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FG to Borrow $1.5 Billion, €995 Million From World Bank, BNDES and Deutsche Bank of Germany

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The Federal Government will yet again borrow another $1.5 billion and €995 million external loans following the Senate approval on Tuesday.

Senator Clifford Ordia, the Chairman of the committee on Local and Foreign Debts, presented the request for new loans at the plenary.

The committee recommended that “the Senate do approve the external borrowing of the sum of $1,500,000,000 and €995,000,000” from the World Bank, Export-Import Bank of Brazil (BNDES) and Deutsche Bank of Germany.

The Senate led by its President Ahmad Lawan approved the request for new loans.

Speaking on the loans, Senator Ordia said these were low-interest rates loans with a reasonable moratorium and payback period.

According to him, $750 million of the $1.5 billion to be sourced from the World Bank has a grace period of five years, 25 years tenor and an interest rate of 2.45 percent per annum while the balance of $750 also has similar terms with an interest rate of 2.5 percent per annum.

On the GIP component of the loan, Ordia said: “The Committee found that a total of six indigenous assembly plants, one in each geo-political zone have been identified and will be rehabilitated and retooled to assemble completely knocked down (CKD) mechanisation farm machinery and equipment to be imported from Brazil.

“The Committee observed the CKD mechanisation farm machinery and equipment to be imported from Brazil will be specifically adapted for local conditions with job creation opportunities for citizens.

“The Committee observed the loan is intended to be used to deliver technological package to the small holder farmers for a fee through the establishment of service centers in each of the 774 Local Governments of the Federation.

“The Committee further observed that the service centers will be owned and run by private business entities who will be supported to acquire various mechanization tools through favourable borrowing rates from participating commercial banks.”

On the SFTAS aspect of the loan, Chairman of the Committee said: “The Committee observed that there is an ongoing program called States Fiscal Transparency, Accountability and Sustainability (SFTAS) program facility in the sum of $750,000,000 funded by the World Bank currently running in all the States of the Federation and the FCT.

“The Committee notes that the said financing was approved by the National Assembly in June 2020 as part of the $1,500,000,000 Development Policy Financing to part finance FGN 2020 revised budget deficit.

“The Committee found that in October 2020, following the continuous economic disruptions occasioned by the pandemic and in view of the need to consolidate on and sustain the gains of the program and to increase States fiscal capacity to respond to the COVID-19 crises, the above program was restructured and expanded.

“The Committee found that the objective of the restructuring is to support States to introduce measures to further mitigate fiscal shocks by introducing COVID-19 responsive Disbursement Linked Indicators (DLI) at State Level, to match the fiscal measures at the Federal level and reallocating the undisbursed balance of the program funds towards the new DLI’s.

“The Committee notes that it is based on the above restructuring, the additional financing in the sum of $750,000,000 is now required for the Covid-19 response of Nigeria and same has now been tagged Nigeria SFTAS Additional Financing for Covid-19 response program for result (PforR).”

On the COVID-19 Action recovery and economic stimulus program (CARES), Ordia said: “The Committee notes that the Project Development Objectives (PDO) of the program (CARES) is to expand access to livelihood support and food security services, and grants for poor vulnerable households and firms.”

 

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.

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Economy

UNGA 2021: The World has the Resources to End Hunger, African Development Bank Head tells UN Food Systems Summit

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Akinwumi Adesina - Investors King

“The world has the resources to end hunger,” African Development Bank President Dr. Akinwumi A. Adesina said in a message on the first day of the United Nations Food Systems Summit.

Convened by UN Secretary General António Guterres, the event is billed by its organisers as “a historic opportunity to empower all people to leverage the power of food systems to drive our recovery from the COVID-19 pandemic and get us back on track to achieve all 17 Sustainable Development Goals (SDGs) by 2030.”

The summit brings together thousands of youths, food producers, members of civil society, researchers, the private sector, women and indigenous people, all of whom are participating both physically and virtually in the summit. It is taking place on the sidelines of the 76th UN General Assembly in New York.

In his opening address, Guterres said the participants represented “energy, ideas and the willingness to create new partnerships,” and was a time to celebrate the dignity of those who produce and create the world’s food.

Decrying the 246 million people in Africa who go to bed daily without food and the continent’s 59 million stunted children as “morally and socially unacceptable,” Adesina said that delivering food security for Africa at greater scale called for prioritising technologies, climate and financing.

“The $33 billion per year required to free the world of hunger, is just 0.12% of $27 trillion that the world has deployed as stimulus to address the Covid-19 pandemic. I am confident that zero hunger can be achieved in Africa by 2030,“ Adesina said.

The African Development Bank’s Feed Africa Strategy, through its Technologies for African Agricultural Transformation program – widely known as TAAT – has provided 11 million farmers across 29 African countries with proven agricultural technologies for food security. Food production has expanded by 12 million metric tons while saving $814 million worth of food imports.

“We are well on our way to achieving our target of reaching 40 million farmers with modern and climate-resilient technologies in the next five years,” the African Development Bank chief added.

At a meeting on food security in Africa organized by the Bank and the International Fund for Agricultural Development (IFAD) earlier this year, 19 African heads of state called for the establishment of a facility for financing food security and nutrition in Africa.

“The Facility for Financing Food Security and Nutrition in Africa should be capitalized with at least $ 1 billion per year,” Adesina said.

The welfare of the 70% of Africa’s population working in agriculture and agribusiness is a barometer of the state of the continent’s health.  “If they aren’t doing well, then Africa isn’t doing well,” Rwandan president Paul Kagame said in a message at the official opening.

The many other heads of state and government who spoke on Thursday included, Prime Minister Mario Draghi of Italy, President Felix Antoine Tshisekedi of the Democratic Republic of Congo, Prime Minister Sheikh Hasina of Bangladesh and Prime Minister Jacinda Arden of New Zealand.

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Economy

AfCFTA: Nigeria-South Africa Chamber Advocate Single Africa Passport, Free Visa

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African Continental Free Trade Area (AfCFTA)- Investors King

The Nigeria-South Africa Chamber of Commerce (NSACC) has called for a single Africa passport and a free visa to ensure the success of the Africa Continental Free Trade Area (AfCFTA) agreement.

Speaking on Thursday in Lagos during the chamber’s September Breakfast Forum, with the theme: `Perspectives on the Africa Continental Free Trade Area in Relation to Nigeria’, its President, Mr. Osayande Giwa-Osagie noted that AfCFTA would boost intra-African trade by 22 percent, adding that its implementation would impact positively on the Nigerian economy.

AfCFTA is a single continental market that adopts free flow of goods, services, and capital, supported by the free movement of persons across Africa.

Giwa-Osagie however said Nigeria must diversify its economy in order to harness the gains of the agreement.

“Current intra-African trade rated at 15 to 17 percent is low and the AfCFTA is expected to boost intra-African by 22 percent. Challenges to its implementation are lack of infrastructure, political instability and lack of economic diversification.

“This gives rise to the need for Nigeria to diversify its economy to harness the gains of the agreement. Given the importance of the free movement of people, there is a need for a free visa for Africa and a single Africa passport.

“While the implementation would help boost the Nigerian economy, the impact would be limited if there are no free movement of people,” he said.

Mr Jesuseun Fatoyinbo, Head, Trade and Transactional Services, Stanbic IBTC Bank, said the business community needed more clarification on tariff reduction or elimination under the agreement.

According to him, the little information available to corporate organisations with regards to tariffs may lead to holding back on investments.

“We have noted increased interests from global multinationals and other corporates in setting up facilities in Africa aimed at serving the continent and exporting abroad.

“So more transparency around tariff reductions both in terms of timelines and details of goods could prompt companies to act,” he said.

Fatoyinbo also called for more attention to the digitisation of trade processes across the continent. “Currently, trade in Africa is largely reliant on physical documentation and this is a major impediment. Policymakers need to prioritize regulatory amendments that allow for the digital signatures, a digital certificate of origin, digital bills of lading, and other documentation,” he added.

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Nigeria Borrows $4 Billion Through Eurobonds as Order Book Peaked at $12.2 Billion

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Eurobonds - Investorsking

The Federal Government of Nigeria has raised a fresh $4 billion through Eurobonds, according to the latest statement from the Debt Management Office (DMO).

Nigeria had set out to raise $3 billion but investors oversubscription peaked at $12.2 billion, enabling the Federal Government to raise $1 billion more than the $3 billion it announced.

DMO said “This exceptional performance has been described as, “one of the biggest financial trades to come out of Africa in 2021” and “an excellent outcome”.

Bids were received from investors in Europe, America, Asia and several local investors. The statement noted that the quality of investors and the size of the Order Book demonstrated confidence in Nigeria.

The Eurobonds were issued in three tranches, details, namely seven years–,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.

The DMO explained that the long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 –2023.

The Eurobonds were issued as part of the New External Borrowing stipulated in the 2021 Appropriation Act. DMO noted that the $4 billion will help finance projects state in the 2021 budget.

Nigeria’s total debt stood at $87.239 billion as at March 31, 2021. However, with the $4 billion new borrowing, the nation’s debt is now $91.239 billion. A serious concern for most Nigerians given the nation’s weak foreign revenue generation and rising cost of servicing the debt.

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