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FG Sets New Four-year Debt Management Strategy

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Debt Management Office
  • FG Sets New Four-year Debt Management Strategy

The Federal Government on Tuesday released the new National Debt Management Framework 2018-2022.

The Debt Management Office stated that the NDMF was a reference document, as well as a compendium of Nigeria’s key debt management policies, strategies and frameworks.

According to the DMO, the NDMF was designed to ensure that government’s borrowing activities were conducted in accordance with statutory provisions and regulations, as well as international best practices.

The third NDMF covered the period 2018-2022, and is expected to guide the activities and operations of Nigeria’s public debt management during the four-year period.

The framework included an assessment of the implementation of the NDMF for 2013-2017, in terms of realisation of its objectives and the challenges encountered on public debt management, as well as expectations for the future.

It stated that the third NDMF, 2018-2022, had been prepared with objectives which were to review the performance of the total public debt portfolio, in terms of costs and risks, by reference to the targets in the NDMF, 2013-2017; to implement aspects of the NDMF, 2013-2017, which were still relevant for the period, 2018-2022.

It would also incorporate the broad objective and the strategic objectives of the public debt function, as captured in the DMO’s strategic plan,2018-2022.

It equally aimed to incorporate the subsisting debt management strategy, 2016-2019, including the various public debt targets; to reflect and incorporate developments in the domestic financial market and the international capital market; and to review the external and domestic borrowing guidelines for federal, states, Federal Capital Territory, and their agencies.

The objectives of Nigeria’s public debt management are to use debt and debt-related instruments to support Nigeria’s development goals, while ensuring that public debt is sustainable.

This is expected to address both immediate and evolving challenges, which include changing investor needs and higher investor expectations from the DMO on product and services; government’s prioritisation of the development of infrastructure, which required new and more creative ways of financing; the growing contingent liabilities of the government and the expected increase in guarantees to support infrastructural development.

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.

Banking Sector

Heritage Bank Liquidation: NDIC Opens Bidding for Assets and Branches

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The Nigeria Deposit Insurance Corporation (NDIC) has commenced the process of liquidating the bank’s assets across Nigeria.

This move comes as part of NDIC’s role as the liquidator of the failed bank, aimed at recouping funds and resolving outstanding liabilities.

The NDIC, through an advertorial published in major newspapers, has announced the sale of 48 properties belonging to Heritage Bank.

These properties include the bank’s head office located at 143 Ahmadu Bello Way and its annex at 130 Ahmadu Bello Way, Victoria Island, Lagos.

Also, the liquidation covers chattels such as vehicles, office equipment, plant, and machinery spread across 62 locations nationwide.

Interested parties are invited to participate in a public competitive bidding process. They have been given the opportunity to inspect the assets and submit bids to acquire them.

The bidding process requires potential buyers to submit bids accompanied by a Certified Bank Draft amounting to 10% of their bid.

Successful bidders will be required to settle the balance within two weeks of notification of their successful bid.

The liquidation process marks a significant step in NDIC’s efforts to manage the fallout from Heritage Bank’s closure effectively.

The corporation has also commenced the verification and payment of depositors with balances of N5 million or less, a category that constitutes about 99% of the bank’s customer base. According to Bello Hassan, the Managing Director of NDIC, Heritage Bank had approximately 2.3 million depositors with total deposits amounting to N650 billion, while its loan portfolio stood at about N700 billion.

The decision to revoke Heritage Bank’s license was made by the CBN due to the bank’s persistent breach of regulatory requirements and its inability to improve its financial position despite intervention measures.

This action underscores the CBN’s commitment to maintaining financial stability within the banking sector and protecting depositors’ funds.

Stakeholders within the banking industry, including the Bank Directors Association of Nigeria (BDAN) and the House of Representatives, have expressed support for the regulatory actions taken.

BDAN’s Chairman, Mustapha Chike-Obi, emphasized the necessity of such decisions in safeguarding the overall health of the banking sector.

Meanwhile, the House of Representatives has passed a resolution urging the CBN to investigate the management and leadership of Heritage Bank to ascertain if any mismanagement or wrongdoing contributed to its failure.

The resolution also called for a comprehensive review of NDIC’s operations to ensure it is adequately equipped to fulfill its mandate as a deposit insurer and investor in failed banks.

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Finance

Economic Woes Slash Nigerian Manufacturing Tax Revenue by 70%

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In a striking indication of the challenges facing Nigeria’s manufacturing sector, tax payments from manufacturers have plummeted to their lowest level in three years.

According to the latest Company Income Tax (CIT) report by the National Bureau of Statistics (NBS), the tax revenue from both local and foreign manufacturing firms fell by a staggering 70.4 percent in the first quarter of 2024.

The revenue dropped to N43.2 billion from N145.1 billion in the same period last year, indicating the severe impact of the country’s tough operating environment on manufacturers’ financial performance.

This decline also reflects a year-on-year decrease of 31.4 percent from N62.9 billion, highlighting the ongoing difficulties manufacturers face.

The report points to increased borrowing costs, driven by rising interest rates and the devaluation of the naira, as key factors squeezing the sector.

“Manufacturers are not finding it easy with the high cost of production,” said Abiodun Kayode-Alli, a senior tax manager at PwC.

He explained that the harsh economic climate has significantly reduced the amount companies contribute to the government in taxes.

“Apart from the tough business environment, collection in Q1 is usually not much because most companies have until June 30 to complete filing and payments.”

Company Income Tax, a levy imposed on the income of corporations, varies based on company size.

Small firms with gross turnovers of N25 million or less are exempt, medium-sized firms (turnover between N25 million and N100 million) pay 20 percent, and large companies (turnover above N100 million) are taxed at 30 percent.

Despite these gradations, the manufacturing sector, which used to be a major contributor, recorded the lowest growth rate among 21 sectors.

The aggregate CIT collection fell by 12.9 percent to N984.61 billion in Q1 from N1.13 trillion in the previous quarter.

This downturn is particularly concerning given that the Federal Inland Revenue Service recently disclosed a shortfall in tax revenue, generating N3.94 trillion against a target of N4.8 trillion.

Muda Yusuf, Chief Officer of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the severe losses incurred by major players due to the foreign exchange reforms.

“The economy has not been favorable to most manufacturers, who are significant contributors to tax revenue,” Yusuf said.

BusinessDay’s research reveals that seven out of 13 listed consumer goods firms reported combined losses of N388.6 billion in Q1.

These firms include industry giants like International Breweries Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, and Nestlé Nigeria Plc.

Also, companies such as BUA Cement, Lafarge Africa Plc, and Nascon Allied Industries Plc saw their earnings decline significantly.

“A lot of consumer firms had higher finance costs because of FX losses and higher interest rates,” noted Ayorinde Akinloye, a Lagos-based investor relations analyst. “Despite some having good operating performance, their profits declined, while others recorded huge losses.”

The Central Bank of Nigeria’s aggressive monetary policy, raising the rate to 26.25 percent in May to combat inflation and support the naira, has exacerbated these financial pressures.

The liberalization of the foreign exchange regime also resulted in a near 30 percent devaluation of the naira this year, further complicating the economic landscape for manufacturers.

This challenging environment has prompted several multinationals to exit the Nigerian market. In the past ten months, companies like Kimberly-Clark, Procter & Gamble, GlaxoSmithKline Consumer Nigeria, Equinor, Sanofi, and Bolt Food have ceased operations in the country.

“Many companies that seem to be alive today are sick and most are not making profits. Many will still shut down because they cannot plan. About 10 million businesses have closed shop,” said Femi Egbesola, national president of the Association of Small Business Owners of Nigeria.

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Banking Sector

Fidelity Bank Leads Trading as Equities Gain N324b

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Fidelity Bank Plc was the most active stock on Monday, 10 June 2024 at the Nigerian stock market as a strong positive sentiment led Nigerian equities to a net capital gain of N324 billion in the first trading session of the week.

The market opened with widespread positive sentiment as investors sought to lock into value stocks in the high-end sectors of oil and gas, construction and manufacturing.

With three gainers for every loser, the market closed with average return of 0.58 per cent, equivalent to net capital gain of N324 billion.

The momentum of activities also improved considerably as total turnover rose by 148.33 per cent to 963.541 million shares valued at N13.498 billion in 8,657 deals. Fidelity Bank topped the activity chart with 605.257 million shares valued at N6.025 billion.

Fidelity Bank’s activities appeared to be driven by buy sentiment as the stock closed within the top 15 gainers with a gain of 6.52 per cent to close at N9.80 per share.

The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Exchange (NGX), rose by 0.58 per cent to close at 99,793.71 points as against its opening index of 99,221.14 points.

Aggregate market value of all quoted equities also increased simultaneously from its opening value of N56.128 trillion to close at N56.452 trillion.

Other most active stocks included Access Holdings, which recorded turnover of 93.067 million shares worth N1.744 billion. United Bank for Africa (UBA) traded 58.726 million shares valued at N1.261 billion. Nigerian Breweries traded 45.256 million shares valued at N1.267 billion while Zenith Bank traded 16.079 million shares worth N539.552 million.

Analysts at Futureview Financial Services said they anticipated a mixed sentiment in the equities market, primarily due to the enduring allure of the fixed income market among investors.

“This interest is fueled by expectations of increased rates in the Nigerian Treasury Bill (NTB) auction and the impending release of the inflation rate. However, amidst these factors, there remains an opportunity for sustainable growth, particularly in fundamentally strong stocks that currently find themselves in the oversold region. We foresee a selective pursuit of bargains, particularly in dividend-paying stocks, driven by the nearing corporate qualification and payment,” Futureview stated.

 

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