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Banking & Finance

Nigeria’s debt sustainable, says DMO, as Stock Debts Soars



DMO auctions 4 FGN bonds valued at N360bn

Against the backdrop of verbal attacks on the soaring Government stock-debts profile, the Debt Management Office (DMO) has declared that Nigeria’s debt remains sustainable.

The Director-General of DMO, Patience Oniha, said this on Monday in Abuja, noting that Nigeria’s total debt stock as of June was N103 billion.

Oniha, however, insisted that there was an urgent need to boost the country’s revenue to further ameliorate the debt burden.

She suggested an efficient tax administration that would ensure greater compliance with remittances, and be devoid of all forms of evasions in the system.

According to her, most countries place more emphasis on taxation as a principal source of funding for the government.

She advised that new borrowings should be tied to projects that would generate commensurate revenues to service loans used to finance them.

She also said that physical assets such as idle or under-utilised properties could be redeveloped for commercialisation to generate revenue.

According to Oniha, the current revenue problem is compounded by leakages like oil theft and petrol subsidy.

“These have significantly reduced the revenue from crude oil sales that used to account for the bulk of government revenue,” she said.

She said that the outlooks of both the local and international markets were becoming tighter with rising interest rates.

She called for moderation in new borrowings and accelerated revenue growth to shore up non-oil revenue.

She, however, said that the country’s total public debt-to-Gross Domestic Product (GDP) ratio was still within reasonable limits.

“At 23.06 percent, the debt-to-GDP ratio is still within Nigeria’s self-imposed limit of 40 percent.

“It is also within the World Bank/International Monetary Fund (IMF) recommended limit of 55 percent for countries within Nigeria’s peer group and 70 percent for ECOWAS countries,” she said.

She said that debt service-to-revenue was high, adding that urgent steps needed to be taken to boost revenue and further enhance public debt sustainability.

“Nigeria’s public debt stock has grown consistently over the past decades and even faster in recent years, and debt service has continued to grow.

“The country’s low revenue base compounded by dependence on crude oil receipts resulted in budget deficits over the past decades.

“Efforts at increasing non-oil revenue are, however, yielding positive results,” she said.

According to her, with a low debt-to-GDP ratio, the debt service-to-revenue ratio would have been low if revenue were strong.

She said that Nigeria was deploying debt management tools of the World Bank and IMF to ensure debt sustainability.

“These tools include an annual Debt Sustainability Analysis (DSA) and a Medium Term Debt Management Strategy (MTDS) every four years,” she said.

Oniha listed other initiatives to ensure debt sustainability as the Presidential Infrastructure Development Fund (PIDF), Infrastructure for Tax Credit, Infrastructure Corporation of Nigeria Limited (InfraCorp) and Off-Balance Sheet Financing.

“The PIDF is managed by the Nigeria Sovereign Investment Authority (NSIA). The fund is to be invested in critical road and power projects across the country.

“The Infrastructure for Tax Credit initiative encourages companies to commit their resources to the construction of new roads or rehabilitating old ones with the assurance that such expended resources would be recouped from company tax.

“InfraCorp is a Public Private Partnership promoted by the Central Bank of Nigeria (CBN), Africa Finance Corporation (AFC) and NSIA, to catalyse and accelerate investment in Nigeria’s Infrastructure sector.

“InfraCorp has a seed funding of One trillion Naira as equity from the promoters,” she said.

Banking & Finance

Against projections, CBN raises interest rate to 17.5%



Against projections, CBN raises interest rate to 17.5%

 Against projections by some experts, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has increased the monetary policy rate by 100 basis points to 17.5 percent.

This is contained in a communiqué issued at the end of the first MPC meeting in 2023, in Abuja on Tuesday.

CBN Governor, Mr. Godwin Emefiele, who read the communiqué said that the previous increases had yielded results, with a slight drop in the inflation rate recorded in December 2022.

The committee, however, held all other parameters constant.

While the Asymmetric Corridor of +100/-700 basis points around the MPR was retained, the Liquidity Ratio of 30 percent and the Cash Reserve Ratio (CRR) of 32.5 percent were also retained.

The MPR had witnessed four consecutive increases, from 11.5 percent in early 2022 to 16.5 in November 2022.

According to Emefiele, the committee deliberated on whether to hike rates further or hold on to examine the impact of the past increases.

“The options considered were primarily to hold the rate or tighten it further to consolidate the previous gains.

“However, the MPC noted that loosening the rate would gravely undermine the gains of the last four increases, hence the hike in rate,” he said.

Some financial experts had projected that the apex bank would most likely retain the previous rates.

According to Umhe Uwaleke, a Professor of Capital Market at the Nasarawa State University, Keffi, increasing the MPR can jeopardise economic growth.

Uwaleke said that the MPC was likely to hold all the existing parameters for two reasons.

“One, historical evidence suggests that the MPC seldom adjusts policy rates in January, due to the need to allow the markets to stabilise in the new year.

“Secondly, inflationary pressure is beginning to reduce as seen in headline inflation numbers for December 2022, not only in Nigeria but also in the United States of America.

“I do not advise a further hike in MPR, as doing so beyond the current high rate of 16.5 percent is capable of jeopardising economic growth,” he said.

An economist, Dr. Tope Fasua, urged the CBN to shun the temptation to further increase the rates.

Fasua suggested that the rates should be retained and be guided by market trends, adding that constantly increasing interest rates could spur recession.

” I hope they hold the rate as it is and watch what happens.

“Already, inflation trended down 0.14 percent; they may be tempted to further increase rates to accelerate the fall.

“But, they need to now think about the fact that constant raising of interest rates could spur recession, as life becomes harder for manufacturers,” he said. 

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Banking & Finance

Naira redesign: Jan. 31 deadline for old notes remains – Emefiele



Naira redesign: Jan. 31 deadline for old notes remains – Emefiele

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, says the Jan. 31 deadline to stop the circulation of old Naira notes remains.

Emefiele gave the clarification on Tuesday in Abuja, after the Monetary Policy Committee (MPC) meeting of the apex bank.

According to him, the 90 days window given by the CBN for Nigerians to deposit their old currencies was enough.

“We called on the Deposit Money Banks (DMBs) to extend their working hours and to work on weekends.

“There is no reason to talk about a shift. The new currencies are available,” he said.

Emefiele said that the apex bank had mandated the DMBs to feed the new notes into their Automated Teller Machines (ATMs) for Nigerians to have equal access.

“We have increased disbursement of the new notes to them. There is an adequate quantity of new notes available.

“Our mint is producing and we are supplying the banks. We have super agents in underserved areas like riverine communities, and CBN staff members have been out on mobilisation.

“We believe that by Jan. 31, the new naira notes would have permeated the nooks and crannies of the country,” he said.

He said that the CBN had so far received about N1.5 trillion of the old Naira notes.

He urged Nigerians to accelerate the process of taking their old notes to the banks before the deadline, adding that they should not fear harassment for security agents.

“We have begged the EFCC and the ICPC to allow Nigerians deposit their old Naira notes,” he said.

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Banking & Finance

Stock Market Capitalisation Drops N18bn; Linkage, Hallmark Insurance Lead Losers’ Table



Stock Market Capitalisation Drops N18bn; Linkage, Hallmark Insurance Lead Losers’ Table

 The local bourse ended the last trading of the week on a negative note as the performance indices declined by 0.06 per cent.

Specifically, the market capitalisation dropped by N18 billion or 0.06 per cent to close at N28.646 trillion as against N28.664 trillion posted in the previous session.

Also, the All-Share Index (ASI) fell by 31.74 points or 0.06 per cent to close at 52,594.68 compared to 52,626.42 recorded on Thursday.

The negative performance of the market was driven by selloffs in Nestle, Zenith Bank and Guaranty Trust Holding Company (GTCO).

Consequently, the year-to-date (YTD) return rose to 2.62 per cent.

Market breadth closed flat as 11 stocks advanced, while 11 others declined.

A breakdown of price movement showed that Abbey Mortgage Bank topped the gainers’ table with a gain of 9.8 per cent to close at N1.68 per share.

Prestige Insurance trailed with a gain of 9.25 per cent to close at 46k while International Energy Insurance rose by 8.89 per cent to close at 49k per share.

Cornerstone Insurance was up by 7.14 per cent to close at 60k, while Courteville Business Solutions increased by 3.57 per cent to close at 58k per share.

Conversely, Linkage Insurance led the losers’ table, dropping by 9.62 per cent to close at 47k per share.

Consolidated Hallmark Insurance with a loss of 7.35 per cent to close at 63k, while WAPIC Assurance declined by 3.23 per cent to close at 30k per share.

Dangote Sugar decreased by 2.58  per cent to close at N17, while Jaiz Bank fell by 2.22 per cent to close at 88k per share.

Analysis of the market activities showed trade turnover settled lower compared to the previous session, with the value of transactions down by 7.42 per cent.

A total of 443.75 million shares valued at N1.68 billion were exchanged in 3,100 deals.

Transactions in the shares of Veritas Kapital topped the activity chart with 347.05 million shares valued at N69.41 million.

Access Bank followed with 11.35 million shares worth N102.4 million, while Zenith Bank traded 6.99 million shares valued at N170.9 million.

Fidelity Bank traded 6.62 million shares valued at N33.13 billion, while Chams transacted 5.99 million shares worth N1.57 million.

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