21 Sep

Daily Watch – Nigeria’s debt soars, CBN holds interest rates

  • According to the Debt Management Office, the country’s debt profile has risen to ₦16.29 trillion. DMO stats released Tuesday showed that the country’s total debt liability had risen to ₦16.29 trillion as of June 30, 2016, up from ₦12.12 trillion, a 34.41 percent increase. External debt by the federal and state governments stood at $11.26 billion (₦3.19 trillion), up from $10.32 billion in July last year. The domestic debt of the FG alone stood at ₦10.61 trillion, up from ₦8.4 trillion a year ago, a 26.31 percent rise. The domestic debt of the states stood at ₦2.5 trillion, up from ₦1.69 trillion in July 2015, a 47.93 percent rise. The DMO used the CBN’s official exchange rates of ₦283/$ for conversions in June 2016, and ₦197/$ for conversions prior to December 2015.
  • The CBN-MPC has retained the Monetary Policy Rate at the current 14 per cent. The decision to leave the rate unchanged was contrary to expectations of economic analysts, manufacturers and some government officials. Minister of Finance, Kemi Adeosun, had on Monday called for the regulator to lower interest rates so that the government could borrow domestically to boost the economy without increasing debt servicing costs. However, the MPC decided to hold the lending rate in order to maintain its primary objective of price stability. The decision was unanimously agreed on by all the 10 members of the committee who attended the meeting.
  • CBN Governor, Godwin Emefiele said the regulator allocated $66 billion over an 11-year period to fund BDCs, a key policy misstep which he said led to the erosion of Nigeria’s foreign reserves and is partly to blame for the current economic crisis. Emefiele said in September 2008 when foreign reserves stood at $62 billion and crude prices peaked at $147 per barrel, rather than save or invest it in infrastructure and industry, “the central bank at that time went about licensing Class A, Class B and Class C bureau de change operators. For Class A BDCs, the central bank was allocating $1 million per week, for Class B, the CBN was allocating $750,000 per week and for class C BDCs, the central bank was allocating $500,000 per week. The CBN was among one of the few central banks in the world allocating dollar cash for BDC operations.”
  • Oando has announced the execution of a definitive agreement with a vehicle owned by funds advised by Helios Investment Partners LLP, an Africa-focused private investment firm, to acquire 49% of the voting rights in Oando’s midstream business subsidiary, Oando Gas and Power Limited (“OGP”). In a statement by the company, the $115.8 million transaction is conditional upon the receipt of regulatory approvals and subject to customary purchase price adjustments. Upon completion, Oando will retain 49% of OGP’s voting rights. The residual 2% will be held by a local entity.
  • The CBN has warned Nigerians to be wary of any deposit money institution not insured by the Nigeria Deposit Insurance Corporation. The regulator spoke on the heels of a similar warning by the SEC on the activities an online investment scheme, “MMM Federal Republic of Nigeria.” The SEC said that the promoters of the scheme, who carried out their business activities via the nigeria.mmm.net portal, promising investors a monthly investment return of 30 percent, had no tangible business model and is ‘a Ponzi scheme’.
  • The African Export-Import Bank says it has closed its first-ever China/Taiwan specific syndicated loan with a $300 million facility guaranteed by the Export-Import Bank of China, the bank said in a statement Monday. Denys Denya, the bank’s Executive Vice President for Finance, Administration and Banking Services, said the five-year syndicated loan, which closed on September 12, was only opened to investors from China and Taiwan. “This syndicated facility helps position Afreximbank to strengthen its role in the development of trade between Africa and the rest of the world, in particular, China and the rest of the Far East,” he said.