The Nation Newspaper

Tag: DEBT

  • Egbin threatens shutdown over N110b debt

    Egbin threatens shutdown over N110b debt

    The management of Egbin Power Plc, Nigeria’s largest power plant, has threatened to shut down operation owing to non-payment of N110billion debt. This may throw a huge segment of the population into blackout, The Nation has learnt.

    The plant has 1320megawatts (Mw) capacity.

    Its Managing Director, Mr. Dallas Peavey, yesterday in Lagos lamented that the huge debt has caused serious liquidity problem to the firm coupled with gas supply and transmission challenges. The problems, according to him, have stretched the company to its limit, adding that by next week, the firm may close shop, which will push the country into another round of blackout.

    Peavey told reporters that the plant was being gradually forced to shut down due to debt and adverse effect of grid instability that endangers its turbines. He identified inadequate gas supply to generate at optimal capacity as another challenge.

    According to him, the planned shutdown of the plant may cause Nigeria’s electricity supply, which recently witnessed improvement to get worse in the coming weeks.

    Peavey said: “Egbin power plant is one of the biggest single power generating stations in Africa with an installed capacity of 1320 Mw consisting of six units of 220Mw each.

    “Following the conclusion of the government’s privatisation exercise in November 2013, the consortium formed by the partnership between New Electricity Distribution Company and the Korean Electric Power Corporation (NEDC/KEPCO) acquired Egbin Power.” He added that the effect of the debt has become worse for the company.

    He said: “We owe the gas companies and have others like our technical partners (KEPCO) to pay, and importantly our lenders, the banks. We have made massive investments in making the plant available to generate electricity sustainably but unfortunately, we can’t break even due to the gross inefficiency in the value chain.

    “The government guarantees to pay us for every megawatt we generate and sell to NBET but they have not done that.  We just got paid for the month of December 2016, three months later and we were only paid a paltry 28 per cent out of the total 100 per cent of the verified and accepted invoice for that month.”

  • FIRS shuts two firms over N884 million tax debt

    FIRS shuts two firms over N884 million tax debt

    The enforcement team of the Federal Inland Revenue Service (FIRS), yesterday, shut the premises of AOP Logistics Limited, at Breweries new site area, Ibadan. The firm has a tax debt profile of N863, 188,498.00. The enforcement team leader said the premises of the firm will not be re-opened until it pays up it tax debt accumulated between 2007 and 2011.

    A senior staff at the haulage firm, who refused to disclose his name, said the firm had been making some tax payments to the FIRS. He, however, failed to provide prove of such payments.

    The FIRS team was also at Markfina International Limited at Kilometre 9, Kulodi, New Ife Road, Ibadan. The staffers of the firm, which is owing N21, 183, 020.95, were ordered out of the premises.

    Mr. Ayodele Oluwalekan, a management staff of the frm, told the FIRS team that the firm has not been able to pay what is owes because it stopped operations for a while, an explanation that did not impress the FIRS team leader, who ordered the premises sealed.

  • Group urges Fed Govt to pay agric support debt

    The Federal Government and the Ministry of Agriculture have been urged to pay the outstanding debts owed previous participants of the Growth Enhancement Support Scheme (GES)  programme to encourage everyone’s participation in actualising of government’s high food production and agricultural diversification.

    The GES programme  is an offshoot of the Agricultural Transformation Agenda encouraging firms to supply fertilsers and seeds to 2500 agro dealers for delivery to farmers.

    Nigeria Renascent Group, a proactive pressure group, in a statement in Lagos, stated  that with the prevailing situation in the country, vis-à-vis government action to agriculture, famine is imminent in the country, if the government does not  act fast by ensuring that important agricultural stakeholders are brought into the project of creating food for all.

    It, therefore, urged the government to pay the debts owed previous participants of the GES programme for this to materialise.

    In the statement signed by Mr. Abdulrasaq Lawal, the group stated: “The zest at which participants engaged in the GES programme, which saw many farmers smile and employment figure rising, has diminished.

    “The reason is not far-fetched. Many of those who participated actively and whole heartedly have since stopped because they cannot continue, owing to the huge debt of over N47 billion naira owed them by the Federal Government. While the few others who are participating now are doing so with measured involvement to avoid inactivity”.

    The group urged the government to “get all stakeholders on board by first settling the outstanding debts owed to them”.

    “This will serve as an impetus and will make them enthusiastic and give them the zeal to go all the way in seeing to the success of government diversification to agriculture policy,” the statement said.

  • Our growing debt

    •Even if inevitable in the circumstances, we still must call for caution in view of our experience

    After exiting the debtor cartel a little more than a decade ago, Nigerians would ordinarily be apprehensive about any attempt to take them down that route again. Little wonder members of the Senate Committee on Foreign and Local Debts at a meeting with the Director-General, Debt Management Office (DMO), Abraham Nwankwo, last week, voiced their concerns about the nation’s debt trajectory.

    The DMO boss had told the members that the nation’s total debt, which stood atN12.12 trillion as at the end of June 2015, had risen to N17.36 trillion as at December 2016. He gave the breakdown of the debt stock as follows: external – N3.48trillion ($11.41 billion); domestic – N13.88trillion ($45.98billion). Of these, the 36 states and the Federal Capital Territory account for about 32.45 per cent, leaving the Federal Government with the balance of 67.55 per cent. He blamed the ballooning debt on the prevailing economic challenges.

    Without question, the realities of the current economic predicament are such that make the debt option somewhat inevitable. First is the shock occasioned by the collapse of the nation’s sole export – crude oil – and with it the revelation that the reforms of the past years, ostensibly designed to diversify the economic base, have come to naught. Then of course is the poor tax base, a factor exacerbated by the shrinking economic activities, which means very little can be done in the short term to ameliorate the revenue situation. Add to this the cold reality of yawning infrastructure deficit said to require a staggering $2 trillion in spending over the next three decades to address; the situation leaves little to imagination as to where the funds will have to come from.

    Yet, as pragmatic as the debt option appears, it isn’t exactly that the senators as indeed citizens’ anxiety are entirely groundless. Clearly, if Nigerians shudder at the rising debt profile in the last one year, the real prospect of contracting another cycle of jumbo loans as being contemplated by the Federal Government cannot but stoke serious concerns.

    Never mind the Federal Government’s oft-touted justification about the relatively low debt to GDP ratio, the disproportionately huge revenue to the debt service ratio, even at the current levels, ought to be troubling enough. In the 2016 budget for instance, a whopping N1.48 trillion was allocated to debt servicing out of the N6.06trillion budget. This year, the amount proposed for debt servicing isN1.66trillion ($5.44 billion) out of the N7.29 trillion ($23.97 billion) 2017 budget.

    As for the argument about the low debt-GDP ratio justifying more debts, we must say that the argument is neither here nor there. The Islamic Development Bank (IDB) representative in Nigeria, Abdallah Mohammed Kiliaki, actually put the issue in better perspective when he noted sometime in March, last year, that: “when you look at the debt-GDP ratio of Nigeria, it is very low. It is 17 per cent compared to Italy and other countries which is about 150 per cent while that of the United States is about 100 per cent.

    “But there is a caveat… when you look at the amount, the revenue, to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis-a-vis the ratio to the total debt, I think Nigeria pays about 75 to 80 per cent of its revenue to service debt”. That of course is the crux of the matter.

    That however is not all that there is to the debt matter. Other issues no less troubling include the sometimes steep interests on the loans; the real possibility of the loans being either diverted or mismanaged; the extant public service culture of crass indiscipline bordering on sabotage and such other dysfunctions associated with the bureaucracy – all of which ensure that the citizens do not in the end get the value for the huge sums taken.

    Much as we do not seek to dissuade the Federal Government from shopping for critical funds to jumpstart the economy, we can only urge it to pay attention to these issues that have not only proven to be the bane of previous efforts but have left citizens frustrated and angry.

  • Nigeria’s debt hits N17.36tr, says DMO

    Nigeria’s debt hits N17.36tr, says DMO

    Nigeria’s total debt profile as at December 31 last year was $57.39 billion (N17.36 trillion), Director-General of the Debt Management Office (DMO), Abraham Nwankwo said yesterday.

    He spoke during his defence of the agency’s 2017 budget before the Senate Committee on Local and Foreign Debts in Abuja.

    Nwankwo said the amount included domestic and foreign debts. Giving a breakdown, he said the external debt profile stood at $11.41 billion (N3.48 trillion), while the domestic debt stock was $45.98 billion (N13.88 trillion).

    He said the N17. 36 trillion included debts of the Federal Government, the 36 states and the Federal Capital Territory (FCT).

    The D-G said the difference was due to the projected debt service payments in respect of new financing that was not fully utilised, as only few loans became effective during the period.

    He pointed out that the domestic debt stock of the Federal Government, 36 states and the FCT accounted for about 80 per cent of the total debt, while their external debt stock accounted for about 20 per cent.

    He assured that though Nigeria’s debt profile was on the increase, it was not in a precarious economic situation that would warrant seeking for debt relief. Nwankwo added that in spite of the recession, the economic indices had not portrayed Nigeria as a weak economy to warrant seeking for debt relief.

    “Nigeria is not in a position to beg for debt forgiveness. In spite of the present state of the economy, the country is still counted as a strong economy among other countries,: he said.

    The economic indicators show that Nigeria has a strong economy,’’ he said.

    He said if borrowing would be genuinely committed to infrastructural development, it would go a long way in the move to develop the economy.

    On repayment of the debt, he said the Ministry of Finance was making effort to expand the nation’s tax base.

  • Domestic debt

    • A ticking time bomb

    All too often, Nigerians, including experts, tend to focus on the magnitude of the country’s external debt to the utter detriment of the no less critical domestic debt. At its last bi-monthly meeting in Abuja, the Monetary Policy Committee of the Central Bank of Nigeria (CBN) spoke out clearly to correct this anomaly. At the end of the meeting, the committee called on the Federal Government to settle the N10.3 trillion domestic debts it owes as a way of reflating the economy and saving banks from collapse.

    Addressing the press on behalf of the committee, the CBN Governor, Godwin Emefiele, said “MPC urged the Federal Government to urgently assess the extent of its indebtedness to the domestic agents and develop a framework for securitizing the debt in order to settle its outstanding domestic contractual obligations which cuts across all sectors of the economy.”

    He continued with an understandable sense of urgency: “These accumulated debts have slowed down business activities of economic agents; most of who are indebted to the banking system; thus compromising the integrity of the financial system”.

    Some of the components of the domestic debt include Nigerian Treasury Bills accounting for N230.9 billion (23.36%), and Treasury Bonds, which account for N230.9 9 billion (2.18%) of the debt burden. The Debt Management Office (DMO) says 30% of these debts will fall due within one year. It is unfortunate that the MPC didn’t come with more details as regards the size and specific composition of the debts. But it is not impossible that a sizable part will be debts owed contractors by various Ministries, Departments and Agencies. These figures are exclusive of another domestic debt figure of 2.5 trillion Naira owed by the states.

    We agree with the CBN that domestic debt must be treated with as much seriousness as the external debt. There is no doubt that the debts will definitely hamper the maximum productivity and efficiency of most of these economic agents while completely grounding the operations of others. Many of them may be employers of labour and may be forced by their impecuniousness to either lay off workers or retain the services of unremunerated staff. Either way, it is the economy that suffers.

    Unemployment or underemployment is worsened. Productivity is affected negatively. And in cases of abandoned ongoing projects, the more the likelihood that contractors will ask for upward variation of their contract sums before being able to mobilise back to site as a result of inflationary spirals.

    But even more serious, as the CBN notes, are the serious dangers that non- payment of these debts pose to the financial system. For one, the more the payment of the debt is delayed, the more interests on loans will be compounded with the possibility of their becoming toxic loans. If the collateral used to obtain the loans are sold, the economic agents may be irreversibly incapacitated rendering them useless to the economy. And given the recessionary state of the economy and the attendant cash squeeze, it is unlikely that such collateral can be disposed of at values that cover the loans.

    Today, most of the banks are widely reported to stand on shaky fiscal grounds. Many of them are retrenching workers. The reinjection of the borrowed funds into the banking system will rejuvenate the financial institutions and make fresh funds available for them to lend to new businesses or enable existing ones strengthen their operations.

    The most ominous warning of the CBN is that the unpaid domestic debts threaten the integrity of the financial system. The Federal Government must heed the CBN’s advice and act urgently.

  • Over N200b debt threatening our, say GenCos

    Over N200b debt threatening our, say GenCos

    •Operators seek lifeline from govt

    Power generation companies (GENCOs) have said the over N200 billion debt owed them by customers may affect their operations if the government does not intervene fast.

    Association of Power Generation Companies (APGC) Executive Secretary Dr. Joy Ogaji said the matter was getting to crisis point. She warned that cessation of operations was imminent as the bulk trader, the Nigerian Electricity Bulk Trader (NBET), is unable to commit to the terms of the power purchase agreements (PPAs) signed with them.

    She said despite the GenCos’ willingness to deliver power in line with the terms of their PPAs, they were unable to do so because of the huge debt.

    Dr. Ogaji said: “In the run-up to the Nigerian electricity sector privatisation, the government promised to set up NBET to shield GenCos from the vagaries of the market, and venturing to invest in the power generation assets was predicated on the promise by the bulk trader to shield the GenCos from these problems irrespective of what happens in the downstream sector of the industry.

    “The worsening market liquidity squeeze has culminated in a situation where the GenCos lack the necessary funding for their operations, acquiring spare parts and equipment for the power generation stations. Some GenCos have not been able to pay their workers for several months.

    “Most of the GenCos are frustrated by NBET’s poor settlement of their invoices (less than 20 per cent). The inability of NBET to handle payments to the GenCos in accordance with the PPAs they have with the agency is strangling their operations.”

    She said NBET that is supposed to help appears to be helpless, more in need of help than the GenCos.

    Dr Ogaji said NBET’s inability to help the GenCos resolve the chronic poor market liquidity challenge has affected  their  operations.

    “If the GenCos are to play their role in the power supply value chain, they must be saved the agony of the debt squeeze, which is threatening most of them to buckle under the weight,” she noted.

    The executive secretary assured that the GenCos were ready to explore all dispute resolution mechanisms including litigation, to test the PPA they signed with NBET.

    In the alternative, she said the association resolved that government should allow the GenCos to take advantage of the provisions of the EPSR Act 2005, which empowers eligible customers to bypass the wholesale electricity market and enter bilateral contracts with any willing eligible customer.

    Dr Ogaji said although the GenCos, at inception, were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts (Mw) over a five-year period, most of them have exceeded their targets. They were being faced with the issue of stranded capacity.

    For instance, she said Ughelli Transcorp, which had 160 Mw generation capacity at takeover, reached the 450 Mw capacity by September 2016, while Egbin at takeover in November 2013, had average 300 Mw generation due to the dismal state of its six units.

    Ogaji said Egbin plant has the capacity to generate an average of 1,100 Mw on availability of gas, saying when the overhaul of the remaining units is completed next year, the station would be operating at a minimum of 92 per cent of its capacity.

    She said when the overhaul of the remaining units is completed next year, the station would be operating at a minimum of 92 per cent of its capacity.

  • $29.9bn loan not a trap, says DMO

    $29.9bn loan not a trap, says DMO

    The federal government has denied claims that the $29.9 billion loan it plans to access is a trap.
    Director General of Debt Management Office (DMO), Dr Abraham Nwankwo dismissed the claims that the planned borrowing was an attempt to trap Nigeria in a web of indebtedness.
    ” The first thing to note is that this borrowing is normal. Normal in the sense that over the past 20 years there is no year we have not borrowed, so interpreting the proposal submitted to the National Assembly by Mr President for a three year borrowing programme to be an indirect way of trapping the country does not seem to be logical because Nigeria has always borrowed every year.”

    “Every year there is a budget and if you check the budgets many years back you will see that we have been borrowing both external and domestic so there is nothing new about this. Let me also emphasize that since we exited from the Paris and London club debt in 2005-2006 we have always borrowed almost from all these sources we want to borrow from now.”

  • FIRS shuts hotel, drug firm, others over N306m debt

    FIRS shuts hotel, drug firm, others over N306m debt

    The Federal Inland Revenue Service (FIRS) yesterday shut another set of tax defaulting companies, in Abuja, Lagos and Sango-Ota over outstanding N306.82 million debts.

    In Abuja, the FIRS team sealed Bolingo Hotels and Towers at the Central Business District for an outstanding tax of N24,4million, which was accumulated from 2002. But the enforcement team, led by Bukar Umar Gana, could not locate Etat Consulting Limited in Abuja, which has a liability of N32.4million. The amount includes company income tax, withholding tax and education tax.

    In Lagos, FIRS sealed the offices of the Nigerian German Chemicals Limited, on Oba Akran Avenue, Ikeja, over a tax debt in excess of N146.6 million. Also affected is Trident Marketing Limited, Ajao Road, Ikeja, which is said to be indebted to the tune of N90.8 million.

    In Sango-Ota, Ogun State, the enforcement team shut Allied Atlantic Distilleries Limited, which owes over N45 million.

  • FMBN seeks EFCC’s assistance on debt recovery

    The Federal Mortgage Bank of Nigeria (FMBN) has solicit the support of the Economic and Financial Crimes Commission (EFCC), in the recovery of its huge bad debts from developers and others, who obtained housing loans from it but misappropriated the fund.

    Acting Managing Director of the apex mortgage bank, Richard Esin, made the request when he paid a courtesy call on the chairman of the EFCC, Ibrahim Magu, at the weekend, in Abuja.

    Esin informed the anti-graft boss that, but for the resilience of the bank, it would have been unable to meet the financial requests of thousands of Nigerians including members of staff of the commission because of defaulting developers.

    He disclosed that the concerned developers have a huge debt overhang with the bank, explaining that they obtained construction finance from the bank to build estates, but diverted the funds into other non-productive and non-regenerative activities.

    According to him, some developers completed the estates, sold the housing units and failed to remit the proceeds to the bank.

    Esin said some Primary Mortgage Banks, which obtained funds from the bank for Mortgage Finances, for on-lending to qualified National Housing Fund (NHF) contributors, declined to disburse the funds to the applicants; while others obtained equity contribution from would-be mortgagors, but refused to deploy same in the provision of mortgage finances to the applicants’ benefit.

    Esin expressed worry that despite the revocation of their operational licences, some of the operators of the Primary Mortgage Banks (PMBs) are still deceptively encouraging innocent and unsuspecting mortgagors to continue to repay their mortgages to them through fictitious accounts with no intention of remitting same to FMBN.

    He appealed to Magu to assist in the recovery of bank funds from contractors and vendors who were mobilised to execute various contracts for the bank, but failed to execute same and misappropriated the bank’s money.

    “These activities are fraudulent, and constitute financial crimes. We, therefore, seek the EFCC’s kind assistance in the recovery of these funds which belong to the Nigerian workers,” he said.

    Speaking further, Esin informed Magu that his management remains committed to helping members of staff of the commission own houses, noting that after the historic MoU between both organisations, the FMBN has disbursed N3 billion in 10 batches to 156 staff members of the commission.

    He further disclosed that N1.6 billion worth of NHF loans for 113 members of staff of EFCC packaged by FGMB are currently awaiting board approval, while N1.3 billion has been approved as NHF loans for EFCC staff, but not disbursed because the targeted houses are no longer available.  “FMBN will work with other interested PMBs to revive the scheme once they are able to provide the bank with a suitable and acceptable security,.” he said.