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China More Likely to Agree to Moratorium Than Let Go Africa’s $152bn Debt

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  • China More Likely to Agree to Moratorium Than Let Go Africa’s $152bn Debt

Despite calls by global experts for both multilateral and bilateral creditors to consider some form of debt relief for African nations, experts familiar with Chinese loan methodology are saying it is unlikely the largest Africa’s bilateral creditor will let go its loans to the continent.

Deborah Brautigam, Head of the China Africa Research Initiative at JHU’s School of Advanced International Studies, put loans made between 2000 and 2018 to African nations by the Chinese government at about $152 billion.

Brautigam explained that because Chinese loans are geared towards structural transformation and economic development, the Chinese government believes those loan projects will eventually get African nations to a new economic position where they will be able to repay. Therefore, China is likely to give moratorium than let go of its over $150 billion loans to African nations.

“The Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development,” said Deborah Brautigam, who heads the China Africa Research Initiative at JHU’s School of Advanced International Studies. The thinking is, “those projects might be good projects and viable projects to get countries to a new stage where they might be in a position to repay the loans,” she said.

In March, African Finance Ministers have said the continent needs around $100 billion to cushion the effect of COVID-19 on the continent and protect about 30 million jobs. In their second virtual meeting, they called for debt relief to allow them enough fiscal space to mitigate risk and curtail the impact of COVID-19 on their economies.

In April, the World Bank put the continent’s debt repayment at about $39 billion in 2018, saying a well-structured debt relief will put about $44 billion to $55 billion in Africa, about 50 percent of what the continent needs to protect jobs and support the economy.

However, while China had announced readiness to Join other Group, World Bank, IMF, etc, to discuss debt relief for African nations and announced, in a speech delivered by Jinping to the World Health Assembly, that China will provide additional $2 billion over a period of two years to support the fight against the COVID-19 pandemic in developing nations, it is highly unlikely it will forgive its debt because of COVID-19 pandemic. Those debts are the modern rail lines, airports, infrastructures, etc currently going on in most African nations.

This was exactly what happened in May 2019 when the International Monetary Fund approached China to offer debt relief to the Republic of Congo. China only adjusted repayment and interests but refused to reduce the principal.

According to Brautigam, China is always willing to renegotiate payment terms and offer moratorium. “Usually, it’s not that difficult to lengthen the payment period or lengthen the maturity of loans,” Brautigam said.

The loan project started by President Xi Jinping in 2013 under the infrastructure investment plan was to further Chinese influence in emerging economies and strengthens its global reach.

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.

Finance

Unity Bank Grew Gross Earnings by 8 Percent to N34 Billion in Nine Months

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Unity Bank Plc grew gross earnings by 8 percent despite COVID-19 and other headwinds that hurt the profitability of most businesses in the first nine months of the year.

A break down of the bank’s unaudited financial results for the period showed gross earnings rose by 8 percent to N33.91 billion for the nine months ended September 30, 2020, up from N31.26 billion posted in the same period of last year.

The lender’s total assets rose by 44 percent from N293.05 billion in the corresponding period of 2019 to N420.87 billion in the period under review.

Unity Bank grew profit before tax from N1.61 billion in 2019 to N1.71 billion in the period under review, while profit after tax expanded from N1.48 billion in the corresponding period to N1.57 billion in 2020.

Customers’ deposits stood at N332.36 billion during the period under review, up from N257.69 billion posted in 2019.

Commenting on the performance, Mrs. Tomi Somefun, the Managing Director/Chief Executive Officer, Unity Bank Plc, expressed delight at the strong growth recorded across the bank’s balance sheet, especially from both the liability and assets side of the business and across key indices.

She said, “even as the bank continues to innovate in its e-business product bouquet to target and support value chain business with robust technology and thus diversify its earnings base.”

Somefun said, “One of the areas that will define our strategic direction going forward is investment in alternative channels, leveraging further deployment of resources in technology.

“COVID-19 gave us a chance to test the integrity and scalability of our technology, the IT infrastructure, and the electronic banking channels, and provided us an opportunity to see where we needed to improve and strengthen, knowing that the future of sustainable banking business is in alternative channels.”

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Financial Sector Grew by 6.8 Percent in the Third Quarter

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The finance and insurance sector that comprises of both the financial institutions and insurance subsectors grew by 5.91 percent year-on-year in nominal terms in the third quarter (Q3).

According to the National Bureau of Statistics (NBS) latest report, the financial institutions’ subsector accounted for 88.89 percent of the sector in real terms in the quarter under review while the insurance subsector contributed the remaining 11.11 percent.

During the third quarter of 2020, the financial institutions’ subsector grew by 6.8 percent in Q3 2020 from 28.41 percent in Q2 2020 and 0.61 percent in Q3 2019 despite COVID-19 and a tough operating environment. The insurance subsector, however, contracted by -18.67 percent in Q3 2020 from -29.53 percent in Q2 2020 and 3.96 percent in Q3 2019.

On a quarterly basis, the sector declined by 24.76 percent.

In terms of contribution to GDP, the finance and insurance sector contributed 2.46 percent in Q3 2020, higher than the 2.40 percent it represented a year ago and lower than the contribution of 3.76 percent achieved in the previous quarter.

The economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria is officially in the second economic recession in four years.

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FBN Holdings Reports N21.9 Billion Profit in Q3 2020

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FBN Holdings

FBN Holdings Plc reported net interest income of N61.463 billion in the third quarter of 2020, slightly down from N61.836 billion posted in the same quarter of 2019.

In the unaudited financial statement filed through the Nigerian Stock Exchange, FBN Holdings Net Interest income after impairment charge for losses also declined to N45.446 billion during the period under review, down from N55.483 billion filed in the corresponding quarter of 2019.

Fee and commission income grew from N26.988 billion in the third quarter of 2019 to N31.810 billion in the same quarter of 2020.

The surged in fee and commission bolstered operating profit to N21.738 billion, up from N18.223 billion filed in 2019.

Profit before tax stood at N21.910 billion in 2020 from N18.223 billion recorded in 2019. While profit after tax rose to N18.723 billion from N18.223 billion filed in the corresponding quarter of 2019.

The strong third quarter performance was not surprising given what the Group Managing Director of FBN Holdings Plc, Mr. UK Eke, told shareholders in the last AGM.

He said “in line with the commitment to supporting our customers and providing leadership in the financial services industry, we will continue to provide unfettered access to financial services to our customers and address their needs. We are working in line with the guidance of the regulators including the Central Bank of Nigeria (CBN) in providing access to funding as we seek to kick-start the economy and drive growth.”

He assured stakeholders that overall, “the impact on our business has been broadly in line with our expectations, and our resilience, breadth of offerings, and investment in alternative channels have ensured that the Group is able to cushion the effect and thrive.”

“More fundamentally, the Group has begun to reap the dividend of its investment in technology that has enhanced the earning capacity of the business and expanded our market reach,” Eke said.

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