Nigeria’s liabilities to the World Bank and the African Development Bank rose from $7.14 billion to $14.25 billion between June 30, 2015, and March 31, 2021, data obtained from the Debt Management Office have shown.
This means that the commitment of the banks to the country rose by $7.11 billion within the period under review. This represents an increase of 98.48 percent.
As of June 30, 2015, the Federal Government had borrowed a total sum of $6.19 billion from the World Bank.
A breakdown of the group’s portfolio in the country shows that a greater part of the loans was obtained from the International Development Association, an arm of the World Bank that specialises in giving concessional loans to poor and fragile countries.
The IDA commitment to Nigeria amounted to $6.09 billion. Another member of the group, the International Fund for Agricultural Development, had a commitment of $94.80 million in the country.
Similarly, at the same time, the AfDB commitment to the country stood at $946.52 million, comprising loans from various internal bodies such as the African Development Bank ($350 million) and African Development Fund ($596.53 million).
By March 31, 2021, the Federal Government’s debt to the World Bank had risen to $11.51 billion, reflecting a $5.32 billion or 86 percent increase.
This debt portfolio included loans of $11.10 billion and $410.23 million from the International Development Association and International Bank for Reconstruction and Development respectively.
With a commitment of $11.51 billion, the World Bank is responsible for 35.02 percent of Nigeria’s foreign portfolio of $32.86 billion as of March 31.
At the same period, the Federal Government acquired $1.59 billion from the AfDB, $0.21 million from Africa Growing Together Fund and $942.51 million from ADF.
This brought the AfDB’s commitment to the country to $2.74 billion, representing 8.3 percent of the country’s total external debt. Most of the loans from the World Bank and the AfDB were tied to a programme or infrastructure project.
On December 14 2020, the World Bank approved a $1.5bn loan to Nigeria, earmarked for two projects: Nigeria COVID-19 Action Recovery and Economic Stimulus Programme and The State Fiscal Transparency, Accountability, and Sustainability Programme.
On June 27, 2018, the bank approved a loan of $775 million for the following projects: Fiscal Governance and Institutions Project, Nigeria Erosion and Watershed Management Project – Additional Financing, Nigeria Polio Eradication Support Project Additional Financing, Nigeria Electrification Project and the State Fiscal Transparency, Accountability and Sustainability scheme.
On March 23, 2017, the bank approved a $200 million credit for the implementation of the Agro-Processing, Agricultural Productivity Enhancement and Livelihood Improvement Support Project and Nigeria, while a $150m credit was offered for Mineral Sector Support for Economic Diversification Project on April 14 same year.
On June 7, 2016, the bank approved a $1.1 billion credit as additional finance to fund the following projects: State Education Program Investment Project, Community and Social Development, Nigeria Youth Employment and Social Support, State Health Investment Project, Third National Fadama Development Project, NG-Polio Eradication Support Project and the National Social Safety Nets Project.
One of the loans approved by the Board of Directors of the AfDB to the Nigerian government is a financing package comprising $150 million ADB loan, $100 million ADF loan and the £5m RWSSI Grant Facility, to finance the Inclusive Basic Service Delivery and Livelihood Empowerment Integrated Programme on December 14, 2016.
Also in 2016 but on December 16, another loan was approved, which was a financing package of $100 million, comprising an $80 million loan and $20 million equity for the rehabilitation of the Kainji and Jebba hydro plants.
On December 3, 2018, the Board of Directors of the AfDB approved a $150 million sovereign loan to finance the Nigeria Electrification Project.
Another loan was approved on April 24, 2019, which was a $70 million loan for a road project in Nigeria’s Southeastern Ebonyi State with the bank providing $40m and its co-financier, AGTF, contributing $30 million.
On June 5, 2020, a $288.5 million loan was approved to help Nigeria tackle the COVID-19 pandemic and mitigate its impact on people and businesses.
As of March 31 2021, 54.26 percent of the country’s external debt portfolio belonged to multilateral organisations including the International Monetary Fund ($3.48 billion), Arab Bank for Economic Development in Africa ($5.88 million), European Development Fund ($51.33 million) and Islamic Development Bank ($29.72 million) and $223.28 million from International Fund for Agricultural Development.
Bilateral debts make up $4.18 billion or 12.73 percent of the country’s external debt exposure.
Nigeria’s is currently indebted to the following bilateral agencies: Export-Import Bank of China, with a portfolio of $3.40 billion; the Exim Bank of India, with a portfolio of $34.95 million; the Agence Française de Développement, with a portfolio of $486.6 million; the Japan International Cooperation Agency, with a portfolio of $74.6 million; and Germany, with a portfolio of $183.7 million.
Commercial loans now comprise 32.47 percent of the country’s external debt exposure, with a value of $10.67 billion.
These loans include $10.36 billion Eurobonds, and $300 billion Diaspora Bond, through which the Federal Government borrowed from Nigerians living abroad.
On the other hand, as of June 30 2015, Eurobond was the only commercial loan available and it constituted 14.54 percent of the country’s external debt exposure with a value of $1.5 billion.
Meanwhile, multilateral sources constituted 70.11 per cent of the country’s external debt exposure at the stated period while bilateral sources made up 15.35 percent of the country’s total foreign debt exposure of $10.32 billion.
Financial experts have continually condemned the huge borrowings of the Federal Government, noting that the country’s rapidly growing debt profile is detrimental to the economy.
The President of the AfDB, Dr Akinwumi Adesina, had during the virtual launch of the African Economic Outlook 2021 described debts owed by African countries including Nigeria as unsustainable.
Adesina had said, “The issue of debt is so fundamental because it’s like you are running up a hill but you have a bag full of sand on your back; you can’t go far. The amount of debt that we have is not sustainable.
“The amount of debt that we have right now is about 70 to 75 percent of the Gross Domestic Product. It used to be sustainable, but what is even more alarming is the structure of the debt, where the debt right now is largely in the hands of commercial creditors, almost $337 billion in terms of high creditors and those that are the private creditors without any type of securitisation for it.”
Credit to Private Sector Rises to N33.26 Trillion in August 2021
The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.
The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.
CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.
However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.
In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).
An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.
“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”
On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.
He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.
Yusuf said: “My guess is that a significant percentage of this have been given to large corporates, multinationals and high end medium enterprises. The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.
“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important. The totality of the investment environment must be right for sustainable real sector development to be achieved.”
He added, “Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways. There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.
“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems. Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”
The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.
According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”
He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.
“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.
“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.
Buhari Borrows N14.86 Trillion from CBN in Six Years
A new report from the Central Bank of Nigeria (CBN) has revealed that President Muhammadu Buhari-led’s administration has borrowed a total sum of N14.86 trillion from the CBN through Ways and Means Advances since the administration came to power in May 2015.
Federal Government’s total debt from the CBN stood at N648.26 as of June 2015, a month after President Buhari was sworn in. The debt rose to N856.33 billion by December 2015 and N2.23 trillion by December 2016, the CBN data has shown.
“Ways and Means Advances is a loan facility used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.”
Government borrowing from the central bank rose to N3.31 trillion in 2017, representing an increase of N1.08 trillion. Buhari further borrowed N2.1 trillion in 2018 to take total borrowing to N5.41 trillion.
This continues in 2019 as the Federal Government took another N3.31 trillion loan from the CBN to hit N8.72 trillion in debt.
In 2020 during COVID-19, the Federal Government borrowed N4.9 trillion to plug its fiscal financing gap, bringing government’s total borrowing to N13.11 trillion.
In the first half of 2021, the Federal Government borrowed an additional N2.4 trillion from the apex bank to take its total borrowing to N15.51 trillion (N13.11 trillion plus N2.4 trillion).
However, deducting the N648.26 billion debt met by President Buhari from the total debt of N15.51 trillion revealed that Buhari’s administration has borrowed N14.86 trillion in the last six years.
Experts have warned that Federal Government abuse of Ways and Means Advances stipulated at five percent of the previous fiscal revenues could raise risks to macro-stability in the context of weak institutional safeguards that preserve the credibility of policymaking and the ability of the central bank to control inflation.
“The CBN’s guidelines limit the amount available to the government under its WMF to five per cent of the previous year’s fiscal revenues. However, the FGN’s new borrowing from the CBN has repeatedly exceeded that limit in recent years, and reached around 80 per cent of the FGN’s 2019 revenues in 2020,” Fitch Ratings stated in January 2021.
Commenting on the situation, Mr Bismarck Rewane, the Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, said the government needs to securitise borrowing from CBN.
He said, “N15tn is about 45 per cent of total money supply. So, if, for example, those ways and means advances were securitised today, people will have to invest in government securities and it will reduce money supply by 45-50 per cent.
“What we need to do is to actually securitised this formally. But I think that right now, the Federal Ministry of Finance or DMO is paying interest on the ways and means advances. So, the effect is that there is a cost to the borrowing, and the central bank is receiving the interest on it.”
FCMB Empowers Agribusiness, Healthcare and Others With AFDB’s $50 Million Credit
Women empowered businesses and local enterprises involved in agribusiness, manufacturing, health care, and renewable energy will have access to long term funding from First City Monument Bank (FCMB), courtesy of a $50m credit facility from the African Development Bank (AfDB).
The $50m credit line will narrow the lending gap to underserved segments and complement FCMB’s lending efforts and operations in the Nigerian market. AfDB will disburse the funds to FCMB before the end of this year.
Mrs Yemisi Edun, Managing Director, FCMB, thanked the African Development Bank for having confidence in the Bank, saying the credit line would help it increase lending to high impact sectors of the Nigerian economy.
She said, “The $50m credit line will increase access to finance for women empowered businesses and enterprises involved in agribusiness, manufacturing, renewable energy and healthcare, enabling them to build back better post-COVID.
“We are delighted that a minimum of 30 per cent of the funds will go specifically to women empowered businesses, which would, in turn, contribute to stimulating gender equality and empowerment. Remarkably, it aligns with FCMB’s transformative agenda of boosting household economic resilience by improving women’s access to credit and work opportunities.”
In addition to the $50m, the AfDB will provide a technical assistance grant of $200,000 to FCMB through its Affirmative Finance Action for Women in Africa (AFAWA). The Women Entrepreneurship Finance Initiative, an international partnership supporting women entrepreneurs in developing countries, supports AFAWA. The assistance grant complements the loan and will further strengthen training, monitoring and reporting by the Bank.
In a statement, AfDB’s Director of Financial Sector Development, Mr Stefan Nalletamby, said, “We are pleased to support FCMB’s strategy to become a dominant player in addressing the funding needs of women-empowered and local enterprises. This project will extend valuable resources to critical but underserved segments during the ongoing COVID-19 pandemic, with its adverse macroeconomic impact”.
AfDB added that the project also advances its ten-year strategy and is consistent with three of its high-five strategic priorities. These are industrialise Africa, Feed Africa, and improve the quality of life for the people of Africa. This also aligns with the Nigeria Country Strategy Paper 2020-2024.
Recently, FCMB secured a $10 million facility from Oikocredit, a major global social impact investor and co-operative institution based in The Netherlands, to upscale its impressive financial support to SMEs and the agribusiness sectors in Nigeria.
FCMB is a member of FCMB Group Plc, Nigeria’s leading and most diversified financial holding company with subsidiaries that are market leaders in their respective segments. The Bank has built a strong base in various sectors of the nation’s economy by consistently offering cutting-edge solutions to its customers across segments.
Having successfully transformed into a retail banking and wealth management-led group, FCMB expects to continue to distinguish itself through innovation and the delivery of exceptional services.
To find out more about FCMB, please visit www.fcmb.com.
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