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FG’s Preference for Borrowing Slashed Savings Bonds by 50% – CBN

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Godwin Emefiele CBN - Investors King
  • FG’s Preference for Borrowing Slashed Savings Bonds by 50% – CBN

The Federal Government of Nigeria’s savings bonds reduced by 50.18 per cent at the end of the 2018 financial year.

According to a report by the Central Bank of Nigeria on its 2018 activities, “a total of N3.59bn was allotted during the review period, indicating a decline of N3.61bn or 50.18 per cent when compared with N7.20bn at the end of December 2017.

“The decrease was attributable to a fewer number of successful bids and FGN’s preference for foreign borrowing in the period under review.

“The new issues were for two and three years and the coupon rate applied ranged from 9.48 to 12.40 per cent and 10.48 to 13.40 for the two and three years, respectively.”

The range of coupon rates in 2017 was higher, between 11.74 to 13.82 per cent and 12.74 to 14.82 for the two and three years respectively.

Consequently, the total value of FGN savings bonds outstanding at the end of December 2018 was N10.75bn.

The CBN stated that there was no new issue of FGN green bond in the review period.

Consequently, it added that the total value outstanding at the end of December 2018 remained at N10.69bn, same as reported in 2017.

The bank said a N100bn seven-year Sukuk was issued and allotted during the review period.

The Sukuk had a rental rate of 15.74 per cent payable semi-annually.

Consequently, the total value of Sukuk outstanding at the end of December 2018 increased to N200bn, representing a 100 per cent increase from N100bn in 2017.

It stated that the Over-the-Counter transactions for Nigerian Treasury bills amounted to N72.122tn, indicating an increase of N11,801.93bn or 19.57 per cent over N60,320.6bn recorded in 2017.

The development was attributable largely to increased transactions by foreign and other institutional investors.

It also stated that during the review period, the OTC transactions in FGN bonds amounted to N11.8tn, indicating an increase of N1.96bn or 19.97 per cent over N9.836tn recorded in 2017.

The trend was traceable to the active participation of investors, both local and foreign.

According to the CBN report, financial market conditions were influenced largely by global economic and political developments in 2018.

On the economic front, the interest rate hikes in the United States indicated that normalisation of monetary policy was more rapid than initially anticipated.

The impact of these rate hikes largely weakened the currency, bond and equity market of emerging economies.

The US-China trade war continues to exert strains on both economic and political grounds, further increasing the uncertainties in the global financial markets.

In view of these developments, reinforced by country-specific factors of tightening financial conditions, higher oil import bills and geo-political tensions, global growth projection was downgraded to 3.7 per cent from an earlier projection of 3.9 per cent.

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

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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