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Nigeria’s Debt to China Surges by $800 Million Amidst Economic Challenges

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DMO

Nigeria’s debt to China has increased from $3.93 billion as of June 30, 2022, to $4.73 billion as of June 30, 2023, representing a $800 million year-over-year increase, according to a comprehensive analysis of external debt stock data from the Debt Management Office.

This surge translates to a significant growth of 20.36% from the second quarter of 2022 to the same period in 2023, reflecting the nation’s increasing indebtedness to China.

While the Federal Government has maintained secrecy regarding the terms of its loans from China, the Debt Management Office (DMO) has previously disclosed some key details.

In June 2020, the DMO disclosed that the borrowings from China had hit $3.121 billion as of March 31, 2020, comprised of concessional loans with a 2.5% annual interest rate, a 20-year tenor, and a seven-year grace period (moratorium).

The DMO emphasized that these terms align with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007.

Also, these favorable conditions reduce interest costs for the Nigerian government, and the extended tenor facilitates repayment over an extended period.

Moreover, the DMO’s document titled ‘Status of Chinese Loans as of September 30, 2021′ unveiled that 15 projects across various sectors, including water supply, power generation, railways, airport terminals, and communication, were funded by loans from China.

However, as per the document, some of these projects did not progress as expected. Notably, the loan intended for the Nigerian 40-parboiled rice processing plants project received approval but did not see any disbursement.

Although concerns loom regarding the potential risk of asset forfeiture in the event of loan defaults, the Director-General of the DMO, Patience Oniha, asserted that the loans are largely concessional, with no national assets serving as collateral.

The United States has expressed concerns about Chinese loans’ influence on the Nigerian government, suggesting that the financial arrangements could unduly increase Nigeria’s debt burden and enhance Chinese influence.

While China has played a dominant role in Nigeria’s railway projects, including the Lagos-Calabar coastal railway, it had become more reluctant to extend additional loans to Nigeria.

The Chinese government has recently expressed its commitment to refinancing and completing the Abuja-Kano and Port-Harcourt-Maiduguri railway projects, potentially indicating a shift in the relationship.

The rise in Nigeria’s debt to China remains a subject of debate amid concerns about the nation’s financial obligations and foreign influence, emphasizing the need for transparency in debt management.

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

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Finance

Federal Government Clears $120m Debt to Gas Companies Amid Nigeria’s Power Crisis

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Amidst Nigeria’s persistent power crisis, the Federal Government has taken a pivotal step forward by clearing a significant portion of its debt to gas companies.

A sum of $120 million has been paid out of the country’s $1.3 billion indebtedness to gas suppliers, offering a glimmer of hope for improved energy stability across the nation.

The Minister of Power, Chief Adebayo Adelabu, underscored the critical role of gas in power generation and highlighted how the mounting debts had severely hampered gas supply to electricity-generating companies, exacerbating the country’s electricity shortfall.

Nigeria heavily relies on thermal power plants fueled by gas for over 70% of its electricity needs, making the timely settlement of gas debts paramount for enhancing power generation capacity and addressing the nation’s energy deficit.

Addressing delegates at the 7th Nigeria International Energy Summit in Abuja, the Director of the Decade of Gas Secretariat, Ed Ubong, expressed optimism about the government’s progress in offsetting its financial obligations to gas producers.

He emphasized the importance of aligning gas and power sectors to foster sustainable energy solutions.

As Nigeria grapples with the multifaceted challenges plaguing its energy landscape, the government’s commitment to settling outstanding gas debts marks a pivotal stride towards revitalizing the country’s power infrastructure and ensuring reliable electricity access for its citizens.

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Finance

Nigeria Insurance Corporation Reimburses Depositors of 179 Closed Microfinance and Four Mortgage Banks

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Retail banking

The Nigeria Insurance Corporation (NDIC) has announced the successful reimbursement of depositors affected by the closure of 179 microfinance banks and four mortgage banks across the country.

The reassuring news came during the 45th Kaduna International Trade Fair, where NDIC’s Managing Director, Dr. Bello Hassan, explained the corporation’s unwavering commitment to safeguarding depositors’ funds amidst financial uncertainties.

Dr. Hassan, represented by Hauwa Gambo, the NDIC’s Deputy Director of Communication, highlighted the corporation’s proactive measures in protecting the interests of depositors.

The introduction of the Single Customer View framework has expedited the process of reimbursing depositors of liquidated banks, ensuring swift and transparent transactions.

The corporation’s collaboration with the judiciary has yielded positive results, facilitating the speedy prosecution of failed insured banks and resolving long-standing cases of bank liquidations like Fortune and Triumph Banks.

This concerted effort has significantly enhanced the debt recovery rate, enabling NDIC to declare full liquidation dividends to uninsured depositors of over 20 deposit money banks.

Furthermore, NDIC has embraced digital remote payment strategies, streamlining electronic funds transfers to verified depositors’ alternate bank accounts.

The introduction of the ‘Deposit Tracer’ initiative in partnership with mobile operators aims to address apathy among depositors with small balances, providing accessible avenues for claiming funds trapped in closed banks.

The initiatives underscore NDIC’s proactive stance in safeguarding depositors’ interests and ensuring financial stability in Nigeria’s banking sector.

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Banking Sector

85.51 Million Nigerian Bank Customers Face Withdrawal Freeze Over NIN, BVN Deadline

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First Bank

As the March 1 deadline looms, an estimated 85.51 million Nigerian bank customers are facing the possibility of frozen accounts due to their failure to link their National Identification Numbers (NINs) and/or Bank Verification Numbers (BVNs) to their accounts.

Recent findings reveal the potential scale of the impending banking crisis.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) indicates that Nigeria had approximately 146 million active individual bank customers as of December 2022.

However, by January 26, 2024, only 60.49 million BVNs were recorded on the NIBSS portal, leaving a significant portion unlinked.

Meanwhile, about 104 million NINs had been issued by December 2023, highlighting the disparity between NIN issuance and BVN linkage.

The Central Bank of Nigeria (CBN) had earlier issued directives to banks, mandating them to restrict transactions on accounts lacking linked NINs and BVNs, with effect from March 1, 2024.

Any accounts found non-compliant risk being designated as ‘Post no Debit,’ rendering them unable to process further transactions.

Responding to the impending crisis, the Director-General of the National Identification Management Commission (NIMC), Abisoye Coker-Odusote, emphasized the need for the revalidation of Front-End Partners (FEPs) to ensure the integrity of the identity database.

She underscored the importance of NIN registration and urged collaboration with various stakeholders to expedite the process.

The Executive Vice Chairman/CEO of the Nigerian Communications Commission (NCC), Dr. Aminu Maida, reiterated the significance of linking NINs to SIM cards to enhance national security.

Telecom subscribers were urged to comply with the NIN-SIM linkage directive to avoid service disruptions.

Meanwhile, financial service providers like Opay have issued reminders of the impending restrictions, urging customers to comply with the linkage requirements.

Amidst concerns, some customers contemplate transferring funds to compliant accounts to avoid potential financial setbacks.

As the deadline approaches, stakeholders are intensifying efforts to mitigate the impact of the impending banking crisis on millions of Nigerians.

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