The Nation Newspaper

Tag: Debt Management

  • Ogun and politics of debt management

    ‘You will never get to your destination if you stop to throw stones at every dog that barks at You ‘
    —Winston Churchill

    Nigeria indeed is a unique nation blessed with unique and dynamic people.But it is thoroughly perplexing the way Nigerians perceive issue pertaining to credit facilities. We see every issue concerning obtaining loan or bond as another route to slavery and servitude. We view it from a very negative prism.
    Unfortunately, that perception is flawed. One of the keys to being financially successful is understanding when loans are a good solution for your situation. According to Wikipedia, a loan is when you receive money from a friend, bank or financial institution for future repayment of the principal, plus interest.
    Loan is a positive financial weapon of development, but due to the cash-and-carry nature of our economy, it is being seen as a weapon of bondage. In advanced world, loan is used as a good financial tool to fast-track development. Simply put, loan is using a money you don’t have to get what you need. In other words, it is using other people’s money to develop your people or your land to pay back at a later time.
    It accelerates development and downloads tomorrow today.This is why advanced economies of Japan and USA are on the fast-lane of development yet they rate among the highest global debtors. In Nigeria, Lagos rates highest in indebtedness.But has this indebtedness stalled the growth and development of Lagos State? Has it retarded the development of US or Japan? The answer is a resounding NO.
    Surely, Loans are never a good idea if you don’t possess the capacity to pay back within the required time frame or when it is not deployed judiciously. What must not be compromised by the citizenry is that the money so collected must be utilized on developmental projects. It must be used to work for the people.
    Indeed, it is like a man that took a credit facility to build a five-star hotel and he is to re-pay over a period of 10 years. Even if the man dies, the hotel will still be there for his children to see and enjoy from.
    What need to be consider when issues concerning accessing loan facility is being considered is: Does the man or government seeking for such facility has the capacity to pay back? Is the reason for such loan salutary? Are the people to administer the loan credible and would judicously utiise the fund?Those are the salient questions to consider and not political sentiments.
    In the case of Ogun State, the answer to the three posers is YES. The National Bureau of Statistics (NBC) recently rated Ogun as third nationally in terms of Internally Generated Revenue (IGR) collection. In the report, the NBC, while assessing states for the duration of January to June 2016, rated Ogun just behind Lagos State and oil-rich Rivers State.
    According to the report, Ogun State, “with its internal resources has been positioned the third highest IGR among other Nigerian states. The state, within six months in 2016 generated revenue of N56.29 billion. Ogun made this increment from N10.84 billion in 2011.. “
    The report indicates that Ogun took a 500 percent leap from what used to be in 2011 to an olympian height in 2016. The import of such rating is that the state possesses the innate capacity to generate enough revenue to repay any financial indebtedness.
    Happily enough, the fund is being used for the people. Proof of shrewd and effective utilisation of the financial resources is evident. Eye-popping and ambitious infrastructural transformation is sprouting in several parts of the state. Millennia projects designed to position the state for the challenges of the 21 century are being executed.
    One of such is the construction of a 10-lane expressway which promises to launch Ogun into the big league of states with modern infrastructure. When completed, two lanes on either side of the expressway would be built with concrete and will be reserved for trucks and other heavy duty vehicles. The advantage of this is massive.It will reduce accident rate on the road as well as preserve the lifespan of the road.
    The expressway would also host the rail transport project being planned by the state government. The rail project is to connect the Federal Government rail line at Sagamu interchange. This will greatly reduce the travel time between Abeokuta and Lagos.
    When completed, the rail line will further ensure that more people can live in Abeokuta or Sagamu and work on the Lagos Island.
    This vision is also being complemented with the development of an array of housing estates located along the Abeokuta-Sagamu corridor. The benefit of such a single project could then best be imagined as it would further pump-up the adrenalin of the states high-flying IGR.
    The loan being sought by the government would assist in ensuring the completion of various projects scattered across the state such as the 35-kilometer Sango-ijoko-Akute-Alagbole-Ojodu road. Urban roads as well as Rural roads are equally to the considered.
    Interestingly, the managers of the state are not resting on their oars. The state today is the industrial Mecca of Nigeria having attracted over 120 new companies under six years with scores still on the queue waiting to come in.
    But really you won’t blame Nigerians for being skeptical when it comes to accessing loan facility. Many a government official had in the past obtained such facility only to divert it to pedestrian usage or simply siphon such fund.
    However, the case of Ogun State under Senator Ibikunle Amosun is different. Since he assumed office in 2011, he has made judicial utilisation of financial resources a priority. He has constructed over nine bridges and 400 kilometres of urban roads across the state.Indeed, he negotiated a singe-digit interest for the loan he seeks.

    •Balogun, is a media aide of Governor Amosun.

  • Debt Management Office raises N947b in 12 months

    Debt Management Office raises N947b in 12 months

    The cumulative debts raised by the Debt Management Office (DMO) this year stood at N947 billion,  FBN Capital has said.

    Its Head of Markets, Olubunmi Ashaolu said the DMO held its final monthly auction of Federal Government of Nigeria (FGN) bonds for the year last Wednesday, and raised N54 billion from the sale of three debt instruments.

    These, he said, were all reopened issues (13.05 per cent Aug ‘16s, 14.20 per cent Mar ‘24s and 12.15 per cent Jul ‘34s). The marginal rates (effective cut-off points) widened in each case from the previous month, by between 240 basis points and 350 basis points.

    Ashaolu who disclosed this in a report titled: ‘A weakening of auction demand for FGN bonds’ also said participation by local investors waned due to the lure of higher yields on money market instruments. Also, offshore investors showed very little interest while the participating Pension Fund Administrators concentrated on the longer dated instruments. “The DMO only achieved its sales target for the long bond (Jul ’34), and then at a price. This year, the debt office has raised N947bn (gross) from its auctions, and so comfortably within the target range in its quarterly calendars of between N800 billion and N1.11 trillion,” he said.

    In fourth quarter, in contrast, the DMO raised N182 billion, and so below the target range of between N195 billion and N285 billion for the quarter.

    “We see yields staying within the range of 14.50 per cent to 16 per cent over the next few weeks due to the turbulence in the money market. Given the macro uncertainties including the passage of the new budget, we see greater challenges in issuance for the DMO in the months ahead,” he said.

    He said the total bid of N94 billion was the lowest of the year and about 10 per cent below the previous month. This, he explained, is due in part, to concerns surrounding pressures on the naira exchange rate following the slide in oil prices.

    The DMO recently confirmed that Nigerian companies issued nine bonds worth $30.4 billion in the International Capital Market in the last three years.

    Director-General of the DMO, Dr. Abraham Nwankwo,  said the Nigerian companies took advantage of the window opened through the successful issuance of Nigerian Sovereign Eurobonds to successfully issue the international bonds. He noted that “for the first time in Nigeria’s economic history, the private sector has been enabled to access long-term funds from both the domestic and international capital markets.

    “The successful issuances of three Nigerian Sovereign Eurobonds in the International Capital Market – one in 2011 and two in 2013 – have opened the window for Nigeria’s private sector to raise required foreign currency funds,”he said.

    He explained that banks and other companies are now able to fund long-term real sector projects  in agriculture, manufacturing, housing, mineral exploration and processing, infrastructure for diversified and sustainable economic growth, towards employment generation and poverty reduction.

    On the domestic front, 22 Nigerian companies raised over $1.37bn from the domestic market between 2007 and 2013.

  • Why we’re floating N40b bond, by Imoke

    Why we’re floating N40b bond, by Imoke

    The Cross River State Governor, Senator Liyel Imoke yesterday gave reasons he decided to float a N40 billion bond to address financial matters in the state.

    Imoke’s Chief Press Secretary, Christian Ita, in a statement on behalf of the governor said the bond is not a fresh debt as misconstrued in some quarters, but a deliberate policy at freeing the state of  its current debt burden.

    The statement read: “The bond issued by the Cross River State government is an application to recapitalise subsisting debts in the state. “It is not a fresh bond to raise fresh loans, but to renegotiate the existing debt and spread the repayment period over a reasonable time and free up the state from numerous debt accruing from 2002 when the first bond was issued by the state government in support of the Tinapa project.

    “The first bond ever issued by the state government was in 2002 when the first Bond Law was passed to enable the state government to borrow funds to finance the Tinapa project. Since 2002, state borrowing by bond a lot of interest has accrued to the state Federation Account, thereby, limiting the state capacity to raise funds to bridge the funding gap in the state annual budget.

    “The current bond N40 billion  is an accumulated compilation of past debts arising from the 2002 bond and subsequent state borrowing which is now being recapitalised and renegotiated  with lower interest rate and longer payment period.

    “The government has presented the request for the recapitalisation of the debt by bond following: The request was first presented to the state executive council and was approved; The approval was sent to the state house of assembly for a resolution to support the bond; The request to the state house of assembly was backed up by a law to amend the State Bond Law and a Debt Management Law.”

    According to the statement, the state’s finances has been in danger due to the fact that the 2002 bond was issued without the required debt management framework and the 2002 bond was limited to N4.5 billion while the borrowing therefrom exceeded that amount by 2005 without Amending the State Bond Law and providing a Debt Management strategy for the debts.

    “The current request has put in place a robust Bond Law and a Debt Management Law with a regulatory framework to renegotiate the debt,” the statement noted.

     

  • Debt Management Office clears Osun of alleged N350b debt

    Debt Management Office clears Osun of alleged N350b debt

    •To introduce Sukuk to other parts of Nigeria

    Osun State is one of the best states in Nigeria with sustainable public debt management, the Director-General of Debt Management Office (DMO), Dr. Abraham Nwankwo, has said.

    Nwankwo spoke to reporters at MicCom Golf Hotel and Resort, Ada, Osun State during a three-day retreat for members of the House Committee on Aids, Loans and Debt Management.

    The DMO chief declared that Osun’s debt profile is a very sustainable one and healthy for its economic growth, describing the state’s alleged heavy debt burden as a mere propaganda and hoax.

    This has deflated the persistent claims by the candidate of the Peoples Democratic Party (PDP), Otunba Iyiola Omisore, who alleged that the Governor Rauf Aregbesola’s administration was indebted to the tune of over N350 billion.

    The former Head of Service under the Aregbesola administration, Elder Segun Akinwusi, had equally built and sustained his campaign for the governorship seat on the same allegation.

    The government had denied the allegation, insisting that only those ignorant of operations of global finance would agree that a bank could give a state or individual loans more than its capacity to pay both interest and the principal.

    But Nwankwo, who did not give figure on the state’s actual debt figure, explained that Osun needed to be encouraged in term of management of debt because it has not borrowed beyond its capacity.

    The DMO boss added that his office recognises Osun State as the first to take Sukuk.

    “By our plan to encourage the issuance of Sukuk in Nigeria, because we need to diversify the instrument in the bond market. We want to make sure that all segments of the society are captured in the bond market. There are some groups of people or individuals, who do not want to participate in ordinary bond because of interest.

    “DMO and others are working hard to introduce Sukuk in Nigeria. We are delighted that Osun took the initiative and helped in introducing it in Nigeria.”