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State Governors parted with N33.9 billion to external debt deductions

While Nigeria’s debt profile hits a new high of N24.9 trillion in March 2019, state governors have parted with the sum of N33.9 billion referred to as external debt deductions in just one year.

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President Buhari Inaugurates National Economic Council, National Economic Council, State Governments seek refund over repaired federal roads

While Nigeria’s debt profile hits a new high of N24.9 trillion in March 2019, state governors have parted with the sum of N33.9 billion referred to as external debt deductions in just one year. This is reflected in the analysis of reports of revenue disbursement to states by the Federation Account Allocation Committee (FAAC).

Analysis of the data obtained from the National Bureau of Statistics (NBS) reveals that the sum of N33.9 billion was deducted from monthly allocation entitled to states between June 2018 and May 2019. This is believed to be deductions in the form of loan servicing obtained from external sources. 

[READ MORE: How State Governments will become richer without FAAC allocation]

Number breakdown: Across the 36 States of the Federation, unsurprisingly, Lagos State parted with the biggest amount from its allocation. Specifically, the sum of N10.3 billion was deducted from the allocation due to the State. This is largely expected as the State’s domestic debt stock is the biggest of all, rising to N542 billion in March 2019.

  • Kaduna State ranks third, with the sum of N2.28 billion deducted, leaving the State with an estimated N93 billion debt profile.
  • Cross River follows Kaduna slowly, having repaid N2.1 billion debt in the last one year, with N167 billion debt stock.
  • Oyo, Rivers, Osun and Katsina all repaid above N1 billion each within the period.

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Recent developments: Last week, the Debt Management Office (DMO) released the country’s debt stock data, and the report shows that only domestics debts accruing to States Governments rose to N3.97 trillion in March 2019. On the other hand, a proportion of the total N7.8 trillion total external debt is still accruable to the states.

  • Recent reports on FAAC disbursement have revealed some worrying trends, as revenue allocation declined by N1.3 billion in May 2019.
  • In April, a total of N617.5 billion was disbursed, while the disbursement dropped to N616.2 billion in May 2019.
  • This means that while states’ allocations are depleting, a portion of their monthly allocation is still constantly bookmarked to service debt.

[READ ALSO: Nigeria’s total debt stock rises to N24.9 trillion]

Debt management: Specifically, loans or debt granted to countries and states come with terms or conditions which may include cash to cover repayment of interest and principal on a debt for a particular period.

  • Debt can be flexible or otherwise, with a wide choice of financial conditions that are specifically tailored to meet a country’s overall debt management strategy.
  • Nigeria’s debt category is largely dominated by 41% of multilateral and bilateral sources from the World Bank, Bank of China, the African Development Bank and so on.
  • In order to manage the debt, billions are periodically substracted from both States and the Federal Government in the form of debt servicing being collected.
  • As of March 2019, the Federal Government paid N719 billion to service both external and domestic debt.

Bottom line: Debt is not entirely bad, as developing nations sometimes need a big push to meet financial obligations, but state governments need to be wary of building the country’s overall debt stock.

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  • Another critical downside to billions being parted by states to service debt is that these monies are being surcharged from already depleted revenue.
  • With most states running on low internally-generated revenue, there appears to be no concrete plan to manage the rising debt stock across the states.
  • In an attempt to deliver promises made to their citizens, many state governors may already be considering other debts accumulation strategies and this calls for great concern.

[READ FURTHER: Accountant General says no problem paying N293 billion debt servicing]

 

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Financial Services

CBN to bar exporters with unrepatriated export proceeds from banking services

The CBN will from January 31, 2021 bar all exporters with unrepatriated export proceeds from accessing banking services.

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CBN to restrict foreign exchange on more food imports

The Central Bank of Nigeria (CBN) has announced the prohibition of all Nigerian exporters who are yet to repatriate their export proceeds, from banking services effective from January 31, 2021.

The apex bank had in an earlier circular warned that failure to repatriate exports within 90 days for oil and gas and 180 days for non-oil exports constitute a breach of the extant regulation.

Analysts believe that the directive is part of a monetary control mechanism by policymaker to maintain relative stability in the exchange rate, especially after the pandemic created a wide disparity between the official exchange and the parallel market rates, eliminating incidences of over-invoicing, transfer pricing, double handling charges, etc.

In lieu of this, all concerned exporters are urged to comply with the directive before the specified date.

What you should know

  • According to Bloomberg sources, the new directive applies to exports up until June last year.
  • In a bid to ensure prudent use of foreign exchange resources, the Central Bank of Nigeria had earlier instructed authorised dealers and exporters to only open forms M for letters of credit, bills for collection and other forms of payment

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Financial Services

Niger Insurance Plc gets shareholders nod to restructure business

Niger Insurance Plc has announced plans to restructure its insurance business into distinct but mutually dependent business entities.

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Edwin Igbiti

Niger Insurance Plc has obtained shareholders’ approval to restructure its insurance business into general, life and business insurance, with each segment to be structured as a separate legal entity.

This is part of the resolutions passed at the 50th Annual General Meeting of Niger Insurance Plc., held on 20th of January, 2021 at Peninsula Hotel in Lekki, Lagos.

The decision to restructure the company is in a bid to make it more efficient and profitable to stakeholders, especially as efforts are geared towards overturning a loss of about 1,1723.2% Year-on-Year, earlier made by the company in its last reported financial statement, Q2, 2020, as reported by Nairametrics.

Other key decisions reached at the 50th AGM include;

  • The re-appointment of Mr Ebi Enaholo and Mrs. Olufemi Owopetu as Directors of the company.
  • Acceptance of the presented financial statement for the year ended December 31, 2019 and the report of the audit committee, directors and auditors.
  • Directors were authorized to fix the remuneration of the auditors.
  • Directors were authorized to appoint external auditors to replace retiring auditors of the company.
  • The appointment of four individuals as members of the audit committee.
  • A decision to restructure the company’s business capital was also reached.

In case you missed it: The shareholders of Niger Insurance Plc in the 49th Annual General Meeting approved the decision by the company’s board to raise additional capital to the tune of N15 billion, in a bid to meet the revised recapitalization targets for general and life insurance companies.

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What you should know: The House of Representatives had in December 2020 directed NAICOM to suspend the mandatory deadline for the first phase of 50%-60% of the minimum paid-up share capital for insurance and reinsurance firms.

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Energy

Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure

ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil exports as production resumes.

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ExxonMobil has lifted a force majeure on Nigeria’s Qua Iboe crude oil export terminal, as crude exports resume for the first time in almost six weeks after a fire at the terminal halted operations.

This is according to a company spokesman yesterday, who confirmed the company had lifted force majeure on Qua Iboe crude loadings.

Qua Iboe production started to ramp up to normal levels of 200,000 b/d in the past week, according to sources, with the release of both the February and March loading programs.

The VLCC Dalia was also in the process of loading a 1-million-barrel stem at the Qua terminal since January 21, 2021, according to data intelligence firm Kpler. This will be the first export of Qua Iboe since December 15, 2020, after a fire hit the facility and injured two workers.

The company has been under pressure since the closure and prices have taken a hit as a result of the disruption. S&P Global Platts last assessed the grade at a discount to Dated Brent of 50 cents/b, down from a premium against the benchmark in December.

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Bonny Light, a mainstay Nigerian crude which typically trades at roughly the same level as Qua Iboe, was last assessed 30 cents/b higher.

What they are saying

One trader said: “If you get a cargo of Qua now it could be 50 cents to a dollar below Bonny even – a January cargo is completely out of cycle and the reliability issues mean people won’t touch it.”

Another trader stated that: “[The return of Qua Iboe] is not what West African crude assessments (WAF) differentials needed.”

What you should know

  • Qua Iboe is one of Nigeria’s largest export grades, and is very popular among global refiners, with India, the US, Canada, Italy, Spain, Indonesia, and the Netherlands being key buyers.
  • Qua Iboe is light sweet crude, which has a gravity of 36 API and sulfur content of 0.13%. The crude, produced from fields 20-40 miles off the coast of southeast Nigeria, is brought to shore at the Qua Iboe terminal via a seabed pipeline system.
  • Indian demand has steadied following a buying spree late last year, and European demand has been hit by renewed coronavirus lockdowns in the region.
  • Prices for Nigerian crude have suffered in recent weeks, even with lower supply due to the outage.
  • February and March loading programs have been issued for Qua Iboe averaging 169,643 b/d and 153,226 b/d respectively.
  • Production of this key grade ranged between 180,000-220,000 b/d in 2020, according to S&P Global Platts estimates.

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