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.”
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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.
Economy & Politics
Nigeria needs $3trillion in 30 years to reduce infrastructure deficit – Osinbajo
Vice President Yemi Osinbajo has stated that Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.
The Vice President, Yemi Osinbajo has said Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.
He disclosed this while featuring at a webinar organized by the Bureau of Public Enterprises (BPE).
Osinbajo told the webinar that Nigeria needs to adopt new models of investments for infrastructural developments because relying on public expenditure alone is not sustainable.
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The seminar discussed the roles of Public-Private Partnership (PPP) in developing Nigerian infrastructure. The Vice President said Nigeria still face a huge infrastructural deficit, despite government investment which is a roadblock to rapid economic growth.
“The Federal Government recognizes this fact, which is why we are considering other approaches to complement and boost financing for the development and maintenance of infrastructure in Nigeria.
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“It is clear that this deficit can only be made up by private investment. Private sector is 92 per cent of GDP, while the public sector is mere 8 per cent. So, the synergy between the public and private sector through Public-Private Partnerships (PPP) is really the realistic solution.
“The fact that only N2.49 trillion was appropriated for capital expenditure in 2020, reflects the importance of deliberate and pragmatic action to boost infrastructural spending.
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“It seems to me to be quite clear that the financial outlay and management capability required for infrastructural development and service delivery outstrip the financial and technical resources available to government.
“In other words, the traditional method of building infrastructure through budgetary allocations is inadequate and set to become harder because of increasingly limited fiscal space,” he said.
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He revealed that the FG has launched a series of PPP’s to enable Nigeria meet its infrastructure deficit needs, citing the roles of agencies like the BPE with PPP’s.
“The Federal Government has recently issued a circular on the administration of PPP projects in the country to provide the much-needed clarity.
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“The circular re-emphasises that the BPE shall be responsible for the concession of public enterprises and infrastructure already listed in the First and Second Schedules of the Public Enterprises Act.
“The circular equally stipulates that the BPE shall act on behalf of the Federal Government, as the counterparty on all infrastructure projects being developed on a PPP basis,” he said.
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He disclosed that the Infrastructure Concession Regulatory Commission (ICRC) would continue to act as the regulatory agency for PPP transactions, with directives including inspections and monitoring PPP projects.
“It is expected that this new policy direction would provide clarity to stakeholders and foster the improvement of PPP programmes in the country.
“Ministries, Departments and Agencies, as well as the multilateral agencies and our development partners are urged to support the PPP policy objectives and institutional arrangements already put up by government,” he said.
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What you should know
- Nairametrics reported last month that Moody Investors Services revealed that Nigeria needs to spend about $3 trillion in over 30 years to bridge the infrastructural gap experienced in the country.
- The Minister of Works and Housing, Babatunde Raji Fashola, revealed that the Federal Government needs at least N500 billion annually for the next 3 years to develop and fix its 35,000 kilometres road network, as work continues on 13,000 kilometres of the network.
- Nairametrics also reported last month that the FG approved the establishment of an infrastructure company that will be wholly focused on critical infrastructural investments in the country.
Economy & Politics
National Assembly does not have power to replace constitution – Omo-Agege
The Deputy Senate President has stated that the National Assembly does not have the power to replace the constitution.
The Deputy President of Senate, Ovie Omo-Agege, has stated that the National Assembly does not have the power to replace the constitution.
The Senator disclosed this at a meeting with the Alliance of Nigerian Patriots led by Amb. Umunna Orjiako on Wednesday. He was represented by his media aide, Mr. Yomi Odunuga.
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Omo-Agege said what could be achieved was an amendment of the constitution by the National Assembly. He urged stakeholders to channel the demands of a new constitution towards constitutional amendment.
“I am not so sure that we as a Parliament have the power to replace the Constitution. We can only make amendments and it is explicit in sections 8 and 9 of the constitution on how we can do that and the requisite number of votes required.
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“I say that because there are some top attorneys in this country, who for some reasons, keep saying that we don’t even need any of this, that we should just bring a new constitution. We can’t do that.
“What we are mandated to do by law is to look at those provisions and bring them up-to-date with global best practices, especially to the extent that it tallies with the views of the majority of Nigerians. So we are not in a position to replace this constitution, but we can only amend.”
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The senator also said that the Senate would look into issues like restructuring if there is a major demand for it from Nigerians and also the exclusive legislative list.
“But, like I said, most of the issues you have raised here, like zones replacing states, that’s another euphemism for going back to the regions. We will look into that if that is what majority of our people want.
“You talked about devolution of powers. The preponderance of views we have received so far is that those 68 items are very wide and need to shed some weight and move them to the Concurrent Legislative List.”
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What you should know
- Nairametrics reported last week, that Sokoto State Governor, Aminu Tambuwal, said any plan to restructure Nigeria and the Constitution must pass through legal due process from the National Assembly.
Economy & Politics
Dapo Abiodun presents N339 billion budget to Ogun State Assembly
Ogun State Governor has presented a N339 billion 2021 budget to the State House of Assembly.
The Governor of Ogun State, Prince Dapo Abiodun, presented the N339 billion budget for 2021 tagged “Budget of Recovery and Sustainability,” to the Ogun State House of Assembly.
This was disclosed by the Governor on Wednesday after he presented the budget proposal to the House. He added that the budget will remain focused on completing as many projects as possible.
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I have just presented the Appropriation Bill for the Year 2021, tagged "Budget of Recovery and Sustainability" at the Ogun State House of Assembly, following inputs from stakeholders across the three Senatorial Districts in the State. pic.twitter.com/laWjnFzxkv
— Prince Dr. Dapo Abiodun – MFR (@dabiodunMFR) December 2, 2020
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What they are saying
“Aggregate expenditure for the State Government is N339billion, with a recurrent expenditure of N162billion and capital expenditure of N177billion,” the State Governor said in his statement.
He added that the budget would be focused on project completion in the state.
READ: Sanwo-Olu presents N1.1 trillion 2020 budget
“The budget remains focused on the completion of as many ongoing projects as possible. The State House of Assembly would be presented with the most critical projects, which we must all work collectively to ensure they receive adequate funding,” he said.
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He also said that the budget will provide suitable grounds for recovery from the obvious economic challenges of the current fiscal year, while ensuring that Ogun State’s local economy remains sustainable going forward.
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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.