The Central Bank of Nigeria (CBN) has warned that the 40% exposure of the nation’s economy to foreign credits portend danger.
The apex bank warned that the withdrawal of such funds could cripple Nigeria’s economy and lead to high rate of poverty.
Deputy Director, Financial Policy and Regulation Department, CBN, Hassan Mahmoud, explained that the level of concentration of credits in the hands of foreign partners weakens the economy.
He said, “A drop in the activities of the capital market by the foreign firms would be devastating to the economy as the market is largely dominated by international firms.”
Mahmoud said the volume of foreign portfolio investments in the money market was over $20 billion.
Mahmoud disclosed this during a workshop for business editors and correspondents organised by the Nigeria Deposit Insurance Corporation (NDIC) on Tuesday in Yola, Adamawa State.
In his address, Mahmoud stated that, “Of the total activities in the capital market, 40 per cent of them are from foreign holdings. Even in our money market too, substantial part of the foreign portfolio investments accounts for over $20billion.
“Over 40% of total credits in the economy are in forex. So, anything that happens to the domestic economy will make this huge funds to go out; and when they are about to go out, it will be very devastating for the economy, given our level of external reserve, tools we have to manage exchange rates, and given the sensitivity of that exchange rate market.
“We see in some advanced economies a zero inflation rate. However, for some economies in the Europe area, we see inflation picking up. Even though we are getting out of import dependence, a substantial part of our input or raw materials is still imported. Those hikes in prices are going to feed into our domestic prices.
“Also, a lot of Nigerian corporate bodies, including government have borrowed from the international markets. Our total borrowings now are over $10 billion; so we have huge exposure to international stock markets, and any developments in those markets will impact whatever value of investments and expectations that we have in those economies,” Mahmoud was quoted in a report by The Nation.
[READ MORE: Nigerian economy to grow by 2.38% in Q4 – CBN]
Nigeria’s economy still struggling: Nigeria’s economy is still struggling despite the growth it recorded recently. Mahmoud said the country had not recovered strongly after the financial crisis which started about a decade ago.
He said, “The GDP as of today from the National Bureau of Statistics (NBS) is 2.28 per cent. However, if you look at the pre-financial crisis period, it was about 6 to 7 per cent. Since the financial crisis started about a decade ago, we have not even added 200 basis points to our GDP growth. This is of great concern.
“China was doing 10%, and has moved 70 to 8% in less than 10 years. Other emerging economies have surpassed their pre-crisis growth rate.
“However, if we are looking at the minus 1.9 per cent that we did in 2015 and 2016, and the 2.28 per cent growth rate in the third quarter of 2019, you will see that we have moved substantially because it is more difficult to come out of recession than to sustain a positive growth rate.
“It is projected by the CBN that by the fourth quarter of 2019, we are going to be doing 2.38%. The International Monetary Fund (IMF) is projecting close to 2.31%. However, the government is actually projecting 3.1% in the National Planning, given expectations from their Economic Recovery and Growth Plan (ERGP) initiative.”
[READ ALSO: CBN to increase LDR to 70%)
Poverty level will increase: According to Mahmoud, despite the increase in the contribution of oil sector to the GDP, the number of Nigerians that would fall into poverty would increase due to the failure of the agricultural sector to produce the expected output. He stated this on the basis of the number of Nigerians engaging in agriculture.
“Non-oil contribution to GDP is declining, even as oil sector contributed more to GDP growth. However, the concern is because of the volatility in the oil sector (if it is the driver of our economy), any shortfall from it will significantly distort our projections.
“However, the oil sector is still contributing less than 10 per cent to the GDP. The non-oil sector is still the major contributor to the GDP, which includes agriculture and manufacturing.”
Finishing 2020 strong, United Capital records double digit growth with profit rising by 61%
Delights shareholders with a proposed dividend of N0.70k per share.
Foremost Pan-African financial and investment services group, United Capital Plc has announced its audited results for the full year ended December 31, 2020, recording double-digit growth across all its major income lines.
Despite the Covid-19 pandemic and the resultant challenging operating environment, the investment institution leveraged on increased efficiency to deliver an impressive 61 per cent year-on-year growth in profit before tax to N7.95 billion compared with N4.95 billion at the end of 2019; while profit after tax stood at N7.81 billion, showing an increase of 57 per cent above the N4.97 billion it closed in 2019.
United Capital also recorded a 50 percent year-on-year growth in gross earnings to close at N12.87 billion in December 2020, compared to N8.59 billion recorded in the similar period of 2019.
On account of a significant 54 per cent increase in investment in financial assets, United capital’s total assets also rose by 48 per cent to N224.75 billion in the period under review, compared to N150.46 billion recorded at the end of the 2019 financial year; while shareholders’ funds grew to N24.43 billion rising by 25 per cent from 19.59 billion a year earlier.
On the back of the strong performance, the Directors of United Capital have proposed a dividend of 70k per share, amounting to a total of N4.2 billion dividend to be paid upon ratification by shareholders at its forthcoming AGM. The 70k dividend per share, which is higher than the 50k per share declared in 2019, is payable to shareholders whose names appear on the Register of Members at the close of business on March 5, 2021.
The Group Chief Executive Officer, United Capital Plc, Mr. Peter Ashade, expressed delight on the performance, which according to him is cheering news despite the challenges that most companies faced in the year 2020.
He said, “I am pleased to inform all stakeholders that United Capital delivered impressive returns amid the unprecedented environment worsened by the pandemic during the 2020 financial year with remarkable double-digit growth in Revenue, PBT and PAT and solid performance across key business parameters.
“This empowers us to adopt a more positive outlook for the year 2021 as we navigate the tough terrain compounded by a second wave of the COVID-19 pandemic among other severe economic challenges,” Ashade noted.
Speaking on its plan for the 2021 financial year, Ashade said, “Despite the tough operating environment, all stakeholder groups can be assured of our commitment to providing best-in-class solutions to diverse client segments and delivering superior returns to shareholders even as we work with regulatory authorities to strengthen the broader financial system as the domestic economy continues on the path to recovery in the year 2021.”
United Capital Plc is a leading Pan-African financial and investment services group, with a mission to provide bespoke and innovative value-added services to its client. The group aims to transform the African continent by providing innovative and creative investment banking solutions to governments, companies, and individuals
DEAL: Tangerine Life completes take-over of ARM Life Insurance Plc
Tangerine Life Insurance has concluded the acquisition of ARM Life Plc.
Tangerine Life Insurance, a subsidiary of Verod Capital Limited has concluded the acquisition of ARM Life Plc.
This is according to a press release issued by the firm’s Head, Brand and Communications, Olabisi Adesokan, seen by Nairametrics.
The merger is expected to consolidate and optimize the unique strengths of both sides, both in the corporate and retail markets, creating a stronger and broader insurance and financial services platform that will be of immense benefits to all.
Background of the deal
A decision to complete the acquisition of ARM Life Insurance Plc was reached at Tangerine’s Board Meeting held on 4th of March, 2020, where the provisions of section 131 of the Investment and Securities Act (ISA) 2007 was triggered.
Provisions in section 131 of ISA 2007 had empowered Tangerine Life Insurance to takeover ARM Life, following its 77.72% equity stake held in the latter, which translates to 7,392,953,710 ordinary shares.
In lieu of this, a decision to buy-out the remaining stake of 2,180,967,082 ordinary shares at N0.63 was ratified at the Board meeting and subsequently implemented.
What they are saying
Commenting on the rationale behind the deal, the Managing Director of Tangerine Life, Livingstone Magorimbo said: “Integrating the businesses has presented us a tremendous opportunity to enhance our capabilities, improve operating efficiencies and grow our businesses.
“At Tangerine Life, we will continue to innovate, drive positive change within the insurance industry and create tremendous value for our customers towards effectively positioning our business to stay ahead of the next wave of industry evolution.”
On the other hand, a former Managing Director at ARM Life, Stephen Alangbo added that: “Innovation is paramount in ensuring customer satisfaction in today’s business landscape. We believe that the combination of both entities will ensure exceptional value creation for existing and new customers and partner.”
What you should know
- According to the press release, the merger places Tangerine Life as the 4th largest life insurer in Nigeria and position it for future growth.
- Tangerine Life Insurance Limited, formerly known as Metropolitan Life Insurance Nigeria Limited was incorporated on 19 August 2004 and licensed by NAICOM on 14 February 2007. It is principally engaged in the provision of group life, credit life and individual life products to over 12,000 blue-chip corporate and retail clients.
- The Company is majorly owned by Oreon LMS Limited, a subsidiary of Verod Capital Growth Fund II, a US$115 Million private equity fund managed by Verod Capital Management Limited.
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