the North East and uncertainty associated with the 2019 elections as key headwinds to these projections.
Global Insurance Market Records Losses in H1 2021
The global insurance market in the first half of 2021 was inundated with claims from natural disasters and catastrophes as well as claims from civil unrest, a report by the global insurance broker, Aon has revealed.
According to the report, claims from the risks are estimated to have reached $42 billion for the first half of 2021. Aon in the report stated that the claims are 2 percent higher than the 10-year average.
In Nigeria, while both the Nigeria Insurers Association (NIA), which is the umbrella body of insurance underwriters and the regulator, the National Insurance Commission (NAICOM) are still collating the actual claims figure paid by insurers within the period, many insurers are still battling with a backlog of claims resulting from the October 2020 EndSARS protest.
Insurers told explained that the EndSARS protest claims are already clashing with their claims responsibilities in the first half of the year.
According to NIA, there are a total of 1,661 protest-induced claims as a result of the #EndSars protests, of which 143 substantiated claims worth an N105.0million have been settled.
A similar experience is shared by South African insurers as reports from that clime said losses from week-long riots were estimated at over $690 million.
According to Reuters, claims from damage and theft from businesses affected by civil unrest in South Africa are likely to be between ZAR7bn ($484m) and ZAR10bn ($692m).
The news agency said the riots and looting which started on July 9 and ended July 17, left more than 117 people dead, hurt thousands of businesses and damaged major infrastructure, including telecommunications towers, in some of the worst civil unrest in decades.
It said the unrest triggered by the jailing of ex-president Jacob Zuma failing to appear at a corruption inquiry, widened into an outpouring of anger over poverty and inequality.
South African Special Risks Insurance Association (Sasria), a state-owned insurer set up after private firms stopped underwriting risks relating to political violence due to unrest during apartheid, has received around ZAR100m in claims so far, its managing director Cedric Masondo told Reuters, adding this was expected to rise significantly.
Aon, said that while $42 billion of first-half catastrophe insured losses is only 2 percent higher than the 10-year average ($41 billion), it is 39 percent higher than the 21st Century average ($30 billion) and 101 percent higher than the average of all years since 1980 ($21 billion).
In total, Aon estimated that natural disasters cost the global economy around $93 billion in the first half of 2021.
It stated, “The economic loss tally is some 32 percent lower than the previous decade ($136 billion), 16 percent lower since 2000 ($110 billion), but 9 percent higher than the average of all years since 1980 ($85 billion). All of these numbers remain preliminary, “it stated.
Aon’s data comes from a minimum of 163 natural disaster events that occurred in H1 2021, which was below the 21st Century average (191) and median (197).
In terms of loss of life, it said natural disasters claimed 3,000 lives during the first half, which is well below the long-term average (since 1980) of 38,900 and the median of 7,600.
Across the events, Aon counted 22 that drove billion-dollar economic losses, the majority of which were weather-related.
The global broker said there were at least 10 separate billion-dollar industry catastrophe loss events on an insured loss basis, it also said the costliest of them all was the US winter storm and freezing weather delivered by the polar vortex, which Aon pegs at the generally accepted $15 billion levels.
It added, “After that, the severe weather event in Europe in June drove a $3.4 billion industry loss, the Fukushima offshore earthquake a $2.5 billion loss and another US severe weather event $2.5 billion as well.”
Zenith Bank GMD, Onyeagwu Advocates Impact Investment In Africa
The Group Managing Director/Chief Executive of Zenith Bank, Mr. Ebenezer Onyeagwu, has called for increased impact investing in Africa for the continent to attain its full potential.
He made the call during his keynote address at the Africa Investment Risk & Compliance Summit 2021 organised by the Emerging Business Intelligence & Innovation (EBII) Group which was held at the prestigious University of Oxford, United Kingdom, on Friday, July 30, 2021.
Mr Onyeagwu delivered his keynote address after the special keynote address by His Excellency, Nana Addo Dankwa Akufo-Addo, President of the Republic of Ghana & Commander-in-Chief of the Ghana Armed Forces, who was the Special Guest of Honour. Her Excellency Dr Amani ABOU-ZEID, The African Union Commissioner in charge of Infrastructure and Energy, also delivered a keynote address at the Summit.
Delivering the keynote address with the theme “Leveraging Impact Investment Opportunities for Growth in Africa”, Onyeagwu described impact investing as an investment that yields optimal returns for investors, value for all stakeholders, and guarantees continued sustenance and existence of humanity.
He decried the shallowness of Africa’s financial market as depicted by the fact that no African exchange is among the Morgan Stanley developed markets index, only two African exchanges (Egypt and South Africa) are in the MSCI Emerging Markets Index, and just six African exchanges are in the MSCI Frontier Market Index.
He noted that although the International Finance Corporation (IFC) estimates that the global investors’ appetite for impact investing could total as much as $26 trillion, only approximately 8 percent of the assets of impact intent funds are focused on Africa.
According to him, this is not significant enough, and Africa appears to be in the room but not on the table, considering that Africa is in dire need of investment and the continent’s 1.3 billion people represent about 17 percent of the global population of about 7.8 billion.
Citing the immense opportunities in Africa that represent enormous investment proposition for discerning investors, including the huge population, large market and active labour force, and the rich natural endowment, Onyeagwu described Africa as “the new frontier” for global growth.
He made a case for increased impact investment in Africa, noting that investment opportunities on the continent cut across agriculture, healthcare, housing, infrastructure, electricity, and the creative sectors.
Onyeagwu exuded immense optimism on the coming into effect of the African Continental Free Trade Area (AfCFTA) initiative, which would create a single, continent-wide market for goods and services, business and investment as being in one country on the continent grants investors access to the entire continent.
He also called investors’ attention to Africa’s rich natural endowment, which includes 60 percent of the world’s uncultivated arable land and 9 percent of the world’s freshwater bodies, noting that Africa holds enormous potential for organic food production.
He, therefore, implored investors in the agribusiness value chain to focus attention in Africa on organic food production instead of genetically modified food in other climes.
Onyeagwu also noted that as a socially responsible organisation, Zenith Bank continues to promote impact investment in Africa. For example, the bank has maintained strong advocacy for investment in Africa through its flagship sponsorship of “Inside Africa” on CNN for 16 consecutive years, which is helping to highlight the immense creativity and talent that abound on the continent and the enormous investment opportunities on the continent of Africa.
He also said that the bank leverages its in-depth knowledge of the African market to guide investors and hedge their exposures.
According to him, the bank has been on a steady Environment, Social and Governance (ESG) investment journey, which started with ESG integration as a business strategy as well as being a signatory to the Nigerian Principles for Sustainable Banking and the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking.
For its efforts, Onyeagwu noted that Zenith Bank received recognition as the “Best Company in Promotion of Gender Equality and Women Empowerment in Africa” at the 2020 Sustainability, Enterprise and Responsibility Awards (SERAS).
In his call to action, Onyeagwu called for a paradigm shift, noting that Africa is a work in progress, and leaders in the public and private sector should not despair. He encouraged leaders to champion the changes they want to see, pay close attention to responsibility and accountability in leadership.
He also called for the de-risking of Africa through reforms, improved ease of doing business, respect for the rule of law and sanctity of contract, and human capital development.
Onyeagwu expressed satisfaction with the several reforms of the Federal Government of Nigeria, including the Road Infrastructure Tax Credit Scheme (RITC), the establishment of the Rural Electrification Agency’s (REA) Rural Electrification Fund (REF), Infraco Plc, and several other development finance initiatives of the Central Bank of Nigeria.
He also noted that several African countries, including Ghana, Kenya and Rwanda, are recording massive improvements in the ease of doing business, leveraging digital technology to simplify government processes and deepen the financial system.
He implored Africans to see themselves as brothers and sisters, say no to xenophobia, and speak with one voice and not with discordant tunes.
Onyeagwu implored the rest of the world to look at Africa as an investment destination that guarantees optimal returns. He noted that Africa has profound talent that abounds across the world and contributes to the development of these climes, and this should be reciprocated.
He encouraged Africans to imbibe the spirit of UBUNTU – “I AM BECAUSE YOU ARE” since we are all connected in humanity.
Zenith Bank is Nigeria’s largest and one of Africa’s largest financial institutions by tier-1 capital, with shareholders’ funds in excess of NGN1.1 trillion ($2.64 billion) as of December 31, 2020. The bank is a clear leader in the Nigerian financial space, with several firsts in the deployment of innovative products and solutions that ensure convenience, speed and safety of transactions.
The Emerging Business Intelligence & Innovation (EBII) Group is independent specialist compliance and global risk management consultancy firm offering education and expert consulting services to entities in the West seeking opportunities for diversification and growth in emerging markets and Africa.
The Group supports African entities and governments with their risk management and compliance requirements and delivers practical and genuine support to firms by providing a comprehensive and relevant assessment of risks, enabling them to successfully navigate their risks and ensure adherence to their compliance requirements.
Nigeria’s Loans From World Bank, AfDB Stood At $14.35B Under Buhari Administration
Nigeria’s liabilities to the World Bank and the African Development Bank rose from $7.14 billion to $14.25 billion between June 30, 2015, and March 31, 2021, data obtained from the Debt Management Office have shown.
This means that the commitment of the banks to the country rose by $7.11 billion within the period under review. This represents an increase of 98.48 percent.
As of June 30, 2015, the Federal Government had borrowed a total sum of $6.19 billion from the World Bank.
A breakdown of the group’s portfolio in the country shows that a greater part of the loans was obtained from the International Development Association, an arm of the World Bank that specialises in giving concessional loans to poor and fragile countries.
The IDA commitment to Nigeria amounted to $6.09 billion. Another member of the group, the International Fund for Agricultural Development, had a commitment of $94.80 million in the country.
Similarly, at the same time, the AfDB commitment to the country stood at $946.52 million, comprising loans from various internal bodies such as the African Development Bank ($350 million) and African Development Fund ($596.53 million).
By March 31, 2021, the Federal Government’s debt to the World Bank had risen to $11.51 billion, reflecting a $5.32 billion or 86 percent increase.
This debt portfolio included loans of $11.10 billion and $410.23 million from the International Development Association and International Bank for Reconstruction and Development respectively.
With a commitment of $11.51 billion, the World Bank is responsible for 35.02 percent of Nigeria’s foreign portfolio of $32.86 billion as of March 31.
At the same period, the Federal Government acquired $1.59 billion from the AfDB, $0.21 million from Africa Growing Together Fund and $942.51 million from ADF.
This brought the AfDB’s commitment to the country to $2.74 billion, representing 8.3 percent of the country’s total external debt. Most of the loans from the World Bank and the AfDB were tied to a programme or infrastructure project.
On December 14 2020, the World Bank approved a $1.5bn loan to Nigeria, earmarked for two projects: Nigeria COVID-19 Action Recovery and Economic Stimulus Programme and The State Fiscal Transparency, Accountability, and Sustainability Programme.
On June 27, 2018, the bank approved a loan of $775 million for the following projects: Fiscal Governance and Institutions Project, Nigeria Erosion and Watershed Management Project – Additional Financing, Nigeria Polio Eradication Support Project Additional Financing, Nigeria Electrification Project and the State Fiscal Transparency, Accountability and Sustainability scheme.
On March 23, 2017, the bank approved a $200 million credit for the implementation of the Agro-Processing, Agricultural Productivity Enhancement and Livelihood Improvement Support Project and Nigeria, while a $150m credit was offered for Mineral Sector Support for Economic Diversification Project on April 14 same year.
On June 7, 2016, the bank approved a $1.1 billion credit as additional finance to fund the following projects: State Education Program Investment Project, Community and Social Development, Nigeria Youth Employment and Social Support, State Health Investment Project, Third National Fadama Development Project, NG-Polio Eradication Support Project and the National Social Safety Nets Project.
One of the loans approved by the Board of Directors of the AfDB to the Nigerian government is a financing package comprising $150 million ADB loan, $100 million ADF loan and the £5m RWSSI Grant Facility, to finance the Inclusive Basic Service Delivery and Livelihood Empowerment Integrated Programme on December 14, 2016.
Also in 2016 but on December 16, another loan was approved, which was a financing package of $100 million, comprising an $80 million loan and $20 million equity for the rehabilitation of the Kainji and Jebba hydro plants.
On December 3, 2018, the Board of Directors of the AfDB approved a $150 million sovereign loan to finance the Nigeria Electrification Project.
Another loan was approved on April 24, 2019, which was a $70 million loan for a road project in Nigeria’s Southeastern Ebonyi State with the bank providing $40m and its co-financier, AGTF, contributing $30 million.
On June 5, 2020, a $288.5 million loan was approved to help Nigeria tackle the COVID-19 pandemic and mitigate its impact on people and businesses.
As of March 31 2021, 54.26 percent of the country’s external debt portfolio belonged to multilateral organisations including the International Monetary Fund ($3.48 billion), Arab Bank for Economic Development in Africa ($5.88 million), European Development Fund ($51.33 million) and Islamic Development Bank ($29.72 million) and $223.28 million from International Fund for Agricultural Development.
Bilateral debts make up $4.18 billion or 12.73 percent of the country’s external debt exposure.
Nigeria’s is currently indebted to the following bilateral agencies: Export-Import Bank of China, with a portfolio of $3.40 billion; the Exim Bank of India, with a portfolio of $34.95 million; the Agence Française de Développement, with a portfolio of $486.6 million; the Japan International Cooperation Agency, with a portfolio of $74.6 million; and Germany, with a portfolio of $183.7 million.
Commercial loans now comprise 32.47 percent of the country’s external debt exposure, with a value of $10.67 billion.
These loans include $10.36 billion Eurobonds, and $300 billion Diaspora Bond, through which the Federal Government borrowed from Nigerians living abroad.
On the other hand, as of June 30 2015, Eurobond was the only commercial loan available and it constituted 14.54 percent of the country’s external debt exposure with a value of $1.5 billion.
Meanwhile, multilateral sources constituted 70.11 per cent of the country’s external debt exposure at the stated period while bilateral sources made up 15.35 percent of the country’s total foreign debt exposure of $10.32 billion.
Financial experts have continually condemned the huge borrowings of the Federal Government, noting that the country’s rapidly growing debt profile is detrimental to the economy.
The President of the AfDB, Dr Akinwumi Adesina, had during the virtual launch of the African Economic Outlook 2021 described debts owed by African countries including Nigeria as unsustainable.
Adesina had said, “The issue of debt is so fundamental because it’s like you are running up a hill but you have a bag full of sand on your back; you can’t go far. The amount of debt that we have is not sustainable.
“The amount of debt that we have right now is about 70 to 75 percent of the Gross Domestic Product. It used to be sustainable, but what is even more alarming is the structure of the debt, where the debt right now is largely in the hands of commercial creditors, almost $337 billion in terms of high creditors and those that are the private creditors without any type of securitisation for it.”
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