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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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#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. 

Nigeria misses out as World Bank lists countries with reforms on women empowerment  

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.

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

“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

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

COVID-19: Our economy is too fragile to bear another round of lockdown – Buhari

President Buhari has called on Nigerians to do all they can to avert a second wave of COVID-19 in Nigeria.

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Q1 2020 National Debt report, Buhari finally speaks on NDDC probe, urges NA to act with a sense of urgency,National Human Rights Commission,Presidency bows to pressure, agrees to demand made by EndSARS protesters, Our economy is too fragile to bear another round of lockdown-Buhari

President Muhammadu Buhari said that the Nigerian economy is too fragile to go into another lockdown, as the second wave of coronavirus forces some European countries – Germany and France, to enter another phase of lockdown.

The President disclosed this in a social media statement on Thursday afternoon via his official Twitter handle.

Buhari said Nigeria will work hard to control its local spread, as the country can’t afford a lockdown.

Looking at the trends in other countries, we must do all we can to avert a second wave of COVID-19 in Nigeria. We must make sure that our cases, which have gone down, do not rise again. Our economy is too fragile to bear another round of lockdown,” President Buhari said.

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(READ MORE:#EndSARS: Hoodlums loot Yakubu Dogara’s house in Jos)

What you should know

According to a Bloomberg report, the rising cases of COVID-19 in Europe have led to another phase of lockdowns, with the Eurozone’s 2 biggest economies, Germany and France announcing new lockdowns restrictions.

“The measures we’ve taken have turned out to be insufficient to counter a wave that’s affecting all Europe,” said French President Emmanuel Macron

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In August, Nairametrics reported that President  Buhari approved the extension of the second phase of eased lockdown by another 4 weeks.

Nigeria’s Gross Domestic Product (GDP) in real terms declined by 6.10% (year-on-year) in Q2 2020, ending the 3-year trend of low but positive real growth rates recorded since the 2016/17 recession.

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Business News

FG to invest in the deployment of Mini-grid systems to power 5 million homes in 2021

The Minister said the government will invest in Mini-grid systems that will provide power for 5 million homes in 2021.

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Estates in Lekki increase electricity tariff to N105/kWh, Eko Electric, Ikeja and 5 others to face NERC sanction for non-compliance, CBN reveals framework for financing National Mass Metering Programme (NMMP)

In a bid to provide remote communities with clean and affordable energy, the Minister of Power, Engineer Sale Mamman has disclosed that the Government is set to invest heavily in the deployment of Mini-grid systems that will provide power for 5 million homes in 2021.

This disclosure was made by Engr. Sale Mamman in a statement released into the mainstream media via his official Twitter handle.

READ: Electricity: Nigeria now has an installed generation capacity of 13,000MW – Minister of Power

The Minister explained that it is virtually impossible for the National grid to cover every geographical point within Nigeria. He emphasized that this reality prompted the present administration to sort out alternatives, and as a result, the Government is set to invest heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, and affordable energy in 2021.

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READ: Nigeria to fix irregular power supply in 40 years- Senate

What they are saying

The Minister, in his statement, said, “It is virtually impossible to have the National grid covering every geographical point within Nigeria, that is why the Government is investing heavily in the deployment of Mini-grid systems, which can easily get to the most remote communities and provide clean, affordable energy.

“In 2021, part of our priorities at the Ministry and two of its implementing agencies will be on providing these Mini-grid systems for communities and stand-alone home solar systems. We have a target of 5 million homes. Clean, affordable, and accessible energy for all.”

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(READ MORE:FG set to create at least 5 million jobs for youths in the power sector – Minister of Power)

What you should know

The Minister of Power, Engineer Sale Mamman, at the 2021 budget defense before the House of Representatives Committee on Power in Abuja, yesterday disclosed that Nigeria’s installed grid power generation capacity has grown from 8,000MW to 13,000MW under the leadership of President Muhammadu Buhari.

READ: UPDATED: FG appoints Eweluka as NBET MD, as finance, power ministers wrestle

The Minister also pointed out that the distribution system had the capacity to evacuate 5,500MW of power, which is a significant improvement from 4,500MW in 2015.

 

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ENDSARS

Post-#EndSARS: A time of reckoning for the Insurance companies in Nigeria

As the dust from the #EndSARS protests settles down, it is a time of reckoning for insurance companies in Nigeria.

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Post-#EndSARS: A time of reckoning for the Insurance companies in Nigeria

A time of unforeseen circumstances causing huge damages to insured objects is a time to gauge the preparedness and evaluate the financial capacities of the insurers in managing the risk events vis-à-vis indemnifying for losses suffered by their clients. As the dust from the #EndSARS protests settles down, it is a time of reckoning for insurance companies in Nigeria.

The hijacked #EndSARS protests have come and gone, but the smoke raised by the trailing losses/damages are still with the insured and are quite humongous to sink the boat of the entire insurance industry put together, if not properly managed.

READ: AIICO Insurance reports an 86% increase in profit after tax for Q4 2019 

From the emerging reports, Lagos state alone requires a whopping sum of N1 trillion to resuscitate the vandalized infrastructures. The concern expressed by many stakeholders is the total costs accruable if all the vandalized infrastructures were fully insured – as the resultant claims could swallow up the insurance industry.

It is not yet clear how much of these assets were appropriately insured but considering that our insurance culture is quite low amongst both the private and public sectors, there is a strong likelihood that some of the vandalized assets might not have been appropriately insured or insured at all.

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READ: Ratings firm explains why bank non-performing loans could be worse than expected

Nairametrics recently profiled and reviewed the capital base of some frontline insurance companies in Nigeria and are persuaded to believe that they have the capacity to withstand the vagaries of the emerging losses and still stand strong, considering their excellent past claims settlement history to date.


Leadway Assurance

It is a privately-owned insurance company, whose financial capacity grew over time and can now underwrite risks of very high costs, as regards heavy industries like Oil and gas and big manufacturing concerns.

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  • It has a capital base in excess of N45 billion, according to its 2019 financial statements and a gross premium was about N89billion.
  • In 2019, it settled claims amounted to about N38.5billion.

READ: Cornerstone Insurance to issue bonus shares in view of recapitalisation


Axa Mansard Insurance

It was formerly known as Guaranty Trust Assurance Plc, following the acquisition of its majority shareholding by Guaranty Trust Bank Plc.

  • Results for the period ended 31st December 2019 reveal that the company has shareholders’ funds of N30billion and a gross premium income of about N41.6billion.
  • About N17.5billion was settled as claims within the period.

READ: Guinea Insurance Plc gives optimistic Q3 earnings forecast in spite of COVID-19


AIICO Insurance Plc

This is one of the largest Life Insurance companies in Nigeria and a primary underwriter for general insurance businesses, as well as a key player in the Oil and Gas industry.

  • As of 2019 year-end, the capital base of the company was N27.9billion, with a gross premium income of N50billion.
  • N25.4billion was settled as claims.

Explore some Advanced Financial Calculators on Nairametrics

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Custodian and Allied Insurance Plc

  • As of December 31, 2019, the company was capitalized to about N19billion, with a gross premium income of N25.2billion.
  • It settled the sum of N2.3billion as claims from clients within the period.

READ: NSE closes in the red as MPC leaves rates unchanged

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Linkage Assurance Plc

The company is a product of a merger of two major insurance companies – Central Insurance Company Limited and Linkage Assurance Plc, to form a new and bigger Linkage Assurance Plc.

  • Results for the period ended 31st December 2019 indicates that the company has shareholders’ funds of about N19billion and a gross premium income of about N6.3billion.
  • About N1.7billion was settled as claims within the period.

Bottom line

There is no doubt that the amount of damages is quite huge but the industry has the capacity to absorb the financial shock that could arise from the legitimate resultant claims connected with the hijacked #EndSARS crisis, as the frontline insurance companies are reasonably capitalized with excellent claims settlement histories.

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