Finance

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

Published

4 years ago

May 19, 2020

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.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

CBN Extends Letter of Credit Issuance Timeline Amid Forex Crisis

Move Aims to Address FX Scarcity Challenges and Enhance Customer Service

Published

13 hours ago

December 8, 2023

Investors King

The Central Bank of Nigeria (CBN) has announced an extension of the timeline for issuing letters of credit from 24 hours to five working days, according to the newly approved 2023 service charter.

This adjustment comes as the country grapples with foreign exchange scarcity, impacting local and international trade.

The 2020 service charter initially stipulated a 24-hour timeline for the issuance and management of letters of credit, but the updated charter now reflects a timeline extension to five working days.

Also, the CBN has prolonged the timeline for the registration of Form M and NXP from 24 hours to two working days.

The move follows the CBN’s unification of all forex market segments in June 2023, aimed at promoting liquidity and stability.

However, this measure appears to have led to increased market instability, with the naira losing nearly a fifth of its value.

Reports indicate that foreign suppliers are now rejecting letters of credit from Nigerian businesses, affecting the importation of goods and services.

Letters of credit are crucial for the payment of visible goods imports, wherein a bank commits in writing to pay the exporter a specified sum within a defined timeframe upon receipt of proper documentation from the customer.

The extended timelines for letters of credit, Forms M, and NXP in the service charter are seen as measures to manage cash flow and instill confidence in the process amidst the ongoing forex crisis.

CBN Governor Yemi Cardoso stressed the commitment to responsive and citizen-friendly governance through efficient, responsible, and transparent service delivery in the revised service charter.

The move is part of the CBN’s effort to comply with the Business Facilitation Act 2022 and enhance ease of doing business in Nigeria.

Banking Sector

Unity Bank MD Advocates Policy Actions to Stem Gender-Based Violence in Nigeria

Published

2 days ago

December 7, 2023

Investors King

The Managing Director of Unity Bank Plc, Mrs. Tomi Somefun has called for comprehensive policy actions that will dismantle the structures that enable gender-based violence in Nigeria.

At the Ebony Life Cinema, the venue of the film screening in Lagos, Unity Bank supported the BECKMA movie premiere by ARDA Development Commuications Inc. which was held to highlight issues of Gender-Based violence and driving positive change in society.

Making the call, Somefun stated that the Bank committed to partnering with the movie premiere and putting the power of the brand behind BECKMA as the event brings sustainability and gender equality to the front burner.

Represented by Unity Bank’s Group Head of Compliance, Mrs. Patricia Ahunanya, Somefun noted that “9 percent of women aged 15 to 49 had suffered sexual assault at least once in their lifetime and 31% had experienced physical violence,” citing a recent study by UNDP in Nigeria.

Speaking further, Somefun said “Gender-based violence is not just a women’s issue, but a societal ill that demands our collective attention. It is high time for us to step forward and advocate for comprehensive policy actions that will dismantle the structures allowing such atrocities to persist”.

She added, “I urge policymakers to enact stringent laws against gender-based violence, ensuring swift and severe consequences for perpetrators. Our homes and various organisations must also be a catalyst for change, inspiring others to follow suit.”

While commending the ARDA Development Communications Inc. for their initiatives to promote gender equality and empowerment in line with SDG5, Somefun assured of the Bank’s commitment to sustainable initiatives and further collaborative initiatives and advocacy programmes for the elimination of gender-based violence.

Banking Sector

Nigeria’s NIBSS Directs Banks to Disconnect Non-Deposit Financial Institutions from NIP System

Published

2 days ago

December 7, 2023

Investors King

Banks in Nigeria have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to disconnect Switches, Payment Solution Service Providers (PSSPs), and Super Agents from the NIBSS Instant Payment Outwards System.

The circular, dated December 5, 2023, highlighted that including these non-deposit-taking financial institutions as beneficiaries on the NIP funds transfer channels violates the Central Bank of Nigeria (CBN) guideline on electronic payments.

The NIBSS emphasized that while Switches, PSSPs, and Super Agents might process outward transfers as inflows to banks, their licenses do not permit them to hold customers’ funds.

The circular referred to the CBN’s guidelines on electronic payment of salaries, pensions, suppliers, and taxes, dated February 2014, as the basis for this regulatory stance.

The directive also pointed to a circular dated May 11, 2018, titled “Permissible Services and Products of PSSP Operation in Nigeria,” reinforcing the need for compliance.

As a result, banks were urged to delist all Switches, PSSPs, and Super Agents from the NIP Outward Transfer channels while allowing their participation in inward transfers.

In Nigeria’s payment ecosystem, operators are required to obtain licenses such as Switching and Processing, Mobile Money Operations, Payment Solution Services, or Regulatory Sandbox from the CBN.

Only Mobile Money Operators (MMOs) have the authority to hold customer funds, according to the CBN’s regulatory framework.