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Buhari Borrows N14.86 Trillion from CBN in Six Years

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President Muhammadu Buhari - Investors King

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.

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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Central Bank of Nigeria Increases Interest Rate on Intervention Loans From 5% to 9%

The Central Bank of Nigeria has increased interest rates intervention loans to 9% per annum to ease the nation’s record high inflation rate.

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The Central Bank of Nigeria (CBN) has increased interest rates on all its intervention loans by 4% from 5% to 9% per annum to ease the nation’s record high inflation rate.

Chibuzo Efobi, director of financial policy and regulations department of the CBN, disclosed in a circular to all banks and Other Financial Institutions (OFIs) dated August 17, 2022.

CBN had reduced interest rates on intervention loans from 9% to 5% per annum in the first quarter of 2020 to help curtail the impact of COVID-19 on businesses and the Nigerian economy at large.

However, the nation’s almost 20% inflation rate despite efforts to halt price increase has forced CBN to start mopping currency in circulation. One of the initiatives introduced in the last two months was to return interest on intervention loans.

This was announced just two days after the apex bank reviewed upward the minimum interest rate payable on savings deposits from 0.15% to 4.2%, 30% of the Monetary Policy Rate (MPR).

In the last two months, the CBN has risen the interest rate by 250 basis points to 14%, increase interest on intervention loans and raised minimum interest rate on savings deposits to contain inflationary pressure.

Nigeria’s inflation rose to 19.6% in the month of July as the value of the Nigerian Naira took a hit against global currency amid rising demand for the United States Dollar in an economy that depends on imports for most of its consumption.

This pushed prices of imported goods or locally made goods with imported items to a record-high as businesses were forced pass to increase in cost to final consumers.

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Research Indentifies Major Factors in Growth of Structured Credit Market

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A new survey from Aeon Investments, the London based credit-focused investment company, with institutional investors in Europe and the US who collectively have around $574 billion in assets under management, reveals the major factors behind more professional investors increasing their allocation to structured credit.

When asked for their top three reasons for this trend, 44% selected greater innovation in the structured credit market, followed by 40% who included greater transparency in the sector.

This was followed by an improving regulatory environment, which 31% of professional investors included in their top three reasons for more professional investors increasing their allocation to structured credit; 22% cited the fact that they can offer attractive yields, which have become even more appealing given the current difficulties in the fixed income market, and one in five (20%) selected the sector’s growing focus on ESG. Some 13% cited structured credit’s ability to offer attractive diversification benefits as one of their top three reasons.

Which structured credit sectors will see the biggest increase in asset allocation from investors?

In terms of which areas of the structured credit market is likely to see the biggest inflows from investors over the next 18 months, 63% anticipate allocations to products focusing on residential real estate will see an increase, and 63% also expect this from those investment vehicles focusing on commercial real estate. Some 49% of respondents expect an increase in investment inflows into structured credit vehicles focusing on consumer credit such as student loans, auto credit/leases, compared to 11% who anticipate a decline. The corresponding figures for flows into structured credit vehicles concentrating on specialist areas of corporate finance such as commercial aviation, shipping, and trade receivables, is 42% and 12%.

Evgeny van der Geest, Managing Director, Aeon Investments said: “In recent years, the structured credit market has seen huge developments in terms of maturity and transparency, and this trend continues to gather pace. This, coupled with a growing desire to diversify portfolios and the search for yield, means more professional investors are increasing their allocation to structured credit investments.”

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Private Sector Loans Reaches All-Time High of N37.13 trillion in April – CBN says

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Godwin Emefile

The Central Bank of Nigeria (CBN) has said credit to the private sector rose to N37.13tn as of April 2022 as banks increase lending to the real sector to create jobs and expand the country’s Gross Domestic Product (GDP).

The apex bank disclosed in its ‘Money and Credit Statistics’ report. From the year to date, credit to the private sector rose by 5.53% or N1.95 trillion from N35.18 trillion reported in January 2022.

In 2021, credit to the private sector jumped by N5.58 trillion to a record N35.73 trillion.

In the latest report from the central bank, credit to the private sector rose from N35.99 trillion in February to N36.37 trillion in March 2022, representing an increase of 1.07%.

The Monetary Policy Committee (MPC) attributed the growth in private sector lending to the increase in industry funding base and compliance with the 65 percent Loans to Deposit Ratio (LDR) directive.

The CBN also disclosed that it had reviewed the performance of its various interventions to stimulate productivity in manufacturing, industry, agriculture, energy, infrastructure, healthcare, and micro, small and medium enterprises.

The governor of CBN, Mr. Godwin Emefiele, in his statement at the end of March MPC, noted that the growth reflected the continued growth of banking system credits to the private sector supported by the sustained drive of the apex bank to increase lending to high-impact real sector ventures. 

He had disclosed that gross credit maintained its upward trajectory since 2019, with an N4.13tn or 19.53 percent growth in industry credit between February 2021 and 2022.

Deputy Governor of Financial System Stability of the CBN, Aisha Ahmad, at the MPC meeting of March 2022 in Abuja, said, “The continued credit growth, particularly to output enhancing sectors, is expected to support economic recovery further. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system from lingering macroeconomic risks.”

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