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Nigerian economy’s 40% exposure to foreign credit is dangerous- CBN

The CBN has warned that Nigeria’s economy is at risk due to the foreign credits which account for 40% of the total credit in the country’s economy.

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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.

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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.”

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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.

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“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.

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[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.

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“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.

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“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%)

CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty 

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.”

 

Patricia

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Economy & Politics

Buhari sheds light on why Magu was suspended

Shehu’s statement sheds more light on Magu’s suspension.

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Following the suspension of the Acting Chairman of the Economic and Financial Crimes Commission (EFFC), the Presidency has revealed the grounds for his suspension through the Senior Special Assistant on Media and Publicity to the President, Garba Shehu in a statement on Saturday evening.

He revealed that a preliminary review was conducted on allegations leveled against Magu and other EFFC staff that justified reasons for an investigation on his activities, and a panel was constituted “in compliance with the extant laws governing the convening of such a body,” adding that in cases of allegations against the head of the EFCC, it was proper procedure for the Chair to step down to enable a fair investigation.

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“As is the proper procedure, when allegations are made against the Chief Executive of an institution, and in this case an institution that ought to be seen as beyond reproach, the Chief Executive has to step down from his post and allow for a transparent & unhindered investigation” he said.

The EFCC does not revolve around the personality of an individual, and as such cannot be seen through the prism of any individual.

“Therefore, the suspension of Mr. Ibrahim Magu, allows the institution to continue carrying out its mandate without the cloud of investigation hanging over its head.”

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He added that the EFCC is committed to fighting economic and financial crimes in Nigeria, and Magu would have the opportunity to defend himself against allegations leveled against him as stipulated by the Nigerian constitution where “every citizen is presumed and remains innocent until proven guilty.”

He said the war against corruption was not a static event, but a continuous process that required transparency and accountability, where people must be held to account for their activities so as to improve Nigeria’s democratic institutions.

“Those who see Mr. Magu’s investigation, as a signal that the fight against corruption is failing, have unfortunately, missed the boat.

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“There is no better indication that the fight is real and active than the will to investigate allegations in an open and transparent manner against those who have been charged to be custodians of this very system,” he said.

“Under this President and Government, this is our mantra and guiding principle. There are no sacred cows, and for those who think they have a halo over their heads, their days are also numbered,” Shehu said.

He also said Magu was not immune to investigations regardless of the “obvious embarrassment that potential acts of wrongdoing by him” may have caused the Nigerian Government, however, the government maintains its fight against corruption.

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Ibrahim Magu was suspended as EFCC Acting Chairman this week after facing a preliminary panel at the Aso Villa and was replaced by Mohammed Umar.

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Economy & Politics

Magu probe: New facts suggest case is about re-looting of previously stolen funds

The report exposed acts of corruption and money laundering against some EFCC officials, including Magu.

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Ibrahim Magu, Buhari appoints new Ag. Chairman of EFCC, gives reason for Magu's suspension

There appear to be more troubles for the suspended acting Chairman of the Economic and Financial Crimes Commission (EFCC), Ibrahim Magu, as some new cases bordering on alleged re-looting of recovered funds and bribery may be lined up against him.

Some new facts also emerged on how accumulated interest rates on the recovered N550 billion by the EFCC in the period under review were allegedly re-looted. The suspended EFCC boss is expected to disclose the whereabouts of the missing interest funds running into millions of naira.

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The final report of the Presidential Committee on Audit of Recovered Assets (PCARA) that covered the period of May 29, 2015, to November 22, 2018, had also confirmed the concerns of the public about the contradiction in the recovered funds by Magu. These contradictions include;

For Foreign currency recoveries, EFCC reported a total naira equivalent of N46,038,882,509.87, while the naira equivalent of the foreign currency lodgments was N37,533,764,195.66, representing a shortfall of N8,505,118,314.21.’’

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“These inconsistencies cast serious doubt on the accuracy of figures submitted by the EFCC. It is the committee’s view that the EFCC cannot be said to have fully accounted for cash recoveries made by it.’’

“While EFCC reported total Naira recoveries of N504,154,184,744.04, the actual bank lodgments were N543,511,792,863.47. These discrepancies mean that EFCC’s actual lodgment exceeded its reported recoveries by N39,357,608,119.43.’

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It should be noted that the about N39 billion discrepancy excludes the missing accrued interest.

With all these, the report suggests that there is an apparent case of manipulation of data in a very brazen and unprofessional manner and has greatly eroded public confidence in the anti-corruption efforts.

The PCARA revealed how the investigative reports on EFCC’s activities by the Nigeria Financial Intelligence Unit (NFIU) exposed acts of corruption and money laundering against some EFCC officials, including Magu.

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The NFIU report shows that the Acting Chairman has been using different sources to siphon money from the EFCC, and in some cases collecting bribes from suspects.

The report has shown that a particular Bureau de Change, owned by Ahmed Ibrahim Shanono linked to the Acting Chairman based in Kaduna has more than 158 accounts and has been receiving huge sums of money.

The PCARA report also said that Magu was linked to a N28m payment to Falana who is alleged to be his close associate and ally.

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READ ALSO: Air Peace’s Onyema saga: EFCC seizes passport, as Northern Youths plan rally at US embassy

Background

According to reports from the News Agency of Nigeria (NAN), the former EFCC boss is being interrogated by the Rtd, Justice Ayo Salami led Presidential Probe Panel over allegations bordering on mismanagement and lack of transparency in managing recovered assets by EFCC.

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A final report of the Presidential Investigation Committee on the Federal Government Recovered Assets and Finances by EFCC from May 2015 to May 2020 had seriously indicted and implicated Magu on various allegations levelled against him.

The terms of reference for the investigative committee were

’Investigate, verify and review the recommendations of the Presidential Committee on Audit of Recovered Assets as it relates to the EFCC, with a view to ascertaining the complicity or otherwise of the Ag. Chairman, Ibrahim Magu, in the mismanagement of the assets recovered by the Commission.’’

‘’Identify Avenues through which the recovered assets are dissipated and seized, recovered, forfeited (Interim and Final) assets are valued, managed, disposed and/or mismanaged with a view to ascertaining compliance or otherwise with extant laws, regulations, processes and procedures.’’

‘’Review the existing procedures on the Management of the seized, recovered and Forfeited assets (interim and final) and proffer Standard Operational Procedures for the management of seized, recovered and forfeited assets.’’

‘’Determine whether assets recovered during his tenure, whether locally in Nigeria or abroad, are being kept safely in a manner as to preserve their original value and determine: –

  • Whether all the assets could be properly accounted for by the Ag. Chairman.
  • To confirm if any of the assets have been diverted to the benefit of the Ag. Chairman, his family, relation, friends or favoured staff.
  • To recover any such diverted assets and return back to the EFCC or appropriate government agency.

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The committee was also to probe and report on corruption and money laundering allegations based on petitions and intelligence reports, involving Magu and Bureau De Change operators as well as some of his associates.

It was to audit the Assets and Finances of the EFCC as a legal entity from 2015-2020, with a view to establishing compliance or otherwise with procurement procedures of the EFCC in line with the provisions of the Procurement Act.

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Real Estate and Construction

Tax on rents and Certificate of Occupancy is valid – Akabueze

FIRS had announced that stamp duty will be paid on house rent and C of O.

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The Director-General of the Budget Office of the Federation, Ben Akabueze, announced that the recent FIRS taxes on Certificate of Occupancy and rents is not new and has been around since the 1980s.

He disclosed this in the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF&FSP) on Friday, adding that ever since the 80s, his landlord had always given him a postage stamp on his rent receipts, and that the law was not just recognized for a long time.

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“Over time, because the culture of postage has dropped off and that was not being implemented. What FIRS has done now is to make that into electronic stamp that you can still use to comply with the existing law,” Akabueze said.

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Last week, the Federal Inland Revenue Service (FIRS) announced that stamp duty will be paid on house rent and Certificate of Occupancy (C of O), in line with its new adhesive duty. The new duty was inaugurated in Abuja at the official inauguration of the Inter-Ministerial Committee on Audit and Recovery of Back Years Stamp Duties.

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FIRS Director for Communication and Liaison Department, Mr Abdullahi Ahmad, said the new policy was necessary so as to give the instruments the legal backing required and make them legally binding on all parties involved in such transactions.

READ MORE: FIRS to deploy new technology in tax collection, as MDAs refuse to pay 7.5% tax

Consequently, Ahmad asked Nigerians to ensure that documents that related to rent and lease agreements for homes or offices, C of O, and other common business-related transaction instruments were authenticated with the new FIRS Adhesive Stamp Duty.

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He also advised Nigerians to make sure that any document related to leasing agreements and rents related to offices and homes, including C of O and other transaction instruments used in these seals were authenticated with the new FIRS Adhesive Stamp Duty.

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