19 Jun

Daily Watch – FG hands Apapa Road to Dangote, Manufacturers take on bigger debt

  • The Punch is reporting that Deposit Money Banks will soon start to raise dollar-denominated loans, especially Eurobonds. Banks are now favourably disposed to raising dollar loans following the creation of the Investor & Exporters FX window by the CBN, and the subsequent appreciation of the naira. Another reason the banks are considering Eurobonds is because some of them are looking at refinancing their dollar loans, which will soon start falling due. While GTB’s $400 million Eurobond is due in November, Fidelity Bank’s $300 million is due next May. Access Bank has $350 million of bonds due in July. GTBank has said it has no plans to issue fresh Eurobonds, but Fidelity Bank and Access Bank have yet to decide. Already, Ecobank has said it is planning to raise $400 million five-year convertible bond this month to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit, while UBA has raised $500 million in its first Eurobond sale following an equivalent issue a week earlier by Zenith Bank in a deal that was four times oversubscribed.
  • The minister of power, works and housing, Babatunde Fashola has signed an MoU with the Dangote Group and other stakeholders for the reconstruction of Apapa wharf road in Lagos. Following the signing of the ₦4.34 billion MoU, the site has been handed over to Dangote and the other groups to commence reconstruction of the road. Speaking at the signing of the MoU in Lagos on Saturday, Fashola noted that it was difficult to move cargo due to the gridlock caused by the bad state of the road. He explained that the decision of the transporters to use the road instead of rail for haulage increased gridlock, caused degeneration as well as well as hardship to residents of Apapa.
  • The World Bank Group will assist states in Nigeria to improve, strengthen and consolidate the Fiscal Sustainability Plan. The FSP was introduced by the FG in 2016 as part of measures to address the 2015-2016 fiscal crisis, which was triggered by a significant decline in revenue. The crisis culminated in low allocations to states and subsequently led to two financial bailouts to the states by the FG. The FSP is also designed to reform the Public Sector Financial Management system spanning the three tiers of government. According to the Ministry of Finance, the proposed intervention by the World Bank would entail financing capacity building and providing technical support for officials in the 36 states of the federation by equipping them with the requisite knowledge and skills to effectively manage the comprehensive implementation of the components of the FSP on a sustainable basis to ensure that the states are put on the path that would lead them out of the situation in which they have to be bailed out or fail to meet their financial obligations for the well-being of the citizenry.
  • The NNPC says it has successfully reduced the price of diesel by 42% nationwide. NNPC spokesman, Ndu Ughamadu, said the reduction of prices, which is the aftermath of key strategic interventions, saw prices fall to ₦175-₦200 from ₦300. Some of the interventions included improving the supply of diesel, and remodelling of the product distribution to address sufficiency issues across the country. The NNPC resuscitated pipelines and depots in places such as Atlas Cove-Mosimi, Port Harcourt refinery and Kaduna refinery.
  • An analysis by the Vanguard shows that the top fifteen manufacturing companies listed on the Nigerian Stock Exchange were compelled in 2016, to seek expensive and short term bank loans to bridge funding gaps. The fifteen companies paid a total interest of ₦127.253 billion to the banks, representing a 44 percent increase from ₦88.403 billion in 2015. This amount was spent servicing about ₦418 billion in loans, representing a 30 percent increase in their loan liabilities from ₦322.5 billion recorded in 2015. The immediate impact was adverse on the bottom-line of the companies with their profitability forced to a 24 percent decline in cumulative profit before tax in 2016.