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Business News

Atiku kicks as Buhari spends $3.7 billion in foreign debt service since 2015

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Budget: FG completes just 31.7% of constituency projects, Nigerians react to President Buhari's signing of Finance Bill 

The Buhari led government has spent about $3.7 billion in foreign debt service since 2015, one of the highest from any democratically elected government. The highest single-year foreign debt service was in 2006 at $1.79 billion.

About 68% of Nigeria’s foreign-denominated debt servicing is in commercial Eurobonds issues over the last two years. The loans range between 5.1% and 9.2% per annum. Nigeria’s external debt stock stood at $27 billion in June 2019.

Rising debt service: The Buhari administration has so far spent about $1.1 billion in foreign debt service this year. In 2018, the government spent about $1.4 billion in debt service, more than 3 times the $444 million it spent servicing foreign debts in 2017. The rising cost of debt service is a direct attribute of the government’s reliance on foreign loans as a means of funding government expenditure.

Debt service since 2003. Source: CBN. Nairametrics Research (C)

Foreign Loans: Nigeria’s fallen revenue following the crash in oil price has allowed President Buhari to rely mainly on foreign loans to fund government expenditure. As of June 2015, Nigeria’s foreign loans were about $10.5 billion mostly made up of multilateral and bilateral loans.

However, by June 2019, total foreign-denominated loans were $27 billion with $10.8 billion made up of Eurobonds. Commercial loans which include Eurobonds and Diaspora bonds make now make up about 42% of total foreign borrowings.

[READ ALSO: Babatunde Fowler attributes FIRS success to technological innovation (Opens in a new browser tab)]

Critics of the government have complained about the government penchant for debts believing that it could put the future of younger Nigerians in jeopardy. Supporters of the government, however, believe the borrowing was necessary to invest in critical sectors of the economy particularly infrastructure.

Recently, Director-General of MAN, Segun Ajayi-Kadir expressed worry about Nigeria’s rising debt.

“….the rising debt profile of Nigeria continues to be a cause for concern, especially the capacity of government to effectively service it and, at the same time, meet the bursting needs and aspiration of the citizenry going forward.” 

“Already, our budget projections for 2020 anticipates a debt service sum of 2.45trillion, an amount higher than the 2.14 trillion earmarked for capital expenditure. 

“And even though our debt-to-Gross Domestic Product (GDP) ratio, which currently stands at 28 percent, is still below the average in Africa, our revenue-to-GDP ratio remains low.”

The Finance Minister Zainab Ahmed however, believes the current debt profile is sustainable, comparing it to our GDP.

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“Currently, Nigeria’s debt is at N25 trillion; that is about $83 billion. And at $83 billion, we are just at 18.99%…so 19% debt to GDP. I hear people say Nigeria has a debt problem. We don’t have a debt problem. What we have is a revenue challenge and the whole of this government is currently working on how to enhance our revenues, to ensure that we meet our obligation to service government as well as to service debt.”

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[READ ALSO: Babatunde Fowler attributes FIRS success to technological innovation (Opens in a new browser tab)]

Former Vice President and defeated PDP Presidential aspirant, Atiku Abubakar during the week piled criticism on the government’s borrowing.

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“I have said it time and again. The business of government is too serious to be left in the hands of politicians. We must all ask questions because if they throw away the future, it is not going to be their future they are throwing away, it will be all our futures.

“The fact that Nigeria currently budgets more money for debt servicing (N2.7 trillion), than we do on capital expenditure (N2.4 trillion) is already an indicator that we have borrowed more money than we can afford to borrow. And the thing is that debt servicing is not debt repayment. Debt servicing just means that we are paying the barest minimum allowable by our creditors.

What this means: Nigeria’s rising foreign debt profile should be a worry to investors and businesses and must be watched closely. The country’s ability to repay these loans will continue to be harder as it increases especially now that it is costing about 9%. The immediate risk for investors is the exchange rate which could be the first to suffer should the government struggle to repay its loans.

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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Consumer Goods

NSE CGI depreciates by 8% in February, recording highest decline since March 2020

The NSE Consumer goods index shed a total of 49.84 index points in February, the highest loss on the index since March 2020.

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Top 10 stockbroking firms trade N1.35 trillion on stocks in 2019, Nigerian stockbrokers facing extinctionBanking stocks lay anchor on the shaky waters of Nigerian Stock Market, Nigerian banking stocks ignore red flags, boost nigeria stock market, stock market

The Nigerian Stock Exchange Consumer Goods Index (CGI), an index that tracks the performance of consumer goods companies, depreciated by 8.12% in the month of February at the back of sell-offs and building negative sentiments in the market.

A preview of the performance of the index revealed that as of the close of trading activities on Friday 26th February 2021, the index stood at 563.85 index points, from 613.69 index points at the open of trade for the month.

In line with this, the Consumer Goods Index shed a total of 49.84 index points – the highest since March 2020 (-132.53 index points)- as wary investors offload shares of top consumer goods company on NSE, leading to the decline in the share price of Nestle, Dangote Sugar, Flour Mills, NB and eight (8) others.

Source:Tradingview

What you should know

  • The NSE Consumer goods Index was designed to provide an investable benchmark to capture the performance of companies in the consumer goods sector. The index comprises the most capitalized and liquid companies in food, beverage, and tobacco.
  • The index is based on the market capitalization methodology, as it tracks the performance of fifteen consumer goods companies on the Nigerian Stock Exchange which includes, Nestle, Nigerian Breweries (NB), Dangote Sugar, and Flour Mills.
  • The overall performance of the companies was bearish, as the index closed on a negative note in the month of February with 12 losers relative to 3 gainers.
  • NNFM (-27.48%) led the losers’ chart, while MCNICHOLS (+56.86%) was the top gainer in the month of February, followed by GUINNESS (+21.32%).

Top gainers

  • MCNICHOLS up 56.86% to close at N0.8
  • GUINNESS up 21.32% to close N23.05
  • UNILEVER up 0.74% to close at N13.95

Top losers

  • NNFM down by 27.48% to close at N7.02
  • VITAFOAM down by 22.89% to close at N7.75
  • CHAMPION down by 18.97% to close at N2.52
  • NB down by 17.46% to close at N52
  • FLOURMILLS down by 16.86% to close at N28.85

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Energy

Dangote tells FG to allow only refinery license holders to import petrol

Dangote Group has urged the National Assembly to include in the PIB a law allowing only companies with active refining license to import petroleum products.

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The Dangote Group has suggested the inclusion of a provision that in the Petroleum Industry Bill (PIB) that only companies that have active refining license should be allowed to import petroleum products.

The company, which is on the verge of completing a 650,000-barrels-per-day refinery in Lagos, said this would encourage investment in local refining.

According to a report by Punch, this disclosure was made by the Chief Strategy Officer of Dangote Group, Aliyu Suleiman, in a presentation during a visit by members of the National Assembly’s Joint committee on PIB to the project site as he highlighted several recommendations by the company.

What the Dangote Group top official is saying

Suleiman said, “Nigeria is exceptional in being a major oil producer with near-zero refining capacity.

“Though the Dangote Refinery will help address this, there could be periods when petroleum products may need to be imported, such as when the refinery is undergoing turnaround maintenance or if demand grows to exceed capacity.

The company made a recommendation for a backward integration policy to be applied in the downstream petroleum sector to encourage investment in local refining.

He said, “To support this, licence to import any product shortfalls should be assigned only to companies with active refining licences. Import volume to be allocated between participants based on their respective production in the preceding quarter. Such import will be done under the DSDP scheme.’’

The Dangote Group said that fuel imported into Nigeria are of very low quality with a harmful effect on health and also impacts the performance and durability of vehicles, especially high-performance cars.

The company suggested that to safeguard the health of Nigerians, imported petroleum products must conform to the Afri-5 specification (50 ppm sulphur) in line with the ECOWAS declaration of February 2020 on the adoption of the Afri-Fuels Roadmap.

What this means

  • The implementation of this policy suggestion will go a long to improve the local refining capacity of refined petroleum products in the country and subsequently end its massive importation that is the current trend.
  • This will also help conserve the scarce foreign exchange that is being expended on the importation of petroleum products in the country.
  • The Dangote refinery which has faced several delays in its completion is expected to take in 2021.

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Coronavirus

FG confirms Covid-19 vaccine will arrive Nigeria on Tuesday, March 2

The FG has stated that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2, 2021.

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FG approves reopening of NYSC camps, extends tenure of PTF on COVID-19, FG commences process of resumption of international flight operations in weeks, COVID-19: Reactions trail FG travel ban on 13 countries, FG inaugurates 16 members to PENCOM board

The Federal Government has confirmed that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2, 2021.

This follows the readiness of the country to receive its first shipment of 4 million Covid-19 vaccines from COVAX, a World Health Organization (WHO)-backed initiative set up to procure and ensure equitable distribution of vaccines for free among countries across the globe, as the world races to contain the coronavirus pandemic.

According to a report from the News Agency of Nigeria (NAN), this confirmation was made by the Secretary to the Government of the Federation (SGF), Mr Boss Mustapha, on Saturday in Abuja while evaluating the country’s fight against the disease.

What the Secretary to the Government of the Federation is saying

Mustapha, who is also the Chairman of the Presidential Task Force (PTF) on COVID-19, disclosed the United Nations Children’s Emergency Fund (UNICEF) would be organizing the shipment from Mumbai, India.

He said, “They (vaccines) should depart India on March 1, 2021, in the night and arrive in Abuja on the 2nd of March, 2021.”

The PTF chairman was full of praises for Nigeria’s health workers and the various frontline workers for working hard to combat the coronavirus pandemic.

In his evaluation of the country’s response to Covid-19 in the last one year, Mustapha said the PTF had performed very well with a very robust national response.

He said, “We have succeeded in discharging our mandate of managing the pandemic with a well-defined process and a robust national response.’

The SGF said that the strategies developed by his committee to manage the pandemic had been replicated in some other countries, especially the compulsory Polymerase Chain Reaction (PCR) testing for travellers.

He explained that the pandemic had helped the country to improve on its health infrastructure, citing the increase in the number of infectious diseases testing laboratories from 4 to 132 across the country.

What you should know

  • COVAX, which was set up in April 2020 to help ensure a fairer distribution of coronavirus vaccines between the rich and poor nations, said it would deliver 2 billion doses to member-states by the end of 2021.
  • The Federal Government had earlier announced that the first 4 million doses of the vaccines from COVAX would arrive in the country by the end of February 2021.
  • Ghana was reported to have received 600,000 doses of the AstraZeneca vaccines on Wednesday, making it the first African country to benefit from the COVAX programme, with Cote d`Ivoire also receiving over 500,000 doses of the Oxford-Astrazeneca COVID-19 vaccine on Friday.

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