Economy & Politics
Ecobank Transnational CEO warns that debt cancellation will hurt African countries
African Finance ministers had asked for debt relief from multilateral Institutions amid the coronavirus crisis.
The Group Managing Director and Chief Executive Officer of the Pan African Banking Group, Ecobank Transnational Incorporated, Ade Ayeyemi, has warned against the idea of African countries seeking debt cancellation from multilateral institutions, bilateral lenders, and international financial organizations.
Ade Ayeyemi stated this during an interview at the Bloomberg Invest Global virtual conference on Monday, July 22, 2020.
The Ecobank CEO stated that canceling the debt of heavily indebted African countries would only come back to haunt them.
According to Ayeyemi, “Forgiveness is not helpful because your debt is somebody else’s savings. When you go to the market to borrow money, the market is looking at your current and past behavior.”
READ ALSO: Nigerian Treasury Bills stay flat at 4.02% per annum
This view was also corroborated by the Chief Executive Officer of Kenya’s largest bank, Equity Group Holdings, James Mwangi, when he said that forgiveness was a form of default, which distorted markets. He pointed out that the call for debt forgiveness was one area where the continent should be conscious of the unintended consequences.
It can be recalled that in April, African Finance ministers asked for debt relief from multilateral Institutions like the International Monetary Fund, World Bank and the European Union amid the coronavirus crisis.
The African countries who asked for immediate relief from debt service obligations from these multilateral institutions including the G20, canvassed for a portion of their debt to be forgiven or converted into long term, low interest loans. This is to help free up funds for the more than 50 poor African countries to deal with the coronavirus pandemic.
Nairametrics had reported last week, the plans by China, to exempt some African countries from repaying their interest-free loans that are due at the end of 2020. It also expressed its willingness to provide further support, including loan maturing extensions, to free up funds needed to deal with the pandemic.
Around the World
WTO: Okonjo-Iweala still in contention as 3 candidates depart race for DG
Okonjo-Iweala and the remaining 4 other candidates hope to succeed the current DG, Mr Roberto Azevêdo.
Three candidates running for the post of the Director-General of the World Trade Organisation have fallen out of the race after failing to secure enough votes in the first rounds of voting, leaving only 5 candidates left, including Nigeria’s Ngozi Okonjo-Iweala.
This was disclosed by Bloomberg on Thursday, before the meeting on Friday. The Candidates that are out of the race are Jesus Seade (Mexico), Tudor Ulianovschi (Moldova), and Hamid Mamdouh (Egypt). The candidates were not able to secure the support needed for the first round of 3 rounds of voting.
READ: China’s Covid-19 vaccine may be ready for general public in November 2020
Dr. Ngozi Okonjo Iweal joins 4 other candidates for the next round of voting. The candidates are; Liam Fox (UK), Amina Chawahir Mohamed Jibril (Kenya), Yoo Myung-hee ( South Korea), and Mohammad Maziad Al-Tuwaijri ( Saudi Arabia).
Ngozi Okonjo-Iweala disclosed last month some of her plans for the Organization if made President. Nairametrics reported she noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.
READ: Soybean Futures reach 2-year high, following U.S sales to China
On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:
“Well, this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’’
She added she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.
READ: Amaechi pleads with NASS to halt questioning of loan agreement with China
“You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members,’’ she said.
Okonjo-Iweala and the 4 other candidates will present themselves to the members of the global trade body for the later stages of voting in the hopes of securing the highest number of votes to succeed the current DG, Mr. Roberto Azevêdo.
Economy & Politics
FG to establish a new anti-corruption agency
Malami disclosed that the new anti-corruption agency would be called Proceeds of Crime Recovery and Management Agency.
The Federal Government has approved the establishment of a new anti-corruption agency that will have the responsibility of properly managing and coordinating all assets seized domestically or returned from abroad, following anti-corruption probes.
The disclosure was made by the Attorney General and Minister for Justice, Abubakar Malami, while briefing state house correspondents after the Federal Executive Council (FEC) meeting on Wednesday, September 16, 2020.
Malami explained that the recovered assets had been scattered across several agencies and that better coordination would encourage international/overall coordination in recovering more looted assets.
Nigeria has repatriated well over $300 million of looted funds this year alone and seized about $40 million worth of jewellery belonging to the former Minister for Petroleum, Diezani Allison-Madueke. This is in addition to the seized ill-gotten properties and real estate.
(READ MORE: Nigeria Customs Service to distribute N3.2 billion worth of food items)
The Attorney General said that this new initiative would create a one-stop-shop for managing seized assets in an open and accountable way. He called the plan the next level of transparency and said the agency could also give the Ministry of Finance, Budget, and National Planning a budget for recovered assets.
He disclosed that the new anti-corruption agency, which would be called Proceeds of Crime Recovery and Management Agency, is to be saddled with the responsibility of managing the assets that constitute the proceeds of crime in the country. He said that the FEC had approved the transmission of a bill, ‘Proceeds of Crime Recovery and Management Agency Bill,’ to the National Assembly.
READ: OmiseGO, fastest growing altcoin, up 49% in past 24 hours
Malami noted that setting up an agency like this had become quite imperative in a bid to consolidate on the gains achieved so far in the government’s war against corruption.
The fight against corruption in the country has not been an easy one, as even a US senator, Chuck Grassley, earlier this year, raised concerns about the return of money due to worries over whether there were proper safeguards to prevent further misappropriation or relooting of those recovered funds.
READ: Exclusive: Best bank in Nigeria judging by the numbers
The Economic and Financial Crime Commission (EFCC), which currently has the responsibility of managing its recovered or seized assets, has been bedevilled by a lot of controversies recently, following the accusation and subsequent suspension of its Ag. Chairman, Ibrahim Magu.
This follows the Minister of Justice’s accusation of the agency for diversion of funds that had been recovered during corruption investigations.
Business
OECD reduces global economic decline to 4.5% from earlier forecast of 6%
The organisation also forecasts that the global economy will grow by 5% in 2021.
The Organisation for Economic Co-operation and Development says the global economic outlook for the year is less than earlier feared, as the body reduces the global economic decline for the year at 4.5%, compared to previous estimates of 6%.
This was disclosed in the OECD Interim Economic Outlook published on Wednesday. They also forecast that the global economy will grow by 5% in 2021.
READ: Global stocks plunge over doubts of America’s economic recovery
“The Interim Economic Outlook projects global GDP to fall by 4½ per cent this year, before growing by 5% in 2021. The forecasts are less negative than those in OECD’s June Economic Outlook, due primarily to better than expected outcomes for China and the United States in the first half of this year and a response by governments on a massive scale,” the OECD said.
The group says economic output for most of the world by 2021 will still be bellow pre-COVID-19 levels and “well below what was projected prior to the pandemic”.
READ: African nations sitting on debt volcano
OECD says economic output recovered fast after the collapse in the first half of the year, due to the easing of containment measures and the initial re-opening of businesses. They warn that the pace of economic recovery is dying out due to second outbreaks of the virus leading to newer lockdown restrictions.
“Uncertainty remains high and the strength of the recovery varies markedly between countries and between business sectors. Prospects for an inclusive, resilient and sustainable economic growth will depend on a range of factors including the likelihood of new outbreaks of the virus, how well individuals observe health measures and restrictions, consumer and business confidence, and the extent to which government support to maintain jobs and help businesses succeeds in boosting demand.”
READ: United Capital result points to how banks could make money in this pandemic
OECD Chief Economist Laurence Boone said: “The world is facing an acute health crisis and the most dramatic economic slowdown since the Second World War. The end is not yet in sight but there is still much policymakers can do to help build confidence.”
She urged that governments must avoid mistakes like tightening fiscal policy too quickly, citing that without government support, “bankruptcies and unemployment could rise faster than warranted and take a toll on people’s livelihoods for years to come.”
“Policymakers have the opportunity of a lifetime to implement truly sustainable recovery plans that reboot the economy and generate investment in the digital upgrades much needed by small and medium-sized companies, as well as in green infrastructure, transport and housing to build back a better and greener economy,” she added.
CBN grants Greenwich Trust Limited operational license for merchant banking
Emirates Airlines banned from operating in Nigeria
U.S stocks close lower, led by Apple, Boeing
CBN introduces N250 billion stimulus package for gas investment to ease pain of fuel price increase
8 Ways to set yourself up for financial freedom in your 20s
COVID-19 Update in Nigeria
Daily Parallel Market Exchange Rate – ₦460/$1
Has the President erred in stopping CBN from funding food imports?
Why Africans are fast using Bitcoin for payment transfers
Fire guts fuel tanker, vehicles at Anthony, Lagos
Wise African
June 24, 2020 at 3:04 am
The CEO is an idiot who doesn’t understand that most of the poor countries were given bad loans at exorbitant rates of 9 – 10% while the rich countries will be given the same loan at 1.7 – 2%
Rik
June 26, 2020 at 5:27 pm
“doesn’t understand that most of the poor countries were given bad loans at exorbitant rates of 9 – 10%”
Why do you think it is 10%? It is precisely because of what the CEO is saying. When you take a loan and can’t pay it back, your next loan would be at higher interest rate. So the CEO’s advice is very correct.
The countries that got their loans at 2% are countries that paid their loans back in the past. That is how the credit rating system works.
Peter Erameh
June 24, 2020 at 7:51 am
Yes,I do agree that ‘your debt is somebody’s else’s saving’ but it should be noted that in a situation where the debt is made up of over bloated and suffocating interest rate, then the statement cannot be completely true!
Therefore, debt forgiveness should be considered from the angle of debt quality based on age analysis and the inability of the debtor to perform in terms of the loan repayment – why continue to carry such toxic assets in your books and continue to earn interest on such toxic assets and take away cash dividends because some financial institutions do not make adequate provisions for such toxic assets in Nigeria. In fact, those with offices outside the shores of this country are more guilty of this as they transfer such toxic assets to their outside offices in order to hide them from the regulatory bodies.
Sometimes,over time the lender would have even earned over 200% of the due interest amount plus the principal amount borrowed and yet when the source of repayment becomes impaired, they will continue to compound excessive interest amount on the account with penal interest rate under the guise of expired facility – and yet most of the accounts have not been adequately provided for in line with the various prudential guidelines.
My humble and personal view is that once you have earned adequately on the lending which would have covered perhaps 100% of your savings or investment plus a reasonable interest amount (even though interest amount is recognized before principal amount) and you are convinced that the source of repayment has become impaired, you can proceed with debt forgiveness because he that is alive is the one that can repay debt.