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Finance Minister gives reason FG approached China for $17 billion loan

Zainab Ahmed reveals how World Bank, AfDB’s lack of interest in Nigeria during the recession forced FG to request for Chinese loan 

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FG inaugurates steering committee on Covid-19 economic recovery, #EndSARS: FG creates new N25 billion Youth Fund, to increase to N75 billion in 3 years, taxes, tax, IMF, business, FAAC disbursed N617billions in April, as South-South scoop N72billions, VAT, Finance Minister, Zainab Ahmed says Nigeria VAT collection rate is low, NBC, Rite Foods, others to pay new tax as FG identifies new revenue streams ,,Finance Minister reveals how World Bank, AfDB pushed FG into requesting Chinese loan 

The Minister of Finance, Zainab Ahmed, has disclosed that the Federal Government decided to obtain $17 billion loans from China as the World Bank and the African Development Bank’s (AfDB) failed to show much interest in Nigeria during the recession. 

The minister explained that the global lender, AfDB, and other lending institutions failed to show much interest in the nation during the recession period, which lasted for a year, as this made it requested the loan from the China-Exim Bank. 

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David Malpass, President, World Bank Group

Ahmed stated that the loan from the Chinese bank, “is meant to make funds available to our own development institutions so that they can give out loans because access to finance has been difficult for the Small and Medium Enterprise (SMEs).” 

Defending Buhari’s thirst for loan: She explained that the $29.96 billion loan request by President Muhammadu Buhari is to fund critical infrastructure across the country. She told the Senate that about $6 billion had been approved by the 8th National Assembly. 

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(READ MORE: Finance Bill designed for the good of Nigerians – Finance Minister, Zainab Ahmed) 

She disclosed to the Senate Committee on Local and Foreign Loans that 70% of the loan, which is about $17 billion, would come from the China-Exim Bank as Nigeria is in need of $22.8 billion to balance the $29.96 billion loan request. Meanwhile, the remaining loan would be sourced from other lending institutions such as the Islamic Development Bank. 

Using debt to cover up dwindling revenue: With revenue declining, the government intends to borrow in order to fund various projects which it says will reflect positively on the lives of Nigerians.

 “The funds ($22.8billion) will be channeled to the funding of infrastructure, which will enhance the productivity of our economy. 

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“Other projects are in healthcare and education. This also includes projects for the rehabilitation of the North-East geopolitical zone, which has been ravaged by insurgency. 

“Others are the Mambila Hydro Power project ($4.9billion), Lagos-Kano modernisation rail project ($4.1billion),  the Development Finance project loan being provided by a consortium of World Bank and African Development Bank agencies ($1.28billion). 

“Above all, the loan would help us improve on the electricity supply,  reduce poverty, create jobs, ensure access to finance,  agricultural productivity, guarantee food security, achieve high school enrolment, provide clean potable water, rehabilitate major roads and develop the mining industry.” 

FG won’t pay back loan alone: Since the Federal Government and some state governments were jointly requesting for the loans from various lending institutions, the Federal Government wouldn’t be solely responsible for the repayment of the loan being borrowed. 

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[READ ALSO: Again, Finance Minister argues that Nigeria is not in debt distress)

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According to Ahmed, some states will also be responsible for the repayment of the loan. “The 2016 – 2018 external borrowing plan is both for the Federal Government and the states. So, some states would be responsible for the payment of some of the loans.” 

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Dr. Akinwumi Adesina

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Nigeria’s debt level still not a problem: According to the Finance Minister, the Fiscal Responsibility Act set Nigeria’s current portfolio ceiling at 25% of total debt to GDP, so sustainability is not a problem. 

Ahmed explained that despite the worries among Nigerians regarding the country’s debt level, Nigeria’s debt level when compared to the USA, UK, and Canada, is still low. She stated that “The ratio for December 2018 was 19.09% but it reduced to 18.9% by the middle of 2019. 

“The debt service to revenue ratio is however high and it provides us strong justification for us to drive our revenue. In 2017, the ratio was 57% and 51% in 2018.” 

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]

1 Comment

1 Comment

  1. Anodebenze

    February 20, 2020 at 2:54 pm

    I think the minister of finance is talking rubuish,she have not given enough reasons is taking this Chinese loan,does she knows, we still have to pay back this loan.the next question is dual or treple (1) is their an alternative to this bloody Chinese loan (2)is this loan necessary ? this is why is still Nigeria is negotiable.(3)have the minister of finance have used half of her brain, to makes us Nigerian proud and comfortable being nigerians,does she know,when we take any loan from any body we are enslaved in some form
    Some people who are demented are ruling us,i am not an engineer no Chinese engineer will be involve or any American engineer will be involved in this project an eye for an eye, we,will ban the americans from coming to Nigeria as long they bans us nigerian,give me half of the money,i will built a railway from lagos to kano with a minimun speed of 150 millions an hour to 300 miles an hour on maglev to 500 miles an hour
    How I will do it is by this (1) by research (2)by gut and trails(3) I copy as and I knows the principle of and essence of meglev trains and the laws of motion.i repeat the process of train technology,and we are saddled with Chinese loan,the problem is Mr Buhari and his cabine tnigeria is negotiable

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Coronavirus

FG yet to purchase Covid-19 vaccines – Minister of State for Health

According to a disclosure made by the Minister of State for Health, the FG is yet to purchase any COVID-19 vaccine.

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NPHCDA to address infrastructural gaps in COVID-19 vaccine supply, FG to focus on procurement of Covid-19 vaccine in first quarter 2021

The Federal Government has said that it is yet to purchase any Covid-19 vaccines as the country is still assessing the prices of different shots, their availability and the logistics required for a nationwide roll-out.

This is coming at a time when developed economies are rolling out the vaccines in their countries and concerns have been raised about the availability of the Covid-19 doses in the African continent.

This disclosure was made by the Minister of State for Health Adeleke Olurunnimbe Mamora, during a telephone interview with Bloomberg.

What the Minister of State for Health is saying

Mamora said that once the government determines which vaccines are accessible and affordable, authorities then have to consider storage and distribution issues as they prepare to give shots to 200 million people.

He said, “We haven’t made any purchases at this point in time.’’ He added that the government expects to have a definitive plan by the end of January.

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Nigeria is working with the World Health Organization backed COVAX programme and hopes to receive its first doses in January. The Minister for Finance, Budget and National Planning, Zainab Ahmed, had said that the country is working on what type and quantity of Covid-19 vaccines to procure and financial provision will be made in the 2021 budget for the vaccines.

COVAX is a global initiative backed by the World Health Organization which aims to provide equitable access to Covid-19 vaccines, especially to poor countries.

What you should know

  • It can be recalled that Bloomberg had reported that experts and a state governor had expressed doubts about the ambitious plan by Nigeria to vaccinate as much as 40% of its population this year due to lack of resources and infrastructure.
  • The Chief Executive Officer of Nigeria’s National Primary Health Care Development Agency, Faisal Shuaib, said on Thursday the country expects to receive 100,000 doses of Pfizer Inc’s shot at the end of January through the Covax initiative.
  • Nigeria has officially reported 107,345 Covid-19 cases, with 1,413 casualties, but testing is not easily accessible for most people, with only about 1.1 million tests conducted so far.

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Economy & Politics

Nigerian government spends equivalent of 83% of revenue to service debt in 2020

The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020.

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The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020. This is according to the information contained in the budget implementation report of the government for the year ended December 2020.

According to the data seen by Nairametrics, total revenue earned in 2020 was N3.93 trillion representing a 27% drop from the target revenues of N5.365 trillion. However, debt service for the year was a sum of N3.26 trillion or 82.9% of revenue.

Nigeria’s debt service cost of N3.26 trillion has now dwarfed the N1.7 trillion spent on capital expenditure of N1.7 trillion incurred in 2020. This is also the highest debt service paid by the Federal Government since we started tracking this data in 2009.

The total public debt (External and Domestic) balance carried by Nigeria as of September 2020 stood at N32.22 trillion ($84.57 billion). Included in the total debt is a domestic debt of about N15.8 trillion.

 

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What this means: Nigeria’s debt to GDP ratio is estimated at about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.

  • However, the challenge has always been the debt service to revenue ratio, a metric that reveals whether the government is generating enough revenues to pay down its debts as they mature.
  • Since the first recession experienced in 2016, Nigeria has struggled with higher debt service to revenue ratio as revenues slid in direct correlation with the fall in oil prices.
  • Nigeria’s government spent about N2.45 trillion in debt service in 2019 out of total revenue of N4.1 trillion or 59.6% debt service to revenue ratio.
  • At 83%, 2020 ranks as the highest debt service to revenue ratio we have incurred. Before now it was 2017 with 61.6%.

Breakdown of what debts were serviced

The following amount was spent on debt service during the year

  • To service domestic debt, the government spent N1.755 trillion in 2020 as against a budget of N1.87 trillion.
  • For foreign debts, a sum of N553 billion was spent against a target budget of N805.47 billion. The drop here is likely a result of lower interest rates on foreign borrowing as well as very limited borrowing from the foreign debt market during the year.
  • The government only contributed N4.58 billion into its sinking fund instead of the budgeted N272.9 billion.
  • The sinking fund is required to set aside funds that will be used to pay down on other loans such as bonds when they mature in the future.
  • Finally, a sum of N912.57 trillion was spent on servicing CBN’s loans, granted via its Ways and Means provisions.
  • Nairametrics reported last week that a total sum of N2.8 trillion was extended by the CBN to the FG as Ways and Means.

What happens next: In 2021, the government projects a debt service of N3.1 trillion against revenue of N6.6 trillion or a debt service to revenue ratio of 46.9%.

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  • The government plans to spend N4.3 trillion on capital expenditure during the year.

 

 

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Tech News

Top 10 Nigerian tech companies and capital raised in 2020

These are the top 10 tech companies and the capital they raised in 2020.

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Startup funding in Africa, Fintech, Disrupt Africa

African startups raised over $1 billion in funding in 2020, with Nigerian startups raising 17% of this amount – $55.37million in Q1 2o2o and $28.35million in Q2 2020, according to Techpoint.

These are the top 10 rankings of the highest fundraisers for 2020.

Flutterwave

The startup provides digital payments infrastructure and services which enable global merchants, payment service providers, and pan-African banks to accept and process payments across various channels.

It raised a $35M Series-B round led by US venture capital firms Greycroft and eVentures in January 2020. The funding was invested in technology and business development to grow market share in the countries it operates in.

54gene

The startup is equalizing precision medicine by including underrepresented Africans in global genomics research. It raised $15M in a Series A funding round in April 2020 led by Adjuvant Capital – a life sciences fund backed by the International Finance Corporation, Novartis, and the Bill & Melinda Gates Foundation.

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These new funds will be used to address the gap that exists in precision medicine for people on the African continent.

Aella Credit

The startup is a one-stop app for all your financial needs. Aella makes it super easy for anyone to borrow, invest, and make payments. It secured a $10 million debt financing round from a Singaporean company – HQ Financial Group.

The new capital raised from Singapore is expected to facilitate the credit company’s effort to provide financial inclusion to many more of the people who are currently unbanked across Nigeria, West Africa, and other emerging markets.

Helium Health

The startup has become the leading provider of full-service technology solutions for healthcare stakeholders in Africa. It raised a $10 million Series A round in April 2020.

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Global Ventures and Africa Healthcare Master fund (AAIC) co-led the investment round. Helium plans to use the latest funding round to hire and expand to North and East Africa, including Kenya, Rwanda, Uganda, and Morocco.

Kuda Bank

The startup provides a full banking service on your smartphone. It secured a US$10 million seed round in November 2020 – the biggest seed round ever to be raised in Africa, led by Target Global with participation from Entrée Capital and SBI Investment.

The funding will be used to help accelerate its growth plans and keep up with customer demand. Specifically, funds will be used for key hires, product development, and to expand operations across Africa.

Trade Depot

The startup is a Nigerian B2B eCommerce company that utilizes an end-to-end distribution platform aimed at connecting the world’s top consumer goods companies directly to retailers in Africa.

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It raised $10-million in a pre-Series B equity round co-led by Partech, International Finance Corporation, Women Entrepreneurs Finance Initiative (We-Fi), and MSA Capital in July 2020.

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The new investment will enable Trade Depot to continue connecting international brands with small businesses in Nigeria, expand into other African cities, launch a suite of financial products, and credit facilities aimed at supporting its retailers.

Field Intelligence

The startup is helping governments and businesses make good on the promise of healthcare in the fastest-growing parts of the world by making the pharmaceutical supply chain radically simple, affordable, and easily accessible.

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It raised a $3.6 million Series A round in March 2020, led by Blue Haven Initiative, with investors including Newtown Partners via the Imperial Venture Fund and Accion Venture Lab.

The investment will be used to scale Shelf Life expansion throughout Nigeria and Kenya, as well as the development of additional services for Shelf Life clients and their patients.

MedSaf

The startup connects suppliers to hospitals and pharmacies directly to make the pharmaceutical supply chain more efficient. The health start-up raised $3.5M in a seed funding round in December 2020.  It will use this funding to expand to other African countries.

Auto Chek

The company is an automotive technology company that aims to build solutions for the African market. It raised $3.4 million in pre-seed funding round in November 2020, co-led by TLcom Capital and 4DX with inclusion from Golden Palm Investments, Lateral Capital, Kepple Africa Ventures.

Auto Chek will use the investment to grow its Nigerian and Ghanaian markets, invest in its tech, and grow its team.

Despite the ravaging impact of Covid-19, Nigerian tech start-ups raised millions of dollars in funding. We hope to see more investors in the first quarter of 2021.

Rensource Energy

The startup allows qualifying companies throughout Nigeria and West Africa to start selling Power-as-a-Service (PaaS) to their customers.

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It raised $3 million from Proparco, with the support of the European Union under the Africa Renewable Energy Scale-Up facility (ARE Scale-Up). The funding will be used to contribute to facilitating energy access in the context of a significant and growing energy gap in Nigeria and support the development of innovative solar energy solutions.

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