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Domestic Debt Servicing Gulps N3.72tn in Three Years

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  • Domestic Debt Servicing Gulps N3.72tn in Three Years

The Federal Government has spent a total of N3.72tn to service local debts in the past three years, statistics available from the Debt Management Office have shown.

According to latest statistics made available by the DMO, the Federal Government spent a total of N1.48tn on actual debt servicing in 2017.

With N1.23tn and N1.02tn spent on domestic debt servicing in 2016 and 2015, respectively, these add to a total of N3.72tn in the last three years.

Among the various instruments that the Federal Government used to borrow from the domestic debt market, the highest interest was paid on the FGN Bonds.

In 2017, for instance, the Federal Government paid N982.66bn on the FGN Bonds. A total of N445.13bn was paid on Nigerian Treasury Bills; N22.99bn was paid on Treasury Bonds; while N25bn of the principal was repaid. An interest of N442bn was paid on Savings Bonds.

The Federal Government has been spending considerable resources in recent times on the servicing of domestic debts, thereby raising questions of the sustainability of the country’s debt burden.

However, the Federal Government has insisted that the nation’s debt burden is sustainable since it is less than 20 per cent of the country’s Gross Domestic Product although less revenues have made the payment of interest burdensome.

This has motivated the government to move towards foreign borrowing since such loans attract less interest payment.

A recent statement released by the DMO put the country’s total debt profile at N21.73tn.

The DMO said the composition of the debt stock as of the end December 2017 showed that external debt was 26.64 per cent of the portfolio, up from 20.04 per cent in 2016, while domestic debt was 73.36 per cent, down from 79.96 per cent a year earlier.

Further analysis showed that the domestic debt for the Federal Government was N12.59tn, while that of the states and the Federal Capital Territory was N3.35tn.

The external debt of the Federal Government, states and the FCT was N5.79tn. This puts the total public debt as of December 31, 2017 at N21.73tn.

According to the DMO, restructuring of the country’s debt mix has led to an increase in foreign debts in order to minimise the high interest rate on local debts.

The DMO stated, “The key benefits of the restructuring of the portfolio are the reduction of the government’s debt service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.

“We repaid N198bn Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances, and we have continued further implementation of the strategy in 2018, with the issuance of the S2.5bn Eurobonds in February 2018, the proceeds of which are being used to repay maturing domestic debts, starting with N130bn NTBs repaid on March 1, 2018.”

According to the DMO, the borrowings are for financing capital expenditure and stimulating the economy.

The funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget, which helped the country to exit recession in 2017, the DMO said.

It added that the total public debt as of December 31, 2017 represented 18.2 per cent of Nigeria’s GDP for the year.

This showed that Nigeria’s debt had continued to be sustainable and was well within the threshold of 56 per cent for countries in her peer group, the DMO said.

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.

Finance

Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

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Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

Union Bank of Nigeria Plc said it has secured a US$40,000,000 finance guarantee facility from the IFC, a member of the World Bank Group.

In a note to the Nigerian Stock Exchange, the lender said the facility would help boost access to finance for local businesses and enable increased international trade for Nigeria.

It explained that the facility “will support Union Bank to establish working partnerships with nearly 300 major international banks within the GTFP network, thereby broadening access to finance and reducing cash collateral requirements for Nigerian businesses.

“The facility will enable the continued flow of trade credit into the Nigerian market at a time when imports are critical, and the country’s exports can generate much-needed foreign exchange.

Under the IFC’s Global Trade Finance Program (GTFP) terms of the agreement, GTFP offers benefiting banks partial or full guarantees covering payment risk on Union Bank’s trade-related transactions.

Accordingly, these guarantees are transaction-specific and may vary depending on underlying instruments like letters of credit, trade-related promissory notes, guarantees, bonds, and advance payment guarantees.”

Emeka Emuwa, Chief Executive Officer of Union Bank, said, “Union Bank is pleased to join the IFC’s Global Trade Finance Program. This is a significant achievement as we continue to expand our trade financing offerings to our
customers. Even in these peculiar times, we remain focused on contributing to economic growth by developing tailored solutions that help our customers harness the teeming opportunities that still exist in the Nigerian market.

Eme Essien Lore, IFC’s Country Manager for Nigeria, said, “Keeping trade moving is essential to growth and job creation, especially during the challenging economic times we are living through today. We welcome Union Bank to IFC’s Global Trade Finance Program and value a partnership that will make a positive impact on Nigeria’s economy.

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Apapa Customs Command Generate N367.6bn in Nine Months

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Nigeria Customs Service

Customs Command Apapa Realises N367.6bn Between January and September

The Nigeria Customs Service, Apapa Command, said it generated N367.6 billion in the nine-month ended September 2020.

Mohammed Abba-Kura, the Customs Area Controller, disclosed this while speaking with newsmen in Lagos.

He said a total of 328 containers of goods worth N19.5 billion were seized during the period. This, he said represents an increase of 37 containers when compared to the same period of 2019.

Speaking further, Abba-Kura said the N367.6 billion realised in the first nine months of the year, represented a 17 percent or N54.1 billion increase from N313.5 billion it collected during the same period of 2019.

The Apapa Command generated N14.3 billion as revenue in the third quarter from customers’ duty and other charges.

He said “The difference recorded was made possible as a result of resilience of officers in ensuring that importers and agents are made to do proper declarations, adhere strictly to import/export guidelines in tandem with extant laws.”

Commenting on the seizures, Abba-Kura said, “These items were seized mainly because of various forms of infractions which range from false declarations, non-adherence to import/export guidelines and failure to comply with other extant regulations as enshrined in the Customs and Excise Management Act.

“In the area of export trade, the period under review recorded exportation of goods worth N26,273,706,822 exported from the country.”

“These exported goods include mineral resources, steel bars, agricultural products among others with a total tonnage of 378,447 million tonnes free on board value of $85.8m. Similarly, the volume of export from January to September 2020 stood at N78.6bn with FOB $257,003,965.”

He added that the compliance level rose to about 60 percent during the period, highlighting the reason for the surge in the number of seizures made.

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Nigeria’s Foreign Reserves Dip Further to $35.69 Billion

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Nigeria’s External Reserves Decline by $50.84 Million to $35.69 Billion

Nigeria’s foreign reserves declined by $50.84 million in eleven days to $35.69 billion, according to the latest data from the Central Bank of Nigeria (CBN).

In the data released on the apex bank website, the nation’s foreign reserves stood at $35.75 billion as of October 2, 2020 but depreciated to $35.69 billion on October 13, 2020.

The foreign reserves plunged from $44.25 billion posted on August 19, 2019 to $41.85 billion as of September 30, 2019 before sustaining the downward trend to $36.30 billion on June 19, 2020 despite the Central Bank of Nigeria devaluing the Naira twice to prevent huge capital flight that trailed COVID-19 outbreak.

Weak oil prices amid low demand for the commodity compounded Nigeria’s woes as the central bank continues to struggle to sustain foreign exchange intervention and ease dollar scarcity in a nation that depends on imports for most of its consumption.

However, the plunge in revenue generation alongside low foreign direct investment due to the weak economic outlook and low investment sentiment, negatively impacted the attractiveness of Nigerian assets.

The apex bank, in its monthly report released for May, said “Nigeria’s international reserves decreased marginally from $36.43bn at end-April to $36.19bn at end-May 2020.

“The net decrease in reserves was due to the sales of foreign exchange at the Secondary Market Intervention Sales and Investor and Exporter windows as well as payments to external creditors.

“Thus, the level of import cover for goods and services, decreased from 4.0 months in April to 3.9 months in May 2020, but remained above the IMF threshold of 3.0 months.

“A comparative analysis of reserves per capita in May 2020 showed that Nigeria’s reserves per capita was $176.58, compared to $889.73 for South Africa, $491.10 for Angola, $218.94 for Egypt and $24.10 for Ghana.

It explained that “Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account balance and depletion of external reserves driven, largely, by decelerating export receipts, particularly oil.

“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.

“As a result, external reserves are expected to lie between $29.9bn and $34.3bn at end-December 2020 (predicated on current declining oil price between $20 and $40).”

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