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LCCI tasks FG to explore equity financing as an option to cravings for loan

The DG of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has stated that equity financing is the way out of Nigeria’s debt.

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LCCI, NECA warn FG on endangering productivity of Nigerians, LCCI DG offers equity financing as solution to President Buhari’s cravings for loan

The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has stated that equity financing is the way out of Nigeria’s debt.

He made this known while proposing an alternative to Nigeria’s cravings for debt financing. which is about to double after Senate approved President Muhammadu Buhari’s $22.7 billion loan request.

President Buhari may sign 2020 Budget tomorrow, President Buhari approves N37 billion for National Assembly renovation, President Buhari appoints Sarki Auwalu to head DPR , Economy: Reviewing FG’s 2019 revenue performance, Nigeria, and other African markets top destination for investments in 2020, Nigeria’s new visa policy to favour some categories of people 

Yusuf suggested that the Nigerian government should draft policies that would attract domestic and foreign private sectors and encourage them to part with capital for equity. He said this would help with infrastructure financing. Nairametrics had reported that President Buhari requested to borrow $22.7 billion in order to fund critical infrastructure projects under the 2016–2018 External Borrowing Plan.

[READ MORE: LCCI condemns Senate over Buhari’s $22.7 billion loan approval)

Although last year December, the President presented the loan request of $29.96 billion, it was reduced to $22.7 billion, with claims that the 8th National Assembly had already approved about $6 billion out of the money. Already, Nigeria has a debt level of about N26.22 trillion.

Speaking on the alternative to rescue Nigeria from more loan requests, Yusuf said, “The growing national debt is a cause for concern as the debt profile grew from N12.6 trillion in 2015 to N26.2 trillion in third quarter 2019, an increase of 108%. An additional $22.7 billion borrowing would bring the total debt stock to $108 billion, although 15% of this are debts owed by the state governments.

“The capacity to service the current stock of debt raises serious sustainability concerns. For instance, the debt service provision in the 2019 budget was a whooping N2 trillion; whereas the total capital budget was N2.9 trillion; this implies that the debt service commitment was 70% of capital budget allocation. The debt to revenue ratio was about 30% which is also on the high side. In the 2020 budget, the total revenue could barely cover debt service commitment and recurrent spending.” Yusuf said in a Vanguard report.

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READ ALSO: Despite servicing debt with N7trn, Nigeria may accept fresh loans from India

He further explained that “The opportunity cost of high debt service commitment for the economy and citizens is very high. There is also the exchange rate risk inherent in the exposure to mounting foreign debt which we need to worry about. As the currency depreciates, the burden of servicing foreign debt would intensify. This is a major problem with increasing the stock of foreign debt.”

“All of these underscore the imperative of appropriate policy choices to attract equity domestic and foreign private-sector capital for infrastructure financing. The government needs to look beyond tax credit in its quest for complementary funding sources for infrastructure. We should be looking more in the direction of equity financing. But for this to happen, the policy and regulatory environment must be right,” Yusuf added.

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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Business News

CAC sets 3-hour time line for company registration in 2021

The CAC is prioritising the reduction of the registration circle for new companies to just 3 hours before the end of the year 2021.

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CAC, Corporate Affairs Commission selects NIPOST as official courier partner

The Corporate Affairs Commission (CAC) has said that following the successful deployment of an end-to-end registration module, it was now prioritising the reduction of the registration circle for new companies to just 3 hours before the end of the year 2021.

This is coming after CAC had in November 2020, announced the implementation of new technology that will change the face of business registration including allowing customers to print their certificates with verifiable QR code from anywhere in the world.

This disclosure was made by the Registrar-General of the commission, Garba Abubakar, at a dinner in honour of the Chairman, Governing Board, CAC and Nigerian Ambassador-Designate to the Kingdom of Spain, Ademola Seriki.

In order to achieve this target, the Registrar-General said the commission was making arrangements to empower over 400 approving officers with working tools to process and approve registration applications either from home or anywhere necessary,” the agency stated.

Abubakar noted that the challenges of the Covid-19 pandemic had adversely hampered CAC’s delivery timeline.

He, however, pointed out that CAC was resolutely committed to serving its customers despite being forced to operate with less than 50% of its workforce.

While bidding farewell to Seriki, the Registrar-General said he received the news of his appointment with mixed feelings as CAC was going to miss his tremendous support and guidance.

Also speaking at the event, the Minister of Industry, Trade and Investment, Niyi Adebayo, described the outgoing CAC Chairman as a man of immense pedigree and endowed with enormous potential to justify the confidence reposed in him by the president.

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In case you missed it

  • The CAC recently announced the upgrade of its website and online registration portal to include features, which allow for the automation of some selected services and processes, in line with the Federal Government’s mandate of improving the ease of doing business in Nigeria.
  • The selected services and processes include Electronic search of company records, Upgraded Companies Registration Portal for Pre-incorporation filings and Post incorporation filings.

 

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Corporate deals

DEAL: Nigerian fintech software provider, Appzone raises $10m to scale its products and services

Appzone platforms are used by 18 commercial banks and over 450 microfinance banks in Africa.

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Appzone a fintech software provider that builds proprietary solutions for financial institutions and their banking and payments services announced that it has closed $10 million in Series A investment.

The Series A round was led by CardinalStone Capital Advisers, a Lagos-based investment firm. Other investors include V8 Capital, Constant Capital, and Itanna Capital Ventures. New York-based but Africa-focused firm Lateral Investment Partners also participated.

Founded in 2008 by Emeka Emetarom, Obi Emetarom, and Wale Onawunmi, Appzone functions as an enabler (at payment rails and the core infrastructure) within banking and payments.

READ: Shola Akinlade: The inspiration behind Paystack’s success

Appzone platforms are used by 18 commercial banks and over 450 microfinance banks in Africa. Together, they amass a yearly transaction value and yearly loan disbursement of $2 billion and $300million.

Before now, Appzone closed a $2 million deal from South African Business Connexion (BCX) in 2014. Four years later, it raised $2.5 million in convertible debt and bought back shares from BCX in the process. But overall, the company says it has raised $15 million in equity funding.

This new funding will be used to scale its products and services and expand across more African countries. The startup also plans to achieve scale by growing its engineering team.

READ: From Chemist to Bank CEO – The Story of Uzoma Dozie

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What they are saying

Yomi Jemibewon, the Co-Founder and Managing Director of Cardinal Stone Capital Advisers, said the firm’s investment in Appzone is further proof of Africa’s potential as the future hub of world-class technology.

READ: Bill Gates holds far more cash than Nigeria’s foreign reserve

Appzone is building a disruptive fintech ecosystem that will be the backbone of Africa’s finance industry with products across payments, infrastructure, and software as a service. The impact of Appzone’s work is multifold — the company’s products deepen financial inclusion across the continent whilst providing best-fit and low-cost solutions to financial institutions. Its emphasis on premium talent also helps stem brain drain, rewarding Africa’s best brains with best-in-class employment opportunities.”

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