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Nigeria’s Debt Rises by N9.61tn Under Buhari

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  • Nigeria’s Debt Rises by N9.61tn Under Buhari

Under President Muhammadu Buhari, Nigeria has grown its debt portfolio by N9.61tn, statistics available from the Debt Management Office have shown.

According to the DMO, Nigeria’s debt stood at N21.73tn as of December 31, 2017, while the figure as of June 30, 2015 was N12.12tn.

This means that within a period of 30 months – July 2015 to December 2017 – the country’s debt rose by N9.61tn, or 79.25 per cent.

In a statement made available to our correspondent in Abuja on Wednesday, the DMO said the composition of the debt stock as of the end of 2017 showed that external debt was 26.64 per cent of the portfolio, up from 20.04 per cent in 2016; while the domestic debt was 73.36 per cent, down from 79.96 per cent in 2016.

Further analysis showed that the domestic debt for the Federal Government was N12.59tn, while the domestic debt 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, the restructuring of the country’s debt mix has led to an increase in foreign debt in order to minimise the high interest rates of local debts.

The DMO said, “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 $2.5bn Eurobonds in February 2018, the proceeds of which is being used to repay maturing domestic debt, 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 agency stated.

It added that the total public debt as of December 31, 2017 represented 18.2 per cent of the country’s Gross Domestic Product for the year.

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

Speaking at a press conference to explain the debt status, the Director-General, DMO, Patience Oniha, said the debt grew because the nation went into recession and the government could not abandon the economy but had to spend.

She added that the current government had been spending more on infrastructure than other administrations in the past, adding that any foreign borrowing had to be tied to a project.

Oniha explained that it was necessary for the government to borrow to rebalance its portfolio such that domestic debts that had higher interest rates needed to be reduced with foreign debts at lower interest rates.

She said, “Through the issuance of particularly the FGN Bonds, we were able to transform the domestic debt market. If you look at 15 years ago, who will be talking about FGN Bonds yields? Using government securities to borrow, we have actually transformed the Nigerian market to the extent that there is now a dedicated institution known as the Financial Markets Dealers Quotation.

“We have had the positive sides. What the government is suffering is debt servicing. And that is why we are running a new strategy now. So, what we are saying is, if you look at December 2017, we have improved in terms of the mix of the portfolio.

“As you know, we also issued $2.5bn in February this year to refinance some of the domestic debts. So, give or take, we are at about 30:70 per cent foreign to domestic debt ratio.

“The actual debt service for the year is N1.67tn. Again, there are two issues you should look at there. The external component is only nine per cent, while domestic is 91 per cent. The domestic has grown and the rate has been high.”

Oniha added, “As a government, we have targets. The target is that domestic to foreign should be 60:40 per cent. Are we there yet? No; we are still at 73:27 per cent. We are not there even with the external borrowing we have done.

“The reason for the 60:40 per cent is that you don’t want to put all your eggs in one basket. You don’t want to be dependent on one source for your funding. It is good to have a mix.

“For the domestic component, we said 75 per cent should be long-term, while 25 per cent should be short-term. We defined long-term in terms of FGN Bonds, and short-term in terms of Treasury Bills. Last year, we started by redeeming N198bn of Treasury Bills, but we are still not there yet.”

The DMO boss added that the country’s debt to Gross Domestic Product ratio remained low at less than 19 per cent, but admitted that the debt service to revenue ratio had not been good enough.

She attributed this to the fall in revenue, adding that the Federal Government’s revenue dipped by about 50 per cent.

According to her, the government is addressing the situation by tackling the issues that resulted in low revenue collection by the Nigeria Customs Service.

She added that the problem of tax evasion was being addressed by the Voluntary Assets and Income Declaration Scheme initiated by the Federal Government.

Oniha said through the programme of diversification, the government was also addressing the problem of low revenue generation as a diversified economy would ensure that the country had several sources of income other than oil.

Responding to a question on the possibility of increased interest rate on commercial foreign loans, the DMO boss stated that though Nigeria’s rates were expected to improve with positive developments in the economy, a fundamental assumption was that advanced nations had better interest rates.

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

Flour Mills Posts Strong Half Year Results Despite Headwinds

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flour mills posts 184% increase in PAT

Flour Mills of Nigeria Plc recorded strong performance in the Half Year (H1) ended September 30, 2020.

In the 2020/21 half-year results released on Tuesday through the Nigerian Stock Exchange, the leading integrated food business and agro-allied Group, grew revenue by 31 percent year-on-year from N270.8 billion posted in the half-year of 2019/20 to N355.1 billion in the period under review with second-quarter growth of 47 percent when compared to last year second quarter.

Similarly, the Group’s profit before tax grew by 60 percent year-on-year from N8.6 billion in H1 2019/20 to N14.6 billion in H1 2020/21 with an impressive 160 percent growth from the second quarter.

The strong performance continues across the board as profit before tax was driven by the agro-allied segment, which realised a profit of N6.3 billion when compared to the loss posted in 2019/20 period. The company said it recorded strong improvement in edible oils and fats, protein and fertiliser businesses after its investments over the years started yielding results.

Profit after tax grew by 68 percent from N5.9 billion achieved in H1 2019/20 to N9.9 billion in the period under review.

According to the company, despite economic uncertainties and headwinds, the Group has continued to show sustained growth in key areas with the agro-allied unit leading with a strong result in edible oils and proteins.

Speaking on the performance, Paul Gbededo, the Managing Director and Chief Executive Officer (CEO) of the company, said “with this result, our business has once again shown its resilience, by following the path of sustainable growth despite the prevailing challenges in both the local and global economy.”

He further stated that “in line with our vision to continue to grow value for our investors, Management will for the remaining part of the financial year continue to concentrate on improving operational effectiveness through accelerated strategies for Group-wide cost optimisation, which will ensure sustainability in the current market climate, while we will continue to invest in growing the business further.”

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US Banks Led the Most Fined Financial Institutions in 2020

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US Banks Are The Most Penalised Financial Institutions in 2020 Financial Year

Banks in the United States were the most fined financial institutions in 2020, according to the latest report from Finbold.

Finbold, a company that specialises in financial data, said three countries accounted for 97.32 percent of the total fines levied on banks in 2020.

The data revealed that United States banks are the most fined at €9.15 billion. This was followed by Australian banks with a combined €770 million, while banks in Israel came third with €762.97 million.

Also, while the fines are likely to increase before the end of the year, the total fines levied against financial institutions globally stood at €11.61 billion as of October 22nd.

Further breakdown showed Swedish banks came fourth with €456.18 million fines while German banks that incurred a combined €169.01 million fines came fifth.

The report showed Goldman Sachs led the most fined bank with €5.26 billion for various violations of regulatory rules.

Wells Fargo came second with €2.53 billion while Westpac Bank in Australia and Hapoalim emerged third and fourth with €770 million and €762.97 million, respectively.

Other heavily fined lenders include Swedbank from Sweden fined €360 million and Germany’s Deutsche with €126.52 million fine in 2020 so far.

Speaking on banks’ fines, Oliver Scott, Chief Editor, Finbold, said “Notably, the tally of bank fines is likely to increase in the coming years as European and Asian regulators catch up with U.S peers who are considered more aggressive. However, banks are looking for means of minimizing fines. Analysts have been of the opinion that the fines could have been avoided if banks leverage technology through the deployment of perfect software.”

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Guinness Nigeria Explains Reason for N12.6 Billion Loss in 2020

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Guinness

Guinness Nigeria Speaks on 2020 Poor Performance

Guinness Nigeria Plc has blamed the challenging business environment amid COVID-19 restrictions that led to the closure of bars, clubs, lounges and restaurants for its 2020 losses.

Mr. Baker Magunda, Managing Director/CEO, Guinness Nigeria, who spoke on the company’s performance in 2020, said the aforementioned represents a major part of the company’s consumption, adding that restriction imposed on gathering impacted the usual demands for celebratory occasions.

He explained that demand was weighed upon by a decline in consumer income, rising unemployment rate due to the shutdown of large corporations, surged in VAT and excise throughout 2020.

According to him, distribution was affected by the ban imposed on inter-state travel despite collaborating with regulatory authorities to minimize the negative impact on the company.

Here is a breakdown of the Guinness Nigeria performance in 2020 Financial Year

Guinness profit plunged by a massive 129.1 percent to -N12.6 billion in the 2020 Financial Year (FY), down from the N5.5 billion profit achieved in 2019 (FY). While the company’s gross profit nosedive by 16.9 percent from N40.13 billion posted in 2019 to N33.33 billion in 2020.

The company decline was broad-based as revenue also declined from N131.5 billion filed in 2019 to N104.4 billion in the 2020 financial year.

Accordingly, administrative cost rose from N9.9 billion in the 2019 financial year to N14.3 billion in 2020. However, the cost of sales moderated by 22 percent from N91.4 billion posted in 2019 to N71.1 billion in 2020.

Finance cost expanded from N2.6 billion in 2019 to N4.5billion in 2020 while finance income declined to N301 million in the year under review, down from N750.9 million in 2019.

Mr. Baker Magunda, said “The last quarter performance of fiscal 2020 was significantly impacted by restrictions due to COVID-19, exacerbating the already challenging economic environment. Closures of on-trade premises (bars, lounges, clubs, and dine-in restaurants), which represents the major part of the consumption occasion for our products and bans on celebratory occasions, impacted sales.

“Demand was also impacted by reduced consumer income, unemployment concerns due to the shutdown of a large number of businesses, and increases of VAT and excise throughout the year.”

Speaking further Magunda said, “Distribution was impacted by the ban of inter-state, and in some cases intra-state travel. Although, Management worked diligently with regulatory authorities to minimize the impact, this hampered our distributors’ ability to restock and have our brands available for purchase.”

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