Economy

FG Should Be Careful On Ability To Pay Back Loans – Cardoso

Published

5 months ago

March 5, 2024

Naijablitz

The Central Bank of Nigeria has warned Nigeria and other West African nations regarding trends in borrowing practices.

Traditionally, nations often relied on loans from the Paris Club, a group of creditor countries.

However, the CBN said it has observed a significant shift towards borrowing from non-Paris Club members and private lenders, such as banks and investors who buy government bonds.

The West African Institute for Financial and Economic Management has warned that Nigeria is at a high risk of falling into debt distress and urged the federal government to look for ways of improving revenue generation.

Governor of the CBN, Yemi Cardoso, gave the warning in Abuja at the Joint World Bank/IMF/WAIFEM Regional Training on Medium Term Debt Management Strategy in Abuja on Monday.

Represented by Dr Mohammed Musa Tumala, Director of the Monetary Policy Department of the CBN, Cardoso noted that while this change in who countries owe money to might seem like a minor detail, he emphasised that it is a critical development with serious implications.

He argued that the way countries manage debt owed to the Paris Club may not be as effective for these new lenders. Cardoso expressed concern that this new debt landscape could pose a threat to financial stability and economic recovery for many countries.

Cardoso said, “Public debt dynamics are increasingly influenced by significant debt servicing obligations to non-Paris Club members and private lenders, including commercial banks and bond investors.

“This shift in the debt structure represents a critical evolution in the global financial framework, with profound ramifications for public debt management in our countries.”

He also stated that recent events like the COVID-19 pandemic, geopolitical conflicts, and natural disasters have put a strain on many countries’ finances, making them more likely to seek loans from diverse sources.

However, these non-traditional lenders might come with stricter repayment terms and potentially higher risks compared to Paris Club loans.

“Following the COVID-19 pandemic, along with other developments such as geopolitical conflicts and natural disasters, the financial strain on our sub-region has escalated, posing a threat to their macroeconomic and financial stability and prospects for faster recovery,” he said.

Nigeria, despite being classified as having generally moderate debt risk, the CBN urged the federal government to remain cautious, particularly regarding potential liquidity risks. These risks, if not addressed effectively, could stem from weak revenue mobilization, a persistent challenge hindering debt sustainability and economic stability.

What the CBN is saying is that while Nigeria’s overall debt risk is considered moderate, the country still needs to be careful about its ability to pay back its loans (liquidity risk). This risk could become a problem if the government doesn’t collect enough revenue (money) in the future.

Dr Baba Yusuf Musa, Director General of the West African Institute for Financial and Economic Management told journalists, “When you compare Nigeria with the rest of the world or peer countries, you realise that with the 37 per cent debt to GDP ratio, we still have room to borrow but the issue with the Nigerian debt is you don’t use GDP to pay debts rather you use the revenue to pay for any debt”

He added, “If you look at it from the revenue side Nigeria is at a high risk of debt distress in terms of our borrowing so what we need to do now is to step up our capacity to generate revenue, the more revenue we have, the less ratio of debt to revenue we have.”

WAIFEM, he said, is “very much in support of what the federal government is doing because there is a window for the government to raise more revenue, all that the people need to do is to support the federal government diversify the sources of revenue and of course generate more sources of revenue, once we have this we don’t have debt problem but rather revenue problem.

He added, “What the Medium Term Debt Strategy does is that it smoothens the debt service so that going forward when borrowing, you take into consideration the redemption profile that you have and the type of loans that you have in your existing portfolio and then it will enable you also to minimise the cost and risk the future loans will add to the debt portfolio.”

Economy

CAC issues guidelines for banks recapitalisation, merger

Published

3 hours ago

July 27, 2024

Admin

The Corporate Affairs Commission has issued fresh guidelines to assist Deposit Money Banks in the ongoing recapitalisation.

The commission, in a statement signed by its management and posted on its Facebook account on Friday, said the new directive is pursuant to its powers under Section 8 (1) (e) of the Companies and Allied Matters Act No. 3 of 2020, stressing immediate adherence to the policy.

It said the new guidelines were issued to guide proper filing for new incorporations, increase in share capitals, mergers and upgrade or downgrade of licence authorisation.

For new incorporations, the CAC stated that intending applicants must submit necessary requirements including, “An approved name reservation or availability, approval-in-principle from sector regulator, duly completed on-line incorporation form and payment of stamp duty and filing fees for the category of license authorisation.”

It added that a certificate of incorporation shall be issued within 24 hours for applications that satisfy all requirements for incorporation of companies prescribed in the, “Commission’s operations checklists available at www.cac.gov.ng/resources.”

Also, banking institutions seeking to increase their share capital through private placements, rights issues and/or offers for subscription must submit a duly signed company resolution, return of allotment and other statutory declaration by directors verifying that the issued share capital is fully paid- up

Other requirements include, “Notice of the fact that regulatory approval is required, an affidavit deposed to by a director of the company to the effect that regulatory approval is required for the increase, an amended memorandum of association reflecting the new share capital.

“Payment of stamp duties and filing fees, Issuance of a letter acknowledging notice of increase and requirement of regulatory approval, filing of regulatory approval and the issuance of a certificate of increase.”

Under this category, the commission warned that the notice of the fact that regulatory approval is required must be filed in accordance with the provisions of Section 127 (3), (4) & (5) of CAMA.

“Annual returns and information on persons with significant control must be filed up-to-date and certificate of increase shall be issued within 24 hours of filing of regulatory approval,” it said.

Similarly, small and medium banking institutions seeking to merge must submit duly signed special resolution for merger by each of the merging companies.

Other requirements are “the scheme of merger duly approved by the Securities and Exchange Commission.

“A certified true copy of court order authorising Extraordinary General Meeting of each of the merging companies. Evidence of publication of court ordered meeting in two newspapers and the Federal Gazette and a CTC of Court order sanctioning the Scheme of Merger.

“All enquiries and complaints on these guidelines and applications submitted in pursuance of the recapitalisation exercise should call +234 816 920 9551,” the statement added.

Recall that the Central Bank of Nigeria in March 2024 directed all banks to increase their capital base for improved productivity.

The apex bank had directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn.

It also said commercial banks with national licences must meet a N200bn threshold, while those with regional authorisation are expected to achieve a N50bn capital floor.

This process has commenced fully with banks issuing public offers and rights issues to meet the two year target.

Economy

Oando denies owning blending plant in Malta

Published

3 hours ago

July 27, 2024

Admin

Oando PLC has denied allegations on social and digital media that it owns a blending plant in Malta.

The energy company also denied importing dirty fuel into Nigeria through a Maltese company, Raz Hansir Oil Terminal Limited.

A statement by the company secretary, Ayotola Jagun, said the allegations levelled against Oando of being a shareholder, and its principals of being board members of Raz Hansir Oil Terminal Limited, a company that operates an oil storage and blending facility responsible for importing adulterated petroleum products into Nigeria, were unfounded.

“We wish to refute such claims and attest that neither Oando PLC nor its Executives have ever held shares, investments, or interests in the fictitious Maltese company.

“As part of a comprehensive investigation into the basis of the false claims, we conducted a search of the Malta Business Registry, the official repository for all registered entities past and current within the country. Our search yielded no results for a company bearing that name. Subsequent due diligence efforts similarly failed to uncover any record of the company’s existence.

“We therefore believe that the false claims are of the malicious intent of misleading the public and our stakeholders,” Jagun stated.

The company reiterated that as a publicly listed company, any corporate actions, such as acquisitions, are declared publicly in accordance with applicable corporate governance laws and rules.

“Furthermore, it is imperative that information released about a publicly quoted company such as Oando, is thoroughly researched and deemed accurate before it is published in the public domain.

“The company’s securities are traded daily across two exchanges (NGX and JSE). To prevent misinformation and confusion among investors, as well as our other stakeholders, we implore all members of the press to take adequate steps to ensure the veracity of reports by fielding all enquiries with Oando PLC’s Corporate Communications department,” Jagun submitted.

Malta and its oil became a topic of discussion lately following allegations by the President of the Dangote Group, Alhaji Aliko Dangote that some officials of the Nigerian National Petroleum Company Limited own blending plants in Malta.

Amid the crisis surrounding his $20bn refinery, Dangote had said: Some of the terminals, some of the NNPC people and some traders have opened blending plants somewhere off Malta. We all know these areas. We know what they are doing,” Dangote said.

Data from Trade Map showed that Nigeria imported fuel worth $2bn in 2023 alone.

Earlier, the Group Chief Executive Officer of the NNPC, Mele Kyari, said he does not own a blending plant outside Nigeria.

Kyari stated that he had been inundated with calls from family members and friends, asking if he truly owned a blending plant in Malta.

Economy

Guinness loss widens to N54.76bn as finance cost spikes by over 100%

Published

4 hours ago

July 27, 2024

Admin

Guinness Nigeria Plc has released its audited financial statements for the year ended June 30, 2024.

Guinness Nigeria Plc loss for the year came in higher at N54.766billion, from loss of N18.168billion in 2023, representing 201percent increase.

The company’s net finance costs rose by 117.79 percent to N99.087billion in 2024, from N45.496billion in 2023. Its loss before income tax (LBT) rose to N73.679billion from N22.138billion loss before tax in 2023 financial year.

The brewer’s full year revenue of N299.489billion as against N229.440billion represents 31percent increase. Its profit from operating activities printed at N25.407billion in 2024, from N23.357billion in 2023, up 9percent.