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World Bank says financial crisis likely from pandemic, China not fully committed to debt relief

The World Banks said Coronavirus is morphing into a major economic crisis, with very serious financial consequences.

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World Bank says financial crisis likely from pandemic, China not fully committed to debt relief

The World Bank has warned that the coronavirus outbreak is turning into a major economic crisis and could likely see the emergence of a financial crisis from the pandemic.

This disclosure was made by the World Bank Chief Economist, Carmen Reinhart, during an interview with Bloomberg Television.

Reinhart during the interview said, “This did not start as a financial crisis but it is morphing into a major economic crisis, with very serious financial consequences. There’s a long road ahead.

READ: World Bank predicts rebound of Sub-Saharan Africa’s economy next year

Reinhart, who assumed her new role in June, is best known for her work with then-Harvard colleague Kenneth Rogoff on the last financial crisis in their 2009 book “This Time Is Different: Eight Centuries of Financial Folly.” It made the pair the go-to resource on the history of government defaults, recessions, bank runs, currency selloffs, and inflationary spikes.

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READ: World Bank says remittances to Nigeria, other LMICs will drop by 20% in 2020

When asked whether central banks buying bonds to keep yields low is ultimately a zero-sum game when everyone’s doing it, Reinhart said, “This is a war. During wars, governments finance their war expenditures however they can and right now there are dire needs. The scenario we are in is not a sustainable one.’’

READ: Cryptos: Nigerian financial experts talk risks associated with trading digital assets

The World Bank had said that before the onset of the Covid-19 pandemic, the rising debt levels were already a cause of concern, particularly in many of the world’s poorest countries.

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Reinhart’s statement is coming after the G20 countries while responding to a call from the World Bank and the International Monetary Fund (IMF), endorsed the Debt Service Suspension Initiative (DSSI) in April 2020 to help about 73 of the poorest countries manage the impact of the Covid-19 pandemic.

READ: IMF: Global economy is now projected to fall by 4.4%

However, the initiative which is through at least the first half of 2021, falls short of the World Bank’s call for a full-year extension.

China is owed almost 60% of the money that the world’s poorest nations would be due to repay this year, according to World Bank data.

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READ: Football: AC Milan announces loss of €195million

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The World Bank President, David Malpass, in August, said that China has made many loans to developing countries with terms that aren’t transparent and at higher interest rates than the nations can afford.

READ: COVID-19: IMF Chief predicts $345 billion financing gap in African countries 

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He had pointed out that the time has come for a much more comprehensive approach to tackling the debt crisis facing the people in the poorest countries, one that involves debt-service suspension as well as broader efforts such as debt-stock reduction and swifter debt-restructuring, grounded in greater debt transparency.

READ: Ruffer ’50 cent’ makes $2.6 billion, as Coronavirus strikes financial market

Asked about China not participating in the debt-suspension relief, Reinhart said the nation was in fact involved, just “less than fully.”

The China Development Bank, a major lender, hasn’t joined the effort, nor have private-sector creditors, she said. “Full participation is something we should strive for but unfortunately haven’t yet seen.”

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

2 Comments

2 Comments

  1. Zhuubaajie

    October 17, 2020 at 6:56 pm

    In any economy there are different levels of lenders, whose risk tolerance and the risk adjusted loan rates are scaled. World Bank loans carry lower rates, but those loans come with many strings attached. Developing nations that can get WB loans, did. But when those loans are insufficient, they turn to higher rate loans from others, such as China. Those nations are the best judge of what loans they want and can afford. The loans made by Chinese banks are mostly COMMERCIAL in nature, with appropriate pledged security to guarantee the principal and repayments. The Chinese banks bargained for and got the payment secured, fair and square. Why is it the WB’s business?

  2. Dan M

    October 19, 2020 at 5:48 am

    Spot on Zhuubaajie. I think the more important thing is whether ‘poor countries’ have properly assessed their needs and repayment plans to support the loans taken. No one issues loans with the intent to lose it. It is critical that skilled and experienced hands handle national planning and execution. Anything short of that results in value destruction.

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Covid-19: FG launches Rapid Response Register (RRR) for urban poor affected by pandemic

The FG has launched a Rapid Response Register (RRR) for urban poor affected by the COVID-19 pandemic.

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The Federal Government of Nigeria launched the COVID-19 Rapid Response Register (RRR), an emergency intervention database, for the urban poor made poorer by the pandemic.

This programme was launched by the Vice President, Yemi Osinbajo on Tuesday.

The scheme would see the FG share N5000 monthly to households as it says 1 million households would benefit from the scheme.

The Vice President’s Senior Special Assistant on Media & Publicity, Laolu Akanda said: “Osinbajo today launched a technology-based Rapid Response Register which identifies urban poor people who in the next 6 months willl receive N5000 monthly. In all 1 million households will benefit from this especially cash transfer being implemented by the Humanitarian Affairs Ministry.”

While inaugurating the COVID-19 Rapid Response Registration (RRR) Cash Transfer Project, the Vice President said:

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“As of Dec. 31, 2020, we have identified and registered about 24.3 million poor and vulnerable individuals into the National Social Register; equivalent to about 5.7 million households.

“Through this project, we are currently injecting about N10billion directly into the hands of about two million poor and vulnerable households every month.

“This social protection method of targeting is the first strategy to be developed and tested in the Sub-Saharan Africa region and Nigeria will be the first country for its implementation.

“With the RRR, which uses a wholly technology-based approach, we are primed to achieve an end-to-end digital foot-print in cash transfers for the urban poor.”

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The Vice President added that the implementation of the scheme would enable Nigeria to achieve its financial inclusion policy under the Enhancing Financial Innovation and Access programme (EFInA).

What you should know 

  • Nairametrics reported last week that the Federal Government announced that it would inaugurate a COVID-19 Rapid Response Register (RRR), which would be a health emergency response for the poor living in urban centers that have been affected by the pandemic.
  • The register which is being built by NASSCO is an expansion of the existing National Social Safety Nets Project (NASSP). It targets small business owners, street vendors, petty traders, Small and Medium Enterprises (SMEs), and service providers.

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FIRS hits 98% of target as it collects N4.95 trillion for 2020 fiscal year

FIRS has announced that it generated N4,952,243,711,728.37 as tax revenue in the 2020 fiscal year.

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FG apologizes, says Self-Certification directive is not for everyone, FIRS introduces stamp duty on house rent and C of O transactions

The Federal Inland Revenue Service (FIRS) has announced that it generated N4,952,243,711,728.37 as tax revenue in the 2020 fiscal year.

This is about 98% of the tax target of N5.076 trillion that was set for the FIRS by the Federal Government, despite the economic challenges of 2020 caused by record low oil prices and the outbreak of the coronavirus pandemic.

This disclosure was contained in a statement which was issued by the Director of Communications, FIRS, Mr Abdullahi Ahmad, on Tuesday in Abuja.

According to a report from the News Agency of Nigeria (NAN), Ahmad in his statement quoted the Executive Chairman of the Service, Mr Muhammad Nami, as saying that this performance was remarkable, considering the devastating impact of Covid-19 on the Nigerian economy.

He pointed out that some of the factors that negatively affected the operations of FIRS last year include, record low oil crude oil prices globally, business disruptions and lootings during the violent #EndSARS protests and the generous tax waivers granted to businesses to ease the impact of the Covid-19 lockdown.

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He also said that additional tax exemptions granted to small businesses in the 2019 Finance Act and insecurity in some parts of the country were other factors that affected collections.

In the analysis of the significance of the 2020 performance, the FIRS Chairman said that the oil revenue which used to contribute over 50% in tax returns through the Petroleum Profits Tax in previous years, accounted for only 30.6% of the tax revenue generated in 2020 due to low oil prices.

He also pointed out that the non-oil tax collection, which was 109% in 2020, was 9% higher than the previous year and attributed these achievements to many reforms initiated by the board and management of FIRS under his leadership.

He said, “The conscientious taxpayers in the country and dedicated members of staff of the FIRS nationwide for their support and devotion to work made this performance possible despite the numerous obstacles encountered in 2020.

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“The FIRS is optimistic that this current fiscal year will be better than in 2020. We shall perform well, given that our service reforms are expected to yield greater dividends, especially as different parts of tax administration are being automated.’’

“We are also optimistic that exploration activities will improve in the oil sector and increase the prospect of higher tax revenue from the sector.

“Similarly, the ongoing reforms together with increased stakeholder collaborations will brighten the prospect of improved voluntary compliance and consequently higher tax revenue generation for the country this year and beyond.’’

What this means

  • This means that despite the unprecedented crisis in the oil sector due to the impact of the coronavirus pandemic, the non-oil sector performed beyond expectation in terms of tax collection.
  • This was made possible by incentives granted by the revenue agency to encourage taxpayers to voluntarily fulfil their obligations towards the government in addition to some reforms to aid efficient and effective tax collections.
  • Some of these reforms include the deployment of technology for tax operations, capacity building for staff, improved welfare for staff and so on.

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President Buhari has approved the expansion of the NSIP – Minister

Minister Sadiya Farouq has disclosed that President Buhari has approved the expansion of the NSIP.

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FG condemns Christmas terrorist attacks in Borno and Adamawa

The Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Umar Farouq, disclosed that President Muhammadu Buhari has approved the expansion of the National Social Investment Programme (NSIP).

According to the disclosure by the Minister during the opening ceremony of the 4th annual review of the National Home-Grown School Feeding Programme, in Abuja, the FG hopes that the plan would lift 100 million Nigerians out of poverty in 10 years.

She revealed that the expanded NSIP would include an additional number of 5 million pupils in non-conventional educational settings in the National Home-Grown School Feeding Programme (NHGSFP), the Npower program is to create jobs for a total of 1 million beneficiaries; GEEP programme to provide loans to an additional 1 million traders, farmers and market people; and the Social Register is to accommodate an additional 1 million households.

Some other programmes in the scheme include: TRADERMONI, MARKETMONI, FARMERMONI, MSME Survival Fund, and N75 billion National Youth Investment Fund (NYIF).

What the Minister is saying

  • “It is therefore safe to say that we have been working tirelessly to ensure that vulnerable Nigerians are brought into the Federal Governments Social Protection umbrella which seeks to support, empower and level the playing field, so that they are better equipped to handle economic and social shocks while contributing their quota to society and to the betterment of our great nation.
  • “The National Home-Grown School Feeding Program is an important intervention because of the multiple wins it is capable of delivering. It is a vehicle for reducing hunger, promoting educational gains, health status improvement and economic stimulation.
  • “The long term benefits to our children and the future of the Nation cannot be overemphasised. Thus, we must resolve to remain steadfast in ensuring that this program reaches its objectives and improves the lives of its beneficiaries.”

What you should know 

  • Nairametrics reported that the Minister of State, Industry, Trade and Investment, Ambassador Mariam Katagum, disclosed that over 300,000 beneficiaries under the Payroll Support scheme and 166,000 artisans had been impacted by the FG’s Survival Fund programme.
  • In October 2020, the President of Nigeria disclosed that the National Social Investment Programmes (NSIP) will be funded with N420billion in 2021, while the National Social Housing Programme (NISH) would be funded with N20billion from the 2021 budget.

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