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‘CBN’s lending policy’ll push down loan yields’



‘CBN’s lending policy’ll push down loan yields’

Even as the Central Bank of Nigeria (CBN) shows no sign of dropping its tough stance regarding new measures to compel banks to lend to the real sector, Lagos-based financial services firm, CSL Research, has warned that the apex bank’s policy may lead to a decline in lenders’ loan yields.

In a report obtained by New Telegraph, the firm said: “We reiterate our view that forcing banks to lend under the current macro-economic situation will only result in a build-up in NPLs in the medium to long term given the sluggish growth in the economy and the high risk in the operating environment- this could pose a risk to financial stability.

“We also expect banks’ margins to be squeezed and capital positions of many banks to worsen. Already, we have observed that banks that had plans to issue bonds to increase their capital position have been holding off as this will only worsen a bad situation. In the short term, we expect yields on loans to decline as banks push more loans to customers at lower yields in a bid to meet the CBN requirement. Furthermore, we expect cost of funds to also decline as banks become less aggressive at sourcing deposits.”

The CBN had in July 2019 sent a circular to all banks directing  them to maintain a minimum Loan to Deposit Ratio (LDR) of 60 per cent by September 30,  2019 subject to a quarterly review. 

At the expiration of the deadline, the regulator announced that lenders must maintain a minimum LDR of 65 per cent by December 31 2019.  It said the sanction for non-compliance was a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target LDR.  In fact, some banks were debited in September 2019 for failure to meet the 60 per cent minimum LDR.

Also, last Thursday,  CBN directed the banks to cancel any customer requests for purchase of treasury bills at primary or Open Market Operations (OMO) auctions, if such customers are borrowing customers of such banks or those of other banks. This also includes those enjoying CBN intervention loans.

Commenting on the directive, CSL Research said: “Forcing banks to lend under the current macro-economic situation, with stringent capital and cash reserve requirements will only result in banks resorting to ingenious ways to meet these requirements and we believe this may be the reason behind CBN’s new directive.

“While the objective of the CBN is clear in terms of improving the flow of credit to the private sector to stimulate growth, we are concerned that these unorthodox methods being deployed to achieve this aim may have many unintended negative effects. We are also not certain how CBN intends to monitor compliance.

“That said, we believe the banks will continue to explore other ways of meeting CBN’s requirements without significantly directing loans to the real sector. Recently, many banks have begun to show renewed interest in corporate and state government bonds which were previously unattractive to banks considering risk and reward. These assets do not qualify as liquid assets and as such are expected to be treated as loans.”

It would be recalled that the CBN also issued another circular to DMBs this week, directing  them  to exclude individuals and local corporates from investing in OMO auctions with effect from October 23, 2019.

In a circular signed by Director, Financial Markets Department, CBN, Angela Sere-Ejembi, the apex bank insisted that participation of the financial institutions at the auction should be on proprietary and non-proprietary basis, without the participation of the investors mentioned above.

Commenting on the directive, analysts at Nairametrics said the development was expected to drive foreign inflows by restricting individuals and local corporate, leaving only the banks and foreign investors to participate at the auction.

The analysts, however, pointed out that there were concerns in some quarters about the direction that the CBN is headed.

They quoted Comercio Partners Limited as saying “this is a follow up to the circular released last week warning banks that all demand at auctions must be effective and fully backed by appropriate funding after observing high levels of unfunded bids at the OMO auction.

“Whether this is a move aimed at protecting the naira, checking the excesses of banks or managing its OMO issuance cost, the move would certainly engender some level of uncertainty, which markets do not like.”

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Five charged in alleged $722m cryptocurrency Ponzi scheme



Five charged in alleged $722m cryptocurrency Ponzi scheme

Five men were charged Tuesday in connection with what federal prosecutors called a lucrative cryptocurrency scheme that fleeced investors out of $722 million in a business model that one of the defendants described as built “on the backs of idiots,” according to court documents.

The 27-page indictment, unsealed in U.S. District Court in Newark, New Jersey, names Matthew Brent Goettsche, 37, of Lafayette, Colorado; Jobadiah Sinclair Weeks, 38, of Arvada, Colorado; and Silviu Balaci, whose age and residence were not immediately known, as part of a conspiracy to commit wire fraud. They were also charged with conspiracy to offer and sell unregistered securities.

“What they allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars,” U.S. Attorney Craig Carpenito said.

Prosecutors allege that BitClub Network, which operated from April 2014 to this month, was built on soliciting money from individuals in exchange for shares of purported cryptocurrency mining pools and on rewarding investors for bringing in new clients. The group did not register shares sold with the U.S. Securities and Exchange Commission, the indictment alleges.

To bolster their business, Goettsche, Weeks and others conspired to solicit investments by providing false and misleading figures described as “bitcoin mining earnings,” prosecutors alleges. Weeks and a fourth man, Joseph Frank Abel, 49, of Camarillo, California, created videos and traveled around the country and the world to promote BitClub Network, describing their firm as “the most transparent company in the history of the world that I’ve ever seen” and “too big to fail,” according to prosecutors.

But behind the scenes, they appeared to combine greed, contempt for their investors and, at times, doubt about sustaining the scheme, according to prosecutors.

If convicted, the defendants face maximum penalties of 20 years in prison and fines of up to $250,000 on the fraud conspiracy count. The charge of conspiracy to sell unregistered securities carries a maximum sentence of five years with a $250,000 fine, reports NBC News.

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SEC: Funding infrastructure via capital market’ll aid devt



SEC: Funding infrastructure via capital market’ll aid devt


he Securities and Exchange Commission, SEC, has said that the establishment of an active infrastructure fund via the capital market as being pursued by stakeholders will be immensely beneficial in closing the infrastructure gaps in the country.


Acting Director General of the SEC, Ms. Mary Uduk, stated  this at the annual conference  of the Capital Market Correspondents Association of Nigeria in Lagos


Represented by the Head, External Relations Department of SEC, Mr. Sufian Abdulkarim, Uduk said international capital markets were the largest and deepest pool of financing in the world, and in conjunction with local capital markets, which represent an essentially untapped source of funds for infrastructure projects, they can make a huge contribution to economic development, if effective transaction structures are developed.


Uduk said government could not be the sole provider/promoter of infrastructure projects, adding that private sector investment in infrastructure sector was also required.


According to her, “given the need to bridge the infrastructure deficit and the challenges of financing it, the county needs to leverage on alternative sources of infrastructure financing, such as the capital market. In view of the government’s bid to reverse the current growth trend, diversify the economy and develop infrastructure, there is no better time than now to leverage the capital market for sourcing of infrastructure development financing.


“The capital market provides an enabling environment for private investments in infrastructure projects and the SEC is doing its part to foster this through the implementation of the Capital Market Master Plan (2015-2025). The plan’s major objective is to transform the Nigerian capital market, making it competitive, while contributing towards the nation’s development through funds mobilization.”


The acting DG said the Nigerian capital market had been used as a source of raising funds as early as 1946, when the colonial government floated the first loan stock worth £300,000 to fund its local administration adding “today, the Nigeria capital market has broadened and become more sophisticated as a result of various development initiatives advocated by the SEC.


“There are various sources of funds available in the capital market, which can be harnessed for infrastructure development, some of which are pension funds, Real Estate Investment Trusts (REITs), Collective Investment Schemes (CIS) amongst others. In addition, there are various capital market instruments that can be used for infrastructures financing, amongst which are the infrastructure project bonds, sukuk, infrastructure debt bonds, green bonds and revenue bonds.”

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Africa’s rising borrowing costs worry IMF



Africa’s rising borrowing costs worry IMF


overnment debt as a percentage of Gross Domestic Product (GDP) in sub-Saharan Africa has doubled in the past decade, heading back toward the level it reached at the turn of the century, a development that  International Monetary Fund (IMF)’s,  Managing Director,  Kristalina Georgieva, has  said is a cause for concern.


According to Bloomberg, IMF said that of 54 countries on the continent, 20 were near or at  distress levels, which means they face difficulties honoring their obligations.

The news agency stated  that African governments have raised about $26 billion in international markets this year, from close to $30 billion in 2018, as they took advantage of investors’ thirst for returns in a world awash with negative yields.



It noted  that  volatile currencies across the continent increase the risks of borrowing in hard currency and the rising cost of servicing debt could crowd out other expenditure in a region that’s home to more than half of the world’s poor people.


It quoted head of sustainable finance at the Institute of International Finance, Sonja Gibbs, as saying that “the conditions are ripe for a much higher level of debt distress. Whatever triggers the next crisis, when it happens, you are likely to see a high degree of contagion risk because investors have been moving into higher yielding assets.”


Further fanning fears of a new crisis is the surge in direct credit from China. The China Africa Research Initiative at Johns Hopkins University estimates that the Asian country’s government, banks and contractors handed $143 billion in loans to African states and state-owned companies between 2000 and 2017.


However, African Development Bank President, Akinwumi Adesina, recently said: “Some individual countries are getting to higher levels in terms of debt-to-GDP ratios, that’s the concern,” adding that the debt-to-GDP ratio of Africa is still  “well within acceptable limits.”


More reliance on commercial bonds has raised debt servicing costs, diverting funds that could be spent on new roads or schools. Nigeria, the continent’s top oil producer, spends about the same amount every year on repaying debt as it does on infrastructure.


Countries such as South Africa, the continent’s most industrialized economy, are raising debt levels and this year had its biggest Eurobond issuance yet to help plug a widening budget deficit.

External debt payments now consume an average 13 per cent of African governments’ revenue compared with 4.7 per cent in 2010, according to data compiled by the U.K.-based Jubilee Debt Campaign.

Overspending and crashing commodity prices in the 1990s led to a debt crisis that prompted multilateral lenders and rich nations to write off the obligations of dozens of African countries in 2005. This time around a debt pardon may not be that easy.


The complex debt structure with opaque terms and mix of different creditors will make any potential restructuring agreement more difficult.

“We’re concerned that debt relief might now become more complicated,” said Jan Friederich, a senior director at Fitch Ratings. “Nowadays there is a greater concern that governments, when they forgive any debts, might not actually help the African countries very much, but might primarily be bailing out the commercial creditors.”

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Speculation boosts dollar investment funds



Speculation boosts dollar investment funds


Apex bank issuing treasuries at high yields to attract foreign portfolio investors




ven as the Central Bank of Nigeria (CBN) insists that it has the capacity to defend the naira, recent downtrend in the nation’s external reserves is fuelling speculation that a devaluation of the local currency is on the horizon, thus fuelling business for operators of dollar investment funds in the country, New Telegraph’s findings show.



Latest data obtained from CBN indicates that the external reserves stood at $39.62 billion as at December 5, 2019, having dropped from $45 billion on July 25, 2019.

Indeed, in a recent report, Coronation Research predicted that unless there was a significant improvement in capital inflows, especially Foreign Portfolio Investment (FPI), Nigeria’s foreign exchange reserves may fall to $38 billion by the end of the year.


The steady decline in the reserves, coupled with measures introduced by the apex bank in the last few months, which are deliberately aimed at attracting capital inflows, have heightened speculation that a devaluation of the naira is imminent.



New Telegraph learnt that the development is good news for local firms with well-known dollar investment fund products.



According to industry sources, such firms have recently been offering attractive returns to clients that want to invest in dollars in the hope that naira would soon weaken against the greenback.



“With treasury bill yields now in single digits and the stock market yet to rebound, a lot of investors are moving into forex trading,” a financial analyst, Austin Okonkwo, told this newspaper at the weekend.



He argued that despite CBN’s efforts to support naira, the regulator would have no choice, but to allow the local currency to weaken against dollar, if the external reserves continue to drop.



He said: “We have seen it happen several times in the past; the CBN would be insisting that it would not devalue, but if the reserves continue to head south, it would allow the naira to weaken. Investment firms know this and many of them are now offering their clients good returns for subscribing to their dollar fund products.”



It would be recalled that Cordros Asset Management Limited (CAML) last month opened the “Cordros Dollar Mutual Fund” for public subscription.


According to the offer document, the mutual fund allows investors to conveniently invest and earn returns in United States dollars.



“The fund invests in United States dollar-denominated securities like Sovereign Eurobonds, Corporate Eurobonds, Money Market instruments and other quoted Corporate Eurobonds. The objective is to offer you competitive returns than is obtainable from an average domiciliary bank account,” the firm said.



CAML explained that the fund was targeted at retail, mass affluent, high net worth individuals, Africans in Diaspora, and institutional Investors who desire to meet future medium to long term liabilities.



Speaking at the signing ceremony, Group Managing Director, Cordros Capital Limited, Mr. Wale Agbeyangi, had said: “The Cordros Dollar Mutual Fund will help investors diversify their   portfolio while also helping those with United States dollar obligations hedge against currency risk. The fund’s objective is to achieve capital appreciation in short to medium term for investors with USD and convertible currencies.”



Also speaking, the Managing Director of CAML, Mrs. Morenike Da-Silva, said: “With the Cordros Dollar Fund, investors who have been discouraged by the high entry levels for US Dollar based investments will now have easier, convenient access.”



Analysts at the event noted that the fund was coming at a time when speculations are surrounding the strength of the naira and investors were looking to diversify with investments denominated in foreign currency.



Although sources at the CBN last week, again, dismissed speculation that a devaluation of the naira was imminent, pointing out that the reserves are still above $30 billion, recent measures introduced by the apex bank, especially issuing treasuries at high yields to attract foreign portfolio investors, continue to feed the speculation that a deprecation of the naira is afoot.



Commenting on the issue in a recent note, analysts at CardinalStone Research stated: “In view of Nigeria’s weak current account position, and the sustainability implications of the currency defense, we believe CBN will have to weigh the monetary and opportunity costs of defending the currency at some point.



“We see the main costs of defending the currency as the following; the cost of issuing CBN treasuries at attractive yields, the direct cost of interventions in secondary markets, and the opportunity cost of defending the currency. To defend the currency following the devaluation in mid-2016, the CBN increased its issuances of OMO bills from N4.2 trillion in 2016 to N7.7 trillion in 2017 and N17.0 trillion in 2018.



“Between 2017-2019, the CBN issued N35.8 trillion at an average stop rate of 15.1per cent, which translates to an associated interest expense of c. N5.4 trillion in the period. Our interest expense estimate is corroborated by total interest expense of N4.2 trillion reported in CBN’s financial statements of 2017 and 2018 combined (2017: N1.3 trillion; 2018: N2.9 trillion).”



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NSE’s total transactions up 15% to N163bn



NSE’s total transactions up 15% to N163bn


The value of domestic transactions executed by institutional investors outperformed retail investors by 38 per cent




otal transactions at the nation’s bourse increased by 15.35 per cent from N141.45 billion (about $461.50 million) in September 2019 to N163.16 billion ($532.35 million) in October 2019.

The performance of the month when compared to the performance in the same period of last year (October 2018) revealed that total transactions increased by 34.34 per cent.



In October 2019, the total value of transactions executed by foreign investors outperformed transactions executed by domestic investors by 28 per cent.

According to a report obtained from the Nigerian Stock Exchange, a further analysis of the total transactions executed between the current and prior month (September 2019) revealed that total domestic transactions increased by 26.45 per cent from N47.00 billion in September to N59.43 billion in October 2019.


Similarly, total foreign transactions increased by 9.83 per cent from N94.45 billion (about $308.2 million) to N103.73 billion (about $338.4 million) between September and October 2019.

The value of domestic transactions executed by institutional investors outperformed retail investors by 38 per cent.


A comparison of domestic transactions in the current and prior month (September 2019) revealed that retail transactions decreased by 21.96 per cent from N23.36 billion in September2019 to N18.23 billion in October 2019.

However, the institutional composition of the domestic market increased significantly by 74.28 per cent fromN23.64 billion in September 2019 to N41.20 billion in October 2019.

Highlights of the performance of the market over the last decade revealed that over a 12-year period, domestic transactions decreased by 66.68 per cent from N3.556 trillion in 2007 to N1.185 trillion in 2018 while foreign transactions increased by 97.88 per cent from N616 billion to N1.219 trillion over the same period.


Total foreign transactions accounted for about 51 per cent of the total transactions carried out in 2018, whilst domestic transactions accounted for about 49 per cent of the total transactions in the same period.

The actual performance referenced 2019 (2019 actual) shows that total foreign transactions carried out year till date (YTD) is about N792.64 billion whilst total domestic transactions YTD is about N834.94 billion.



Speaking recently at a forum, the Chief Executive Officer, NSE, Mr. Oscar Onyema, said: “It is my strong belief that one of the things that Nigeria (and indeed Africa) needs to sustain its growth, is a solid and vibrant capital market ecosystem that will attract investment and unlock the potential that exists in the economy.”



He noted that the NSE was playing a key role to help develop enormous opportunity for Nigeria and fulfil one of its key objectives as a member of the UN Sustainable Stock Exchange Initiative.



“This is evident in our recent partnership with the Luxembourg Stock Exchange to facilitate cross listing of green bonds and provide domestic issuers global visibility to attract international investors.

“Creating and sustaining the growth trajectory of our markets and the economy at large, requires a strong commitment from each and every one of us. 



“It is not an easy journey, but it is one we have no choice but to embark upon individually and collectively, in order to develop and guarantee Nigeria and indeed Africa’s competitive advantage in today’s interconnected world,” he said.

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NPA/BUA: Sustained conflict puts N146bn investment in jeopardy



NPA/BUA: Sustained conflict puts N146bn investment in jeopardy


Terminal operator invested $32  million in excess to provide infrastructure at Rivers Port




ix months after, Nigerian Ports Authority (NPA) and BUA Ports and Terminals Limited (BPTL) have lost huge revenue to the decommissioning of Rivers Port Terminal B.


The two parties are currently in court, while the N146 billion sugar factory suffers.


BUA had gone to a Port Harcourt Federal High Court, while NPA went to the International Court of Arbitration (ICA) in London, United Kingdom, for mediation.

It was learnt that moves by the Bureau of Public Enterprises (BPE) to mediate have not yielded positive result.


Currently, the port water channel from the Bonny River channel to Fairway Buoy is facing a security challenge, which has led to the use of armed naval personnel to escort vessels at $50,000 per trip.

BUA’s General Manager, Mohammed Lile Ibrahim, had told the House of Representatives Committee on Ports & Harbour that there were absence of tug-boats, pilot-cutters and low duration of pilotage at the port.


He said his company had remitted $29 million as revenue to the Federal Government’s coffers, built three new factories at the cost of $4 million, handled a total of 11.5 million metric tonnes of cargoes and invested $32 million in excess to provide infrastructure at its Terminal B, despite the challenges it faced since 2006 when the port was concessioned.


He said that 10 per cent of its total concession area of 8.1 hectares had also not been released by NPA.


The feud between the organisations started in 2016, when the terminal operator contracted Julius Berger to rebuild the port’s berth 8, which collapsed in 2014.

The issue of variation with the construction company, however, stalled the job.


NPA’s General Manager, Corporate and Strategic Communications, Jatto Adams, in a statement, had said that the decision to decommission the terminal was out of safety concerns.

He noted that on May 16, 2019, the company, in letter, had informed NPA that the jetty was in a state of total dilapidation and in urgent need of repair or reconstruction.


Adams explained that the absence of security had led to the nefarious activities of hoodlums and vandals who, over a period of time, cut the pipes and steel beams of the berths, thereby affecting their stability and consequently making remedial works imperative.


In her complaint, the authority’s Managing Director, Hadiza Bala Usman, said that BUA was required to rehabilitate and reconstruct that particular terminal in line with the concession agreement, but did not do that for years.

She explained that after NPA’s inspection, BUA’s concession agreement was terminated for failure to adhere to that development plan.


Bala-Usman said: “We instituted a conditional survey, with a report sent to us that the Port Harcourt Port has reached the end of its lifespan.”

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Buhari’s $30bn loan request reignites debt-trap fears



Buhari’s $30bn loan request reignites debt-trap fears

President Muhammadu Buhari’s recent letter to the Senate seeking the lawmakers’ approval for an external loan of $29.96 billion to execute key infrastructural projects across the country, has reignited concern in some quarters that the nation is headed  for a debt trap, writes Tony Chukwunyem




n the wake of President Muhammadu Buhari’s submission of the 2020 budget proposal to the National Assembly on October 8, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had, during the public presentation of the details of the budget, disclosed that the Federal Government planned to borrow from domestic and external sources next year to help it finance part of the over N2.2 trillion deficit in the N10.33 trillion 2020 budget.



She said about N745 billion would be expected from domestic lenders, while about N850 billion would come from foreign borrowing.


The minister further stated that additional project-tied loans totaling about N328.1 billion were being expected during the year from various multi-lateral and bi-lateral.



Rising debt



Reacting to the minister’s disclosure, financial analysts noted that plans to borrow an additional N1.92 trillion in 2020 would take the country’s total public debt portfolio to about N27.62 trillion, an additional N15.5 trillion borrowed since the administration was sworn in for its first term in office four years ago.



In fact, 24 hours after the ministers’ press conference,  the Debt Management Office (DMO) had in an update posted on its website, stated that the country’s debt portfolio rose to about N25.7 trillion as of June 30, this year.



Specifically, the DMO’s figures showed that Federal Government’s debt as at June 30, this year increased by about 60 per cent to N13.4 trillion, while the 36 states and the Federal Capital Territory (FCT)  debt also rose to N3.97 billion.



According to the data, of the total debt portfolio, the Federal Government accounts for 79 per cent, about N20.4 trillion of the N25.7 trillion outlay. This consists of external (N7.02 trillion) and domestic (N13.97 trillion).

Also, the states and FCT account for about N5.28 trillion, consisting of external N1.31 trillion and domestic N3.97 trillion.



As analysts pointed out, when the present administration came into office, the total domestic debt stock was about N8.4trillion, while states’ domestic debts stood at about N1.7trillion.


The external debt stock of the federal and state governments was about N2.03 trillion.


President’s $29.96bn loan request



Given the foregoing, it thus did not come as a surprise to industry watchers that the president’s letter to the Senate on November 28, seeking the lawmakers’ approval for an external loan of $29.96 billion to execute critical infrastructural projects across the country, is generating heated debate in business circles, with some stakeholders warning that even if the president’s request is granted, the nation could fall into another debt trap, similar to the one it exited in 2005.



At that time, following a vigorous campaign for debt pardon embarked upon by the government then in power, some of Nigeria’s creditors under the Paris Club wrote off $18 billion or 60 per cent of the $30 billion that the country owed the cartel.



However, according to President Buhari’s letter, the administration decided to re-present the loan request, which had been rejected by the Eight National Assembly, because the funds were needed  for key projects in different sectors of the economy.



The letter titled: “Request for the National Assembly to reconsider and approve the Federal Government’s 2016-2018 external borrowing plan,” reads in part: “I hereby request for resolutions of the Senate to approve the Federal Government’s 2016-2018 External Borrowing Plan as well as relevant projects under this plan. Specifically, the Senate is invited to note that (a): While I have transmitted the 2016-2018 external borrowing plan to the Eight National Assembly in September 2016, this plan was not approved in its entirety by the legislature.



“Only the Federal Government’s emergency projects for the North East’s four states projects and one China Assisted Railway Modernization Projects for Lagos-Ibadan segment were approved out of the total of 39 projects.



“That outstanding projects in the plan that were not approved by the legislature are nevertheless, critical to the delivery of the government’s policies and programmes relating to power, mining, roads, agriculture, health, water and educational sectors.



“These outstanding budgets are well-advanced in terms of the preparation, consistent with the 2016 date. Sustainability analysis undertaken by the Debt Management Office was approved by the Federal Executive Council in August 2016 under the 2016-2018 external borrowing plan.”



Stating that the new borrowings are tied to projects supported by the World Bank, African Development Bank (AfDB), Islamic Development Bank (IDB), German Development Bank and China EXIMBank,  government explained  that it wanted to borrow more outside so that 40per cent  of its loans come from offshore sources by 2019 to lower cost and help fund its record budgets.






As indicated earlier, the president’s letter sparked a heated debate among industry stakeholders even as most of them advised the government to be cautious to ensure that the move does not get the country into  a debt crisis.



For instance, in his reaction, the Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said: “There is a need to clarify place of the new loan request in relation to the 2020 budget and the 2020 -2022 medium term expenditure framework.



“Additional borrowing should strictly be in line with section 41 of the Fiscal Responsibility Act which stipulates that Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period.”



Noting that Nigeria’s debt profile grew from N12.6 trillion in 2015 to N25.7 trillion in 2019 second quarter, an increase of 104per cent, the LCCI D-G  stated that there was cause to be worried about the development,  adding that the bigger concern , however,  is about  the country’s  capacity to service the debt.



He said: “For instance, the debt service provision in the 2019 budget was a whooping N2 trillion; whereas the total capital budget was N2.9 trillion; this implies that the debt service commitment was 70per cent of capital budget allocation. Debt to revenue ratio was about 30per cent, which is also on the high side.



“In the 2020 budget, debt service commitment and recurrent spending are beginning to crowd out capital expenditure.  This trajectory is not consistent with our national aspiration to build infrastructure and a competitive economy. Debt service of N2.45 trillion is more than the capital budget of N2.14 trillion in 2020 budget.  That is 114 per cent of capital budget.



“The opportunity cost of high debt service commitment for the economy and citizens is very high.  There is also the exchange rate risk inherent in the exposure to mounting foreign debt which we need to worry about. As the currency depreciates, the burden of servicing foreign debt would intensify.  This is a major problem with increasing the stock of foreign debt. This underlines the need for appropriate policy choices to attract domestic and foreign private sector capital for infrastructure financing.


“The government needs to look beyond tax credit in its quest for more complimentary funding sources for infrastructure. We should be looking more in the direction of equity financing.  But for this to happen, the policy and regulatory environment must be right. It is also critical to review the spending structure of government and the cost of governance.  The ballooning recurrent expenditure, in the face of declining revenue is a cause for concern.”



Similarly, the D-G, Nigeria Employers’ Consultative Association (NECA), Mr. Timothy Olawale, stated that the figures released by the DMO earlier in the year showed that Federal Government’s domestic debt was on an uptrend.



According to him, “this trend, which is very disturbing, could have a negative effect on the developmental capacity of Nigeria despite government’s financial managers’ argument that the rate of increase is within a manageable limit.”



Olawale noted that while the effect of the increasing debt might not be immediate in totality, it could be significantly damaging in the long term with a chunk of revenue consumed by debt servicing to the detriment of infrastructural development.



He said: “This, sadly, is the current reality as a chunk of the 2020 budget would be used for debt servicing rather than developmental projects. This trend is not sustainable and could harm the nation on the long term.”


FG’s defence


However, despite the misgivings expressed by stakeholders, government has insisted its debt-to-Gross Domestic Product (GDP) is not only one of the lowest among the country’s peers but also within an acceptable threshold.


The Minister of Finance, Zainab Ahmed,  had  in a presentation to investors in Washington recently,  emphasised  that  while Nigeria’s debt had risen in recent years,  it was still equal to just 19 per cent of GDP in 2018.


That is well below the average for emerging markets of just under 50 per cent of GDP, according to the Institute of International Finance.



IMF’s position

Indeed, speaking at the public presentation of the International Monetary Fund’s (IMF) October 2019 issue of the “Regional Economic Outlook for Sub-Saharan Africa”  in Lagos on November 27, the Fund’s Senior Resident Representative and Mission Chief for Nigeria, Mr. Amine Mati, stated that while Nigeria’s  debt profile had increased in recent years, the country’s debt to GDP ratio is still well below the average for sub-Saharan Africa and Africa as a whole. 



He, however, stated that Nigeria’s revenue to GDP ratio was low, adding that the “the potential to increase revenue is high.”



Mati said: “Nigeria debt has increased, (but) the level is way below the average for the region. Even if we include the CBN overdraft and others we are talking about a debt to GDP ratio that doesn’t go beyond 27 to 28 per cent to GDP and that is including Asset Management Corporation of Nigeria (AMCON) overdrafts etcetera.”


Also speaking at the event, member, President’s Economic Advisory Council and Managing Director, Financial Derivatives Company, Mr. Bismarck Rewane, supported the IMF’s position that Nigeria does not have a debt crisis.


He said: “We don’t have a debt crisis, we have a revenue problem, but there are also other problems such as poverty, productivity. Also, what we use our revenue for is also important.”



But as a financial analyst, Mr. Aloysius Eke, argued in a chat with New Telegraph, “both supporters and opponents  of the FG’s borrowing plan  have not focused on the real issue, which is that until Nigeria stops depending on oil exports for the bulk of its revenue, present and future administrations will continue to search  desperately  for funds to carry out their developmental programmes.” 

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U.S. financial regulators urge monitoring of Bitcoin, others



U.S. financial regulators urge monitoring of Bitcoin, others


panel of top U.S. financial regulators including Treasury Secretary, Steven Mnuchin and Federal Reserve Chair, Jerome Powell, has urged federal and state officials to monitor risks from digital assets like bitcoin.



The recommendation came in an annual report recently published by the Financial Stability Oversight Council, set up after 2008 to help identify emerging risks that could trigger a new banking crisis. The panel also includes U.S. Securities and Exchange Commission Chair Jay Clayton and Commodity Futures Trading Commission Chair Heath Tarbert.


“The council recommends that federal and state regulators continue to examine risks to the financial system posed by new and emerging uses of digital assets and distributed ledger technologies,” the report said.


U.S. lawmakers and administration officials including Mnuchin and President Donald J. Trump have warned of the risks to the financial system from cryptocurrencies and stablecoins like Facebook’s proposed Libra. But some former officials, including ex-CFTC Chair Christopher Giancarlo, have pushed for faster adoption of blockchains, arguing that the country could fall behind other countries as the fast-moving technology develops.


According to the new report, the risks of “existing and planned digital-asset arrangements” could put financial-industry stability in peril “via both direct and indirect connections with banking services, financial markets and financial intermediaries.”

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Gridlock: Stakeholders seek transit parks for trucks



Gridlock: Stakeholders seek transit parks for trucks

Stakeholders have said that only the establishment of truck transit parks can reduce the number of articulated vehicles on Lagos roads as the taskforce set up by the Federal Government has been unable to free Lagos port roads of gridlock, BAYO AKOMOLAFE reports




resently,  land transportation is the only dominant mode of moving out containers and bulk cargoes out of Nigerian seaports.


It accounts for about 80 per cent of haulage due to inefficient rail and water modes of transportation. This has led to the perennial traffic gridlock on the port roads for over a decade.



Reports by the Federal Road Safety Corps (FRSC) indicates that the existing road networks handle larger volume of tonnage and passengers from the port to the hinterlands.



Also, data by the National Bureau of Statistics explained   that between 2011 and 2016, a total of 543.84million tonnes of goods were discharged from the ports and moved through Nigerian roads.




It was learnt that over 15,000 trucks access Lagos State to do business daily without adequate facilities to park their vehicles.



The only alternative is the use of Lagos bridges, which the truckers said could  collapse soon.


Bothered by the gridlock and state of the port roads, Comrade Suleiman Adamu Danzaki, Special Assistant to President of National Union of Road Transport Workers (NURTW), Ibikunle Baruwa, said that the bridges in state may soon collapse as they carry loads that are more than their weight and capacities.


He explained that the issue of transport in the country needed urgent attention by government, most especially in Lagos.


The  Presidential Committee on Apapa gridlock, which has worked tirelessly to decongest the traffic situation around the ports, has already failed in its assignments.

Call up system


The implementation of the manual call-up system introduced last year to end the gridlock also failed because of extortion.


It was gathered that security operatives at the port access roads were exploiting the call up system to make illegal money from truckers.


The collapse of the call-up system introduced by the Nigerian Ports Authority (NPA) to streamline truck access to the port has crippled the businesses of some importers and their agents.




Worried by the problem, the Executive Secretary of the Nigerian Shippers’ Council, Hassan Bello, said that the inefficient transport system in the country had pushed up production cost by 46 per cent.



Truckers now charge N700,000 instead of between N50,000 and N80,000 they were collecting to move a 40 feet container from Apapa Port  to their destinations within Lagos.




Unfortunately, Danzaki noted that the Lagos State Government had no land to accommodate the number of trucks coming into the state, saying that the best solution was for  the state to synergise with Ogun State to build a transit park.



He said: “I don’t think we should be looking at the revenue, extortion but we should be talking about the future of our generations to come. The best thing is to go back to Ogun trailer park.”


Danzaki alleged that the presidential taskforce had failed in their assignment, saying they lack capacity to control the drivers.


He said that beating the drivers would not solve the problem of Apapa without Thea transit park, rather he stressed that only trailer parks could solve the congestion.

The parks


Bello said that this was the major reason the council was trying to fill the vacuum created by the absence of interconnectivity in modes of transportation when it came up with the idea of transit park for all articulated vehicles in the country.



The council, it was gathered,  had started  providing the parks in Maraba, near Jos, Jebba, Lokoja, Obollo-afor, Ore, Port Novo, Ogere and Onitsha, where truck drivers could conveniently park their vehicles, secure accommodation, procure fuel, food, shower and rest.



The parks are primarily intended for short-term safety breaks and also long-term parking services in high-use corridors.

Bello noted that the park project would directly address transport infrastructure deficit by providing short-term resting place for truck drivers on long distance travels and reduce loss of lives and cargo through accidents due to fatigue on the part of the driver.




At  a South West Sensitisation rally programme on transit park organised by NSC and Federal road Safety Corps (FRSC), Bello said that government had intensified effort to provide transit parks across  the country to promote safety and security of drivers, cargoes and haulage vehicles while in transit.



Bello, who was represented by Mr. Samuel Abu Vangtau, Director, Special Duties, explained that the park project  was the initiative of the council to ease congestion on the roads.



He said that both the council and FRSC had signed a Memorandum of Understanding in 2017 on enlightenment programmes for truck owners, drivers and the general public.




Bello  noted that the council was playing the role of economic regulators which cover every activity in the port and beyond the port.



The executive secretary said that apart from reducing accidents and loss of lives within the 240,000kilometres of road network, the transit park project would help to reduce pilferage and theft of cargoes  on transit and the provision of cargo tracking system at each park.



Last line



It is necessary for government and private investors to establish truck parks to curb gridlock, loss of live and cargoes on Nigerian roads.

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Tapping capital market potential for infrastructure needs



Tapping capital market potential for infrastructure needs

Following the unabating dearth of infrastructure in the country, there is need to leverage the nation’s capital market to bridge the widening gap. Chris Ugwu writes




orld over, infrastructure contributes to economic development by increasing productivity and providing amenities that enhance the quality of life.

The services generated as a result of an adequate infrastructure base will translate to an increase in aggregate output.



However, investment in infrastructure services, such as transportation (roads), electricity and water are intermediate inputs to production, this is because infrastructure services tend to raise productivity of other factors as it is often described as the ‘unpaid factor of production.’



Although the Nigerian capital market has suffered monumental loss due to sustained decline in stock prices, the country’s huge infrastructural deficit in power, housing, roads, healthcare, port services among others have contributed to a large extent in retarding the overall growth and development of the sector, which is central to capital formation.



Meanwhile against this backdrop, stock market operators have agreed that the growth of investment business in any nation largely depends on economic development.

They, therefore, called on authorities to intensify efforts on infrastructural development to enhance citizens’ standard of living.



As a way of consolidating the call, financial experts last week at a fora noted that since government and banking sources were unable to meet the growing financing need in Nigeria’s infrastructure, there is need to bridge the gap through the nation’s capital market to achieve the desired growth.


They also said that for this to be realised there is need to put in place sound macroeconomic and policy frameworks.

Key to bridging gap



Nigeria can bridge the infrastructural gap and also increase productivity if only it could leverage on alternative sources of financing such as the capital market.



Acting Director-General, Securities and Exchange Commission (SEC), Mary Uduk, at the 2019 Annual Workshop organised by the Capital Market Correspondents Association of Nigeria (CAMCAN) which held in Lagos at the weekend, said that infrastructure development was important for a country’s sustained economic growth and competitiveness.



She added that a well-developed infrastructure had the potential to increase productivity, which leads to poverty and unemployment reduction, facilitate trade and promote innovation in an economy.

Speaking on the theme of the workshop, “Bridging Nigeria’s Infrastructure Gap: The Capital Market Option”, Uduk who was represented by Head, External Relations department at SEC, Sufian Abdulkarim, noted that the theme of the workshop was timely as Nigeria has a huge gap in infrastructure base measured through levels of physical capital of roads, public education, electricity production, health infrastructure, and access to treated water.



According to her, a report by the African Development Bank on Nigeria’s Infrastructure Plan in 2013 had estimated that Nigeria would need to invest about $350 billion in its infrastructure sector in 10 years to be at par with its peers.

She noted that there were other estimates that have put this figure slightly higher and said that the government, in recognition of this, was doing its best to close the infrastructure gap as outlined in the Economic Recovery and Growth Plan (ERGP) for 2017-2020.



“However, the government cannot be the sole provider or promoter of infrastructure projects, private sector investment in infrastructure sector is also required. In view of the government’s bid to reverse the current growth trend, diversify the economy and develop infrastructure, there is no better time than now to leverage the capital market for sourcing of infrastructure development financing,” Uduk said.



She further added that the capital market provided an enabling environment for private investments in infrastructure projects and that SEC was doing its part to foster this through the implementation of the Capital Market Master Plan (2015-2025).



“We believe that the establishment of an active infrastructure funds via the capital market as being pursued by capital market stakeholders would be immensely beneficial in closing the infrastructure gaps in the country.

“The international capital markets are the largest and deepest pool of financing in the world, and in conjunction with local capital markets, which represent an essentially untapped source of funds for infrastructure projects, they can make a huge contribution to economic development, if effective transaction structures are developed,” the acting DG said.



Need for sound policy frameworks



Investment analysts also stressed the need for sound macroeconomic and policy frameworks to enable the capital market capture investors in long term domestic projects.


The Head, Debt Capital Markets, FBNQuest Merchant Bank Limited, Mr. Oluseun Olatidoye Olatidoye, stated this in his presentation tagged “Bridging Nigeria’s infrastructure Gap, the capital market option,” at a forum.

Olatidoye said: “To successfully tap into the capital market for infrastructural financing, the existence of sound macroeconomic and policy frameworks are pre-conditions, hence, freedom must be given market forces to take its course.



“As much as the government has its role, political interference must be limited. This insures investors against any form of political risk, and most importantly corruption which has the potential of crippling the entire endeavor.”

He explained that on the retail side of the market, it was largely unarguable that capacity is more limited in the case of Nigeria.



“Retail investor size sums to circa 3 million and to have meaningful participation would require a great deal of education of this investor category. Besides, the mobilisation of retail funds is more likely through mutual fund schemes.



Olatidoye, who noted that foreign capital was a great deal in the domestic debt capital market, added that project bonds, Sukuks, and other infrastructure-based fixed income products may be unappealing to foreign interest for a couple of reasons.



“Top of such concerns include foreign exchange policies, liquidity, and tenor (money market has been the major destination for FPIs).


“However, asides luring investors with reasonable yields, mitigating structures need to be in place to address risk factors, and this is largely reliant on a significant degree of macroeconomic policy stability and direction to capture offshore investors in long term domestic projects,” he said.


He noted that foreign exchange volatility if not addressed in ‘most market’ approach could deter the interest of foreign counterparties.



“Depending on the structure of the bond, projects could be of a nature that exposes the financers to devaluation risks, which will whittle down the dollar value of local currency cash flow from such projects.

“Hence, may fail to service the debt (especially if denominated in the dollar). Moreover, investors will be wary of rating characteristics of the issue. As it is often the case for government-sponsored issuances where the state’s creditworthiness influences the rating of its issue or SPV.



“This will offer the highest form of safety and confidence for investors. We should be reminded that PENCOM requires a minimum of an ‘A’ rating from two rating agencies for infrastructure funds.

“Ultimately, if infrastructure funds are the preferred options for issuers, the ingenuity of financial advisers would be put to test in coming up with structures that protect investors from currency fears (assuming the status quo remains) and also meeting the rating criteria,” he said.



FG tasks market stakeholders



In a bid to address the infrastructural development in the country and boost the economy, the Federal Government had also called on the Chartered Institute of Stockbrokers (CIS) to come with policy proposals that would drive the economy.



The Federal Government made the call recently at the 2019 edition of the CIS’s annual conference in Lagos.


Speaking on the theme: “Boosting capital market competitiveness in a challenging macro-environment, “ Minister of Industry, Trade and Investment, Otunba Richard Adebayo, said it would be a welcome idea if  CIS  could come up with  policy proposals to support and address Nigeria’s infrastructure challenges while government incentivizes and provide the enabling environment to support this objective.


The minister represented by Dr. Francis Alaneme, Director, Federal Ministry of Industry, Trade & Investment, said: “We declare our willingness to partner with the CIS in ensuring the necessary enabling environment that will further stimulate and boost competitiveness in the capital market as well as ensure a coordinated and integrated approach to Nigeria’s financial sector is attainable. The best way to improve competitiveness is through a mixture of policies designed to help, improve capital market competitiveness.”


Chairman, Capital Market and Institutions Committees, House of Reps, Honourable Babangida Ibrahim, stated that the theme was timely and address the need for effective policies that will drive the market forward.



His words: “I want to assure this institute that the committee is ready to work with the CIS and already the National Assembly and House of Reps in particular are aware of the major challenges facing the capital market in recent times.



“As a result of that, we have already started engaging with some of the key stakeholders including the institute on the best way forward.  I would like to appeal to the institute to be unofficial advisers to the government and continue to monitor the activities of the government as regards policies affecting the market so as to ensure we move the capital market forward.



“The theme is timely and there are certain actions that must be taken in order to boost the competitiveness of the market. One of the challenges facing the capital market is investors’ confidence because of the inability to get the kind of gains they want. Recently, we brought a motion in the house to investigate unclaimed dividends and we discovered that it is growing day by day and so I will appeal to this institution and other key players that by the time we commence the public hearing, all these challenges will be tackled.”



Last line


Sound macroeconomic and policy frameworks is essential towards improving the investment climate capable of attracting private investors at the level that can meaningfully aim at financing the nation’s infrastructure deficit and meeting its strategic programme.

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