The Nation Newspaper

Tag: DEBT

  • $1.2b Etisalat debt: Why NCC intervened, by board chair

    $1.2b Etisalat debt: Why NCC intervened, by board chair

    The Chairman, Board of the Nigerian Communications Commission (NCC), Senator Olabiyi Durojaiye, has said the board intervened in the $1.2billion Etisalat loan face-off with 13 local lenders in order to ensure continuous provision od services to the over 21 million subscribers of the telco.

    He added that the intervention became imperative too to safeguard its over 4,000 employees, and stabilise the telecom sector to ensure its contribution to nation’s gross domestic product (GDP) is not impacted while investment continues to thrive.

    According to a statement endorsed by its Director, Public Affairs, Tony Ojobo, the emergency meeting, which was presided over by the board chairman,  was  to review the Etisalat issue in its entirety and also review the intervention made by the NCC management.

    The board commended the NCC management for its handling of the Etisalat issue.

    The board commended the cooperation and inter-agency collaboration exhibited by the Central Bank of Nigeria (CBN), the regulator of the financial sector.

    The board directed the management of carriers to ensure at all times that telcos meet the financial and technical integrity standards expected of them.

  • ALGON set to appeal $315.6m judgment debt 

    The Association of Local Government of Nigeria (ALGON) has dissociated itself from a $315m judgement debt.

    ýThe association spoke after it National Executive Council (NEC) meeting in Abuja. It also passed a vote of confidence on its leadership led by Alhaji Ibrahim Ahmad Karaye.

    Justice Valentine Ashi of a High Court of the Federal Capital Territory had in his judgement  ordered the Central Bank of Nigeria (CBN) to pay $318, 807,950.696 to Riok Nigeria Limited and two lawyers.

    ýRiok was said to have executed some contracts for ALGON which were not paid for.

    But ALGON, through its National Presidentý, Alhaji Karaye, its National Secretary General/ Director of Legal Services, Mrs. Evan Enekwe, described the contracts for which Riok Nigerian Limited got judgement in its favour as doubtful and unverified.

    ALGON said: “ALGON passes a vote of confidence on the current. Executive under the leadership of Alhaji Ahmad Karaye, who is the National President of the Association,

    “ALGON expresses satisfaction and endorses the initiative and reconciliation of NEC and ALGON Board of Trustees (BOT).

    “ALGON hereby dissociate itself from all claims and doubtful. Contracts purportedly awarded for projects that are yet to be verified; and consequently denies liability and direct NEC to take immediate stepsý to appeal against all such judgements that constitute impediment on the release of external debts deductions refund to local government councils”.

    The association also ask its President, Alhaji Karaye and his Executive to pay solidarity visits to states and IDPs in the North-East geo-political zone of Nigeria affected by the Boko Haram insurgency.

  • Forex reserves dip to $30.25b as CBN issues N32b debt

    Forex reserves dip to $30.25b as CBN issues N32b debt

    The Nigeria’s foreign exchange reserve stood at $30.25 billion by June 28, down by 0.36 per cent from a month ago, Central Bank of Nigeria (CBN) data showed last Friday.

    The reserves showed a 14.8 per cent rise from a year ago, when they stood at $26.34 billion. The  dollar reserves have risen slightly this year, thanks to the rise in global oil prices.

    The Organisation of Petroleum Exporting Countries (OPEC) member country has added $4.2 billion to its reserves since the beginning of the year. Foreign reserves stood at $26.09 billion at the beginning of the year.

    The foreign exchange reserves rose by $7 billion in six months to hit $31 billion at the end of April. According to FBN Capital Research, the reserves rose after the disbursement of $600 million by the African Development Bank (AfDB) last November and the recent sale of N1.5 million Eurobond.

    “There has also been a significant recovery in oil production over the period. With less certainty we can speculate about improved forex management and possible swap transactions,” it said.

    The research firm said the positive surprise was due to the upward swing in reserves, since the CBN stepped up its forex sales in early March.

    “The steady accumulation makes it less, not more, likely to adopt the forex reforms sought by the market. There is no sign that the CBN plans to slow its sales, which for wholesale transactions alone are close to $3 billion: rather, it launched its latest window (for investors and exporters) only last month,” the report said.

    It said the macro-economic damage from the latest period of oil price weakness, which is approaching three years, could have been manageable if a fiscal buffer against external shocks had been functioning.

    The CBN also sold N31.94 billion ($104.76 million) in treasury bills last Friday in a bid to tighten liquidity in the money market, while overnight lending rate fell.

    Traders said the bank sold N31.52 billion of 349-day treasury bill at 18.59 per cent and N440 million naira of 160-day treasury bill at 17.98 per cent at an auction last Friday.

    Cost of borrowing among commercial lenders, however, dropped to around five per cent on the interbank market from around 8.5 percent last week. Traders said cash balance in commercial lenders’ accounts with the CBN stood at N320.35 billion last Friday, boosted by the repayment of around N287.39 billion in matured treasury bills last Thursday.

    “Interbank rate is at low level because the CBN sold fewer dollars this week (on the currency market),” a currency trader said.

    Traders expect rates to remain flat next week unless the CBN decides to take advantage of the low rates to mop-up excess liquidity from the banking system.

  • $1.2b Etisalat debt: Banks consider legal action against core investor

    $1.2b Etisalat debt: Banks consider legal action against core investor

    The 13 banks that raised $1.2billion loan for mobile operator Etisalat Nigeria may press criminal charges against directors of Mubadala Development Company of the United Arab Emirates (UAE).

    This is the latest option the banks are considering to recover the outstanding part of the facility.

    It was gathered that the banks held a meeting at the weekend to consider engaging  a London-based counsel to assemble a team of lawyers to press charges against Directors of Mubadala for abdicating their contractual obligations.

    A source close to the meeting said the banks explored the legal option to save Etisalat Nigeria which they still see as a viable business. They are also said to be interested in ensuring the continuity of Etisalat Nigeria.

    The source said: “The banks have a different position now. The first thing considered at the meeting is the legal option to compel Mubadala through a Mareva injunction to honour its obligations to the consortium. This is because other than this loan crisis, Etisalat is a viable business. The banks have access to theirs books and they can see that despite the crisis, Etisalat’s business value has not diminished. That is why the banks took that position that they are not interested in a takeover of the business. They are in fact more sympathetic to the Nigerian investors led by Hakeem Belo-Osagie and are willing to work with him to steady the ship and keep Etisalat business going while searching for new investors.”

    The source said the lenders also felt that there was no need dissipating needless time and energy on the option of hostile takeover considering that the law is sacrosanct on that. “They realised the licence is not transferrable. So, they alternatively opted to pursue Mubadala for a recovery of the outstanding sum of money from the loan. The banks are said to be convinced of this option considering what they perceived to have been a trend with Mubadala. In each of the country where Mubadala had exited, it left behind burdens of unpaid loans,” the source added.

    Another source close to one of the lenders who corroborated the development, said: “The banks rose from their weekend meeting with a strong resolve that Mubadala may have tried this trick with the wrong customers this time around. Yes, I can confirm they will press charges.

    A leading Investment Analyst who works as External Consultant to the Central Bank of Nigeria (CBN), speaking on condition of anonymity, has advocated a stronger involvement of the Federal Government at the diplomatic, economic and trade relations levels as options to save Etisalat Nigeria.

    According to him, government needs to reach out to the Abu Dhabi government to rein in the Directors of Mubadala and compel them to respect a contractual loan obligation they entered into in Nigeria with the consortium of banks. At the economic level, the government must provide all necessary support under its “Ease of Doing Business” policy to new investors the Emerging Markets Telecommunications Services’ team led by Hakeem Belo-Osagie may be reaching out to. Key members of the nation’s Economic Management team such as the Minister of Industry, Trade and Investment, Minister of Finance and the Central Bank Governor can be directed to join the NCC to provide all necessary concessions to enable the new investors make their decision and settle in quickly,” he counseled.

    “The second leg of the proposed economic intervention is for the government to direct the Sovereign Wealth Fund to invest in Etisalat considering its continued viability as a business. Telecom is a critical national infrastructure that represents the backbone of business, economic development and even national security. The intervention of the Sovereign Wealth Fund will not only preserve the jobs of thousands of Nigerians directly employed by Etisalat Nigeria but that of scores of other Nigerians indirectly employed in the entire value chain of the Etisalat business,” he said.

  • FRC urges compliance with FRC Act on debt limit

    The Acting Chairman, Fiscal Responsibility Commission (FRC), Victor Muruako, has advised the Federal Government to set a debt limit for the three tiers of government to serve as guide for loan procurement.

    He gave the advice when he spoke with the News Agency of Nigeria (NAN) in Abuja on Wednesday.

    According to him, the Fiscal Responsibility Act (FRA) 2007 provides for the urgent need to set the debt limit of the three tiers of government.

    Muruako said that the Federal Government had not complied with Section 42 of the FRA, 2007.

    The said section provides for the president to set overall limits or debt ceilings for the amount of consolidated debt of the Federal and State Governments, subject to approval of the National Assembly.

    “Most governments operate with the information that they are still borrowing within the limit, although we have not exceeded the standard.

  • Edo’s debt profile: Dynamics of govt finance

    Statistics have a deft way of creating one impression or the other, sometimes for good, and at other unwelcome times, for bad.

    The latest Nigeria Extractive Industries Transparency Initiative (NEITI) Quarterly Review shows

    Nigeria’s debt profile and indicates a drastic drop in the revenue profile of most states of the federation. In the Southsouth, the report ominously avers that the debt profile of the state governments is on the increase, consisting of domestic and external debts between December 2015 and June 30th, 2016.

    For instance, Lagos state has the highest cumulative debt of N603.25 billion as against the state’s revenue of N410.5bn for 2016. The second on the debt table is Delta State with N331.95 billion growing debt as against N142.78 of the state revenue. Akwa Ibom State occupied the fourth place on rising debt profiles with N161.23 billion.

    What cannot be ignored in the NEITI report is that it clearly vindicates Edo State on both domestic and foreign debts. The World Bank loan Edo State took is cheaper to service and attracts about 1% interest rate compared to domestic borrowing that attracts 18% interest

    rate. The report maintained that “considering that most states already have a high debt burden,

    the possibility of even higher debts for the states remain quite high.”

    Among the subnational governments, Lagos, Kaduna, Edo, Cross River and Ogun states retained the top spots on the list of foreign debtors. If Nigerian external debt accounts for 20% of Nigeria’s debt profile, how does Edo’s debt constitute one of the highest? Is 20% more than 80%? Is the external debt stock of $11.41 billion (N3.48trillion) which accounted for 20%

    more than the domestic debt stock of $45.98 billion (N13.88trillion), which accounted for 80%?

    A clarification is necessary here. The total debt profile of $57.39bn is made up of external debt stock of $11.41 billion (N3.48trillion) which accounts for 20% and domestic debt stock of $45.98 billion (N13.88 trillion) which accounts for 80%. The external debt of 20% cannot amount to the highest.

    Analysts should stop categorising Edo State as the most indebted states in Nigeria. The rate of the rise in foreign debt has been slower than that of domestic debt. In recent times, the Federal Government has been making attempts to increase the proportion of foreign debt, because of the higher interest rate charged on domestic debts.

    Edo State is just as privileged as Lagos state in Sub-Saharan Africa to access World Bank loans at less than 1% for 20 years, and in some cases, 10-year moratorium.

    For a shared understanding of Nigeria’s domestic debt, a major source of concern is that Nigeria’s public domestic debt has experienced rapid growth over the past 10 years and that debt service outlay is quite high. The domestic debt-GDP ratio is only about 10%; the total public debt-GDP ratio is 12.25%, and compares favourably with the peer group threshold of 56%.

    Although the debt service-revenue ratio is high, the problem needs to be unbundled so we can all agree on the appropriate solution path. Indeed, following the rebasing of Nigeria’s GDP in 2010, the DMO observed that the increase in the GDP did not enhance the country’s ability to service its debts.

    Nigeria’s tax revenue-GDP ratio is still below 6% compared to the average for the country’s peer group, which is 18%. Essentially, therefore, from this perspective, what is being experienced is a revenue problem which impacts the debt service-revenue ratio.

    Already the Federal Government is set to raise its domestic and foreign borrowing ratio under the new Debt Management Strategy (DMS) unveiled by the DMO for the next four years. The DMS is about how funds are borrowed, internally and externally. It is a medium term project from 2016 to 2019 setting out the broad guidelines for four years. A review of the new debt strategy shows that it would slant significantly in favour of external borrowing than domestic borrowing.

    As Mr. Nwankwo said domestic and external borrowings would now be in the ratio of 60:40 per cent as against the previous ration of 84:16 per cent respectively. The new borrowing strategy, he explained further, would progressively increase the percentage share of external financing, taking into account the need to moderate foreign exchange risk in the short to medium term.

    He said the reason for the shift towards more external borrowing was because external borrowing was cheaper, apart from the advantage of lower cost of fund to avoid the risk of crowding out the private sector.

    Only Edo, Lagos, Delta, Ebonyi, Anambra, Cross River, Akwa Ibom,  Kano and Enugu states have paid their workers’ salaries and allowances up to April and are therefore not owing their workers.

    From the foregoing, there can be no doubt that Edo State is on the right path with its borrowing for the development of the state. It is one borrowing ideal that does not commit the state to punitive debt burden that generation unborn will have to bear.

    • Cephas sent this piece from Benin City
  • Bi-Courtney to Fed Govt: pay N200b debt for ‘failure to hand over airport terminal’

    Bi-Courtney to Fed Govt: pay N200b debt for ‘failure to hand over airport terminal’

    •MMA2 handles 20m passengers, 400,000 flights in 10 years 

    Airport terminal operator Bi-Courtney Aviation Services Limited (BASL) has urged the Federal Government to pay over N200 billion to it for failing to hand over old domestic terminal, otherwise known as General Aviation Terminal (GAT), Lagos.

    Its chairman Dr. Wale Babalakin said the payment  was necessary after BASL was awarded damaged by the Federal High Court to the tune of over N132 billion in 2012.

    He said the amount increased to N200 billion, owing to the revenue the terminal operator would have collected as revenue for flights and other commercial activities at the old domestic terminal.

    Babalakin spoke to reporters at the 10 years’ anniversary of Murtala Muhammed Airport Terminal Two (MMA2), in Lagos.

    He called on government to honour the terms of the concession agreement it signed in 2007, so as not to frustrate more private sector players interested in funding airport infrastructure.

    He said said: “We are seeking the assistance of all and sundry for the payment of the N200 billion owed to Bi-Courtney Airways Services by the Federal Government. As far back as 2012, the Federal High Court awarded damages of N132 billion to Bi-Courtney Airways Limited.

    “Six appeals against the judgment in the Court of Appeal have been dismissed. Even the appeal to the Supreme Court was also dismissed. No nation can truly achieve its potential, if it treats its dynamic citizens this way.

    “We call on the regulatory authorities to honour the concession agreement, which has been approved by every level of government, including the Presidency and confirmed by all the strata of the courts in Nigeria.

    “This is the only way to reward our pioneering efforts .We are grateful to Allah that our eye opening effort that had led to the upgrading of some airports in Nigeria and the decision of the Federal Government to concession airports.”

    Babalakin said his firm welcomes the idea of concessioning, it is done properly and in accordance with the Rule of Law.

    He called on government to assist domestic carriers, which are struggling to keep their operations afloat.

    He said the firm was disposed to plans by government to concession 22 airports, if the process is transparent.

    He said the firm has explored necessary mediation channels to impress it on government to honout its agreement, but the efforts were yet to produce the desired results.

    He said: “In 2008, the former President Musa Umaru Yar’Adua presided over meetings to resolve all issues about MMA2, despite the directive given by the former president, aviation authorities are yet to honour the concession agreement.”

    He said aviation authorities are frustrating efforts by BASL  to begin regional flights from MMA2, despite approval secured since 2007.

    Babalakin said: “We got approval since 2007 to operate regional flights from MMA2, but the relevant authorities are frustrating our efforts. We could trace it to both the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Civil Aviation Authority (NCAA). It is the airlines that are affected, because they burn aviation fuel moving their aircraft from MMA2 to the international terminal. This would not arise if they had allowed us to operate regional flights from MMA2.”

    The Chief Executive Officer of BASL, Captain Jari Williams, said MMA2 processed over four million passengers annually.

    He added that MMA2 is the first privately-funded Design, Build, Operate and Transfer (DBOT) terminal in Nigeria.

    It was inaugurated in May 2007 by former President Olusegun Obasanjo.

    MMA2 has handled over 20 million passengers, 400,000 flights and created employment opportunities for over 100,000 people in the past 10 years.

    The terminal is home to retail outlets, shops, restaurants and banks offering a wide range of products.

  • JV cash call debt stagnates oil reserves’ growth, says NAPE

    JV cash call debt stagnates oil reserves’ growth, says NAPE

    The Nigerian Association of Petroleum Explorationists (NAPE) has blamed the shortfall in Joint Venture (JV) funding for the stagnation of Nigeria’s oil reserves at 37 billion barrels for over 10 years.

    Its President and the Chief Executive Officer, Degeconek Nigeria Limited, an oil and gas consultancy firm, Mr. Abiodun Adesanya, spoke to reporters on the sidelines of the 10th Annual sub-Saharan Africa Oil and Gas Conference in Houston, Texas, United States (U.S.).

    He lamented that the shortfall in JV counterpart funding from the Federal Government, put at $7 billion as at last year, had grave impact on exploration, adding that as a result of lack of exploration, there was no additional reserves increase.

    He regretted that the budget earmarked for exploration activities as a result of the shortfall in JV funding had dwindled over the years leading to low discoveries and drilling of new wells.

    He said: “If you don’t spend money, you don’t get anything back. It is risky, which is why when the issues of budget cut comes up, the most hit is exploration because of the associated risks. But since the present administration came up with a formula to work on JV funding, we are beginning to see interest in exploration. Don’t forget that apart from the problem of funding, the issue of security in the Niger Delta in the last 15 years has been a major challenge.”

    The NAPE chief noted that reserves had not been static but rather a plus and minus issue.

    “As you produce, you deplete reserves. As you promote certain contingents into reserves, you increase the reserves. So, what has happened is that it is better to be flat than go down. I guess the strategy is to keep it flat if we cannot make it to go up; that is why you are seeing 37 billion barrels when production is ongoing. Depletion is going on and replenishment is going on simultaneously as well. And when you have that kind of scenario, the figure could go up or down,’’ he explained.

    He assured that the 40 billion barrels of reserves targeted by the Federal Government by 2020 was achievable because the country has been able to identify where the resources to achieve the target are. He added that there were quite a number of fields that have been discovered but not yet certified by the Department of Petroleum Resources (DPR) into being called reserves.

    He said a formula had been found to address that challenge and it seemed to be working because the country had witnessed a reduction in the vandalism of oil production infrastructure, and that again had increased the confidence of the operators to step out.

    He advised the Federal Government to make provisions for incentives for prospective investors willing to explore hydrocarbon in frontier basins to further boost the reserves. According to him,  such incentives have become necessary in view of the government’s intention to increase oil reserves to 40 billion barrels by 2020.

    Adesanya said a frontier basin is one where exploration activities have not been carried out or a basin with short-term exploration activities and a significant volume categorised as undiscovered. Such basins are Chad, Anambra, Bida, Dahomey, Gongola/Yola and the Sokoto, as well as the Middle/Lower Benue Trough.

    According to him, the government should provide incentives such as pioneer status to investors willing to explore in the cretaceous frontier basins because they are high-risk areas unlike the prolific tertiary basins such as the Niger Delta.

  • IMF: Nigeria spends 66% of tax revenues on debt servicing

    IMF: Nigeria spends 66% of tax revenues on debt servicing

    The International Monetary Fund (IMF) says 66 percent of Nigeria’s tax revenues is spent on servicing debts, calling on the country to raise taxes.

    Speaking at the IMF Fiscal Monitor briefing in Washington on Wednesday, Vitor Gaspar, director of the fund’s Fiscal Affairs department, said he is happy the Nigerian government now sees taxation as a path to development.

    “I had the privilege of visiting Nigeria some months ago and I was very happy to understand that for the authorities in Nigeria, fiscal policies in general and tax policy in particular are part of the strategy for development,” he said.

    “That is precisely how I believe fiscal policy should be thought in developing countries as part of the development strategy.”

    Catherine Patillo, assistant director and chief of Fiscal Policy and Surveillance Division of the IMF, said Nigeria has needs strong fiscal consolidation and improved taxation, stating that revenue-to-interest ratio is on the increase.

    “The Economic recovery and growth programme (ERGP) is very welcomed,” Patillo said.

    “It focuses on diversification, private sector-led diversification and in addressing some of the deep-seated problems related to strengthening infrastructure, which is necessary for diversification, as well as building revenues, particularly non-oil revenues.

    “So, we very much welcome the ERGP. It is an opportuned time, as you are aware Nigeria went into recession last year, we’ve forecast recovery, but still very fragile this year and the need to address the fiscal situation is quite urgent.

    “Our recommendation is for the continued strong fiscal consolidation, debt has risen, the profile has weakened; one striking statistics I think is the fact that over the past year, the ratio of interest payment to tax revenue has doubled to 66 per cent in Nigeria.

    “So, two-thirds of all tax revenue is going into interest payment, illustrating the need to raise tax revenue. That would allow the government to implement the social and growth-friendly policies that are part of the objectives of the ERGP.”