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Nigeria is in a weak financial position to absorb recession shocks —Bismark Rewane

Nigeria does not currently have enough buffers to withstand the shocks of the global recession which the International Monetary Fund (IMF) recently projected will happen post Covid-19.

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Recession

Nigeria does not currently have enough buffers to withstand the shocks of the global recession which the International Monetary Fund (IMF) recently projected will happen post Covid-19. This was disclosed by Bismarck Rewane, the Chief Executive Officer of Financial Derivatives Ltd.

Speaking to CNBC Africa during the station’s Power Lunch West Africa programme, Rewane explained that Nigeria is broke and that the situation has left the country in a rather precarious financial position as far as dealing with the looming recession is concerned. He also pointed out that unlike in 2008 and 2016 when the country had enough buffers to cushion the effects of the recessions recorded in those years, the same cannot be said for the Nigeria of 2020.

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READ ALSO: Moody’s affirms B2 rating for Nigeria, maintains negative outlook

He, however, expressed optimism that the country will be able to quickly recover from the recession, but on the proviso that the President Buhari-led government will be ready to adjust to the structural changes which the IMF has recommended. Rewane said:

“I think the IMF projection is realistic in the sense that it’s not just Nigeria but there’s a global recession. But Nigeria in 2020 has buffers that are much less than it had in 2016 and much more less than it had in 2008. Therefore, the ability to withstand the shock, which were never anticipated at this point in time, is actually limited. To a large extent and in reality, Nigeria is in a very weak position.

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“Having said that, the IMF is looking at a quick recovery; assuming that Nigeria will make some structural changes that are more than required at this point in time.”

READ MORE: Fitch downgrades Nigeria’s IDR to “B”, says CBN’s remedial policy not enough

The Economist also commented on Moody’s latest affirmation of its negative outlook for Nigeria’s B2 long-term issuer rating, as well as the country’s senior unsecured loan rating. According to him, Moody’s and other rating agencies based their affirmations on the likelihood that Nigeria may default on its loan obligations. Considering the fact that much of Nigeria’s revenue comes from oil sales, and also bearing in mind what is happening in the global oil sector, there is a high possibility that loan defaults are inevitable for the country.

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“When you look at our dependence on oil and the sharp fall in the price of oil and the output cuts as well, you find that our revenues are very vulnerable. To that extent, there’s the likelihood that there could be a default, even though as much as it may be is what the ratings agencies have suggested. The IMF, on the other hand, is looking at the broad picture; looking at growth, looking at inflation, looking at the ability to come out of this without massive unemployment and corporate mortality,” Rewane said.

He added that the Nigerian government is taking the current economic situation very seriously and is taking the necessary actions to mitigate its impacts. On the fiscal side, the country is seeking to borrow about $6.9 billion from multilateral lenders like the World Bank and the IMF. The loan is expected to help the country to meet the fiscal gap of about $14.4 billion which has been created by the Coronavirus pandemic.

You may watch the rest of the interview by clicking here.

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Patricia

Emmanuel covers the financial services sector for Nairametrics. Do you have a scoop for him? Well then, contact him via his email- [email protected]

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Appointments

Ecobank Transnational appoints Alain Nkontchou as new Chairman

“I am honoured to be appointed as Chairman of Ecobank Transnational Incorporated.”

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Alain Nkontchou

Ecobank Transnational Incorporated (ETI) has announced the appointment of Alain Nkontchou as its new Chairman of the board of directors.

Nkontchou, who is Camerounian by nationality, has been serving as an Independent Non-Executive Director of the pan-African banking group since 2015. A statement made available to the Nigerian Stock Exchange (NSE) confirmed that his latest appointment took effect on June 30, 2020.

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The Camerounian is taking over from Nigeria’s Emmanuel Ikazoboh, whose six-year tenure as Chairman of Ecobank’s holding company ended last month, even as he just reached the retirement age of 70.  The company also noted that the new appointment is in tandem with its Articles of Association.

While reacting to his own appointment as Chairman, Alain Nkontchou said he is quite honoured and that he was looking forward to working with the rest of the board members.

“I am honoured to be appointed as Chairman of Ecobank Transnational Incorporated. Having served on its Board since 2015, I have seen Ecobank’s resilience and its proud history, built on strong foundation to secure the Bank’s future success. I look forward to working with the Board and Executive team as we continue our journey ahead and I know that we are well-placed to navigate through the current environment and set the standards in financial services for our customers across Africa. I would also like to express my thanks to my predecessor, Mr Emmanuel Ikazoboh, for his leadership of the Board and to wish him all the best for the future,” he said.

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Alain Nkontchou co-founded Enko Capital Management LLP, a London-based asset management company with Johannesburg office. He currently serves as the Managing Partner and of the firm which specialises in prospecting investment opportunities in Africa.

Prior to this time, ETI’s newly-appointed Chairman was a Non-Executive Director at Laurent Perrier champagne between 1999 and 2009. He was also the Managing Director of Credit Suisse’s Global Macro Trading from 1995 to 2008. He held a similar role at JP Morgan Chase & Co.

Meanwhile, from 1989 to 1994, Nkontchou worked with Chemical Bank first in Paris and then New York. At the bank, he rose through the ranks to become the Vice- President, Head of Trading, and Sales. Apparently, he is an accomplished business executive.

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Alain Nkontchou obtained an MSc in Electrical Engineering from Supélec and P.M. Curie University, Paris, and another MSc in Finance and Accounting from ESCP (Ecole Supérieure de Commerce de Paris).


It should be noted that ETI’s stock closed yesterday’s trading session on the Nigerian Stock Exchange with a share price of N4.80. The share price gained by +1.05% to appreciate from its previous close of N4.75. Year to date, ETI’s share price has declined by about 22%.

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Economy & Politics

Nigeria’s public debt is officially N29.83 trillion

Further disaggregation of Nigeria’s total public debt showed that N9.99trn or 34.89% of the debt was external.

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Q1 2020 National Debt report

The total public debt stocks of the Federal Government of Nigeriastates within the Nigerian federation, and the Federal Capital Territory (FCT) jumped to N28.63 trillion as of Q1 2020. This is according to a report by the National Bureau of Statistics (NBS) which was released on Friday. 

A breakdown of the report showed that the total debt stock of the states as of 31 March 2020 is N4.1 trillion. Meanwhile, these states’ total Internally Generated Revenue (IGR) for 2019 was N1.3 trillion. They also received N2.47 trillion from FAAC. 

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Note that as always, Lagos State recorded the highest IGR at N398.7 billion. The state also received N117.8 billion in FAAC disbursements and has a total debt stock of N444.2 billion, thereby making up 10.8% of the total debt stock of the states. 

On the other hand, Yobe State recorded the lowest debt stock out of all the states with just N29.2 billion. This made up just 0.7% of the total debt stock of the states. Meanwhile, the state generated a total IGR of N8.4 billion in 2019. 

Part of the report by the NBS said: 

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“Nigerian States and Federal Debt Stock data as at 31st March 2020 reflected that the country’s total public debt portfolio stood at N28.63trn. Further disaggregation of Nigeria’s total public debt showed that N9.99trn or 34.89% of the debt was external while N18.64trn or 65.11% of the debt was domestic. 

“Similarly, States and FCT domestic debt was put at N4.11trillion with Lagos state accounting for 10.8% of the total domestic debt stock while Yobe State has the least debt stock in this category with a contribution of 0.7%.” 

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Meanwhile, the FCT had total debt of N106.8 billion, making up 2.6% of the total debt stock of the states. The FCT also recorded an IGR of N74.5 billion in 2019 and received N71.9 billion in FAAC. 

The Federal Government’s total domestic debt stock by Q1, 2020 was N14.5 trillion, with FGN bonds making up 72.5% of the total portfolio followed by treasury bills at 18.24%. 

The total public debt stock has risen by 4% since December 2019, as the previous figure stood at N27.4 trillion. 

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You may download NBS’ Nigerian Domestic and Foreign Debt report by clicking here.  

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Coronavirus

COVID-19: WHO reverses itself based on new discovery about the virus

This admission is coming on the heels of criticisms from experts.

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WHO warns countries against rushing to lift coronavirus restrictions

The World Health Organization (WHO) has provided an update on the modes of transmission of SARS-CoV-2, the virus that causes COVID-19, from infected people, based on new scientific evidence.

The WHO on Thursday, formally recognized that the coronavirus can be transmitted indoors by droplets in the air, marking a reversal for the United Nation’s agency.

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In a scientific brief, the WHO said that people who spend time in crowded places with poor ventilation are at risk of being infected by the coronavirus as the droplets circulate throughout the air in indoor gatherings.

This admission is coming on the heels of criticisms from experts who have been putting pressure on the UN health agency to update its description of the spread of the virus to include the possibility of airborne infections.

The WHO now admits that transmissions through aerosols, or tiny air droplets, could have been behind outbreaks of COVID-19 that have been reported in some closed environments such as restaurants, nightclubs, places of worship or places of work where people may be shouting, talking or singing.

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Apart from refraining from having close contact with infected people and frequent hand-washing, the WHO pointed out that people should avoid crowded places, close-contact settings, and confined and enclosed spaces with poor ventilation.

However, the WHO still focuses more on the spread of the virus by larger droplets that are discharged through coughing, sneezing and singing or from contact with a contaminated surface.

The WHO in its statement said, “Respiratory droplet transmission can occur when a person is in close contact (within 1 metre) with an infected person who has respiratory symptoms (e.g. coughing or sneezing) or who is talking or singing; in these circumstances, respiratory droplets that include virus can reach the mouth, nose or eyes of a susceptible person and can result in infection.”

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It also revealed that based on what is currently known, the transmission of COVID-19 primarily occurs from people when they have symptoms and can also occur just before they develop symptoms when they are in close proximity to others for prolonged periods of time. While someone who never develops symptoms can also pass the virus to others, it is still not clear to what extent this occurs and more research is needed in this area.

The UN health agency had previously advised that the spread of the virus through the air is only common when people, mostly health care workers, were involved in medical procedures that produced aerosols, though a lot of evidence has surfaced suggesting that the virus can stay in the air for hours and infect a person when inhaled.

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