The Nation Newspaper

Tag: Foreign

  • Shipowners kick against foreign domination of oil trade

    Can indigenous shipowners match their foreign counterparts in the capital intensive crude oil lifting business? Yes, says the Nigeria Shipowners Association (NISA), which has launched a campaign to be involved in the business.

    The association says its involvement in the trade would be in national interest.

    Its participation would reduce youth unemployment, generate revenue and ensure security, its General Secretary, Captain Niyi Labinjo, told The Nation.

    Labinjo said it was more profitable for a Nigerian ship to lift crude as the country was losing by using foreign vessels.

    “We will gain about N968 million a day if we use our own indigenous ships to lift crude oil. This is because Nigeria carries about 2.5 million barrels of crude a day at the rate of $2.50 per barrel,” he said, adding that the huge sum would have accrued to Nigeria and created employment for at least 5,000 professionals in the sector. The advantage is that indigenous ships will get their water, food, tug boats, chandelling, engineers and rags from Nigeriam he noted.

    Labinjo said there are many qualified Nigerians in these fields who have no jobs, adding that using foreign vessels was not in the best interest of the nation because when the dependent country has crisis, Nigeria may have challenges lifting its crude.

    He said as at the last count, indigenous investments in the sector have created over 40, 000 jobs across the hydrocarbon value chain.

    Meanwhile, the Shippers Association, Lagos State has attributed the drop in the revenue collected by the Nigerian Customs Service (NCS) to inconsistency in government policies.

  • Foreign core investor seeks to buy out 7-Up’s minority shareholders

    Affelka SA, the foreign majority core investor in Seven-Up Bottling Company Plc, has launched a bid to buy all outstanding shares held by minority shareholders in the company, in a move reminiscent of a similar decision by its competitor, Nigerian Bottling Company (NBC).

    Regulatory filing yesterday showed that Affelka SA has secured initial regulatory approval to acquire all the “outstanding and issued shares of seven-Up Bottling Company that are not currently owned by Affelka”.

    Affelka is offering N112.70 per share for the 171.54 million ordinary shares of 50 kobo each held by the minority shareholders, representing 26.78 per cent of Seven-Up Bottling Company’s issued share capital. The bid price represents 15 per cent premium on the last traded share price of the company on August 9, 2017, the last business day prior to the date the proposal was received from Affelka SA by Seven-Up Bottling Company’s board.

    According to the proposal, the acquisition would be carried out through a scheme of arrangement under Section 539 of the Companies and Allied Matters Act (CAMA) and other applicable rules and regulations.

    Already, Seven-Up Bottling Company has received the “No Objection” approval of the Securities and Exchange Commission (SEC). However, the scheme is still subject to the approval of the shareholders at a Court-Ordered Meeting as well as the approval of the Federal High Court.

    The NBC had acquired minority shares and delisted from the Nigerian Stock Exchange (NSE) amidst protests by Nigerian retail shareholders.

    The Nigerian Stock Exchange (NSE) had in October 2017 downgraded Seven-Up Bottling Company Plc from its special pricing status category following the depreciation in share price of the company.

    The “high-priced stocks”, according to the NSE categorization, are stocks with share prices of N100 and above and regular and pre-determined level of activities. In 2012, the NSE had alongside the introduction of market-making introduced a pilot programme under which stockbrokers could move prices of “high priced stocks” with 10,000 shares as against the general operating rule of 50,000 shares for the movement of share prices of other stocks.

    The NSE indicated that it downgraded Seven-Up Bottling Company from a “high-priced stock” category to the general stock category with effect from today, Monday October 23, 2017.

    With the reclassification of Seven-Up Bottling Company from the “high-priced stocks” list, stockbrokers will only be able to move the share price of the company with 50,000 shares.

    “We bring to your notice that 7up Bottling Plc has qualified to be reclassified from a high-price stock to a medium-priced stock, as the company’s shares hit below the N100 mark on 30 May 2017, and trades below N100 up till the close of business on 17 October 2017. This indicates that 7up Bottling Plc has traded below N100 in at least four out of the last six months. The stockbrokers will be able to move the price of 7up Bottling Plc with 50,000 units with effect from 23rd, October 2017,” the NSE stated.

  • ‘Nigerian loses over $18b annually to foreign trips’

    Prince Adetunji Oluwafemi Fadina is President/Managing Director, Jethro Tours International, a firm that signed a contract to promote domestic tourism across major cities of the federation. In this interview with Ibrahim Apekhade Yusuf, he speaks on the untapped tourism potential of the country. Excerpts:

    State of culture and tourism in Nigeria

    To be candid, I think the problem with us is that we are looking at culture from a different perspective, we are looking at weaknesses instead of strength, we are not seeing things through. But we have a very rich culture and tradition and if you go to India, you will want to learn about their culture and tradition, if you go to Pakistan or you go to Dubai, you will want to learn about the old and the new, if you go to Egypt you will want to learn about the pyramids.

    In Nigeria, instead of us showing how rich our culture is, we will want to be looking more of a foreign person than more of a Nigerian. We should be proud of who we are and I think until we go back home and look at the rich culture we have and turn that product into a revenue-generating stream we won’t get anywhere. The reason why people go to Israel is because of the culture of Jesus who is a Jew.

    The first time I traveled to Israel I found out that most of the Jews didn’t know Jesus, they know more of Moses. And honestly speaking if we know what we have, we don’t need to go out because we have a lot of rich culture and I think the Minister of Tourism shouldn’t be looking at Culture to be the pivot instead of Tourism because I have never seen anywhere in the world where you are pushing Culture ahead of Tourism.

    Tourism is the real umbrella, it is the father of all, where you have a tourism economy, the economy thrives. Culture and tourism have a mutually beneficial relationship which can strengthen the attractiveness and competitiveness of places, regions and countries. Culture is an increasingly important element of the tourism product as it creates distinctiveness in a crowded global marketplace. At the same time, tourism provides an important means of enhancing culture and creating income which can support and strengthen cultural heritage, cultural production and creativity.

    Culture and tourism are linked because of their obvious synergies and their growth potential. Cultural tourism is one of the largest and fastest growing global tourism markets and the cultural and creative industries are increasingly being used to promote destinations. The increasing use of culture and creativity to market destinations is also adding to the pressure of differentiating regional identities and images, and a growing range of cultural elements are being employed to brand and market regions. Partnership is essential. The complexity of both the tourism and cultural sectors implies that platforms must be created to support collaboration, and mechanisms must be found to ensure that these two sectors can communicate effectively. Local communities are beginning to come together to develop cultural products for tourism rather than competing directly with one another. New policies are likely to feature new structures and projects involving public-private partnership and bringing together a wider range of stakeholders to use culture not only to make destinations attractive for visitors, but also to promote regions as destinations to live,work and invest in.

    The most important aspect in linking tourism and culture is to develop an effective partnership between stakeholders in the two sectors. In many cases the problem is that there are different approaches: the profit motive vs. non-profit, markets vs. public, etc. The role of any platform trying to bring these two sectors together must be to identify their common interests and to act as a mediator between them. It is clear that there is a common interest in the attraction of people to the regions in which they are based, but very often differences approach get in the way.

    In the tourism sector it is normal to speak about visitors, conceived of as customers or clients, whereas the cultural sector is more concerned with residents, usually seen as audiences or citizens. These differences can be overcome when it is made clear that tourists are also part of the cultural audience. As well as partnership between tourism and culture, it is also important to build other forms of partnership, for example with other regions, between the public and private sectors and between a region and its citizens. Links between regions can extend the cultural opportunities available to tourists and help to support new and innovative product offers.

    Working with the private sector is essential for attracting investment and continuing to improve the quality of both the cultural and tourism offer. Convincing residents of the benefits of tourism development is increasingly crucial as they come to form the core of the cultural and creative tourism experience.

    Tourism as alternative to oil

    I think one of the reasons we are not thriving in tourism sector is because we are not having major players and stakeholders who are at the helm of affairs, we are having people who are been scold to be ministers, and when you are scold, you still don’t understand it because your investment is not there and you have people who have billions and billions of dollars who are stakeholders in this industry and someone who is just been put there maybe because of political affiliation is coming there to be scold, and you see them coming up with different summits, bring us together to come and tell them about what tourism is all about and hijack all our ideas and they will think they are ministers no they are wrong. Tourism is the pivot, we need to go back to that and we need to understand that inside tourism, we have what we call the minds concept which is meeting incentive, conference and exhibition because these are the bedrocks, the foundation of tourism and that is why the culture, the leisure, the domestic tourism like pilgrimage, estate, fashion and Nollywood all comes as a connection together in making what we call the revenue of tourism, that I believe is the alternative revenue for Nigeria.

    Best practice

    For instance, trips abroad cost Nigeria over $18.6billion annually. Now let’s take a look at two major ones, religious tourism. In Ogun state axis of Ota we have Shiloh that comes up every November, that is what we call destination tourism 80% of the people that come to Shiloh are not from Ota, they are from Lagos, Lekki, Ikoyi, Ikorodu and some other places outside the country. So they provide buses, and the question I ask is these buses are they moving towards the community of paying taxes? I’m a Christian, the bible says give what belongs to Caesar to Caesar r and what belongs to God to God. But are they doing the right thing? So if the government can work with theses religious bodies, I know this might offend some people but sincerely speaking we are Christians let’s be honest with ourselves, because the honesty and clarity of the game and the way we play religion is painful and is actually to the detriment of the nation. Religious tourism is what Israel feeds on and they make over $1billion every year. So it’s about time we look at Shiloh and RCCG and Mountain of Fire how many government stands are in these places, none. How do people know the country without its stands in those places, they will not know you, be proud to show yourself as a Nigerian.

  • ALGON, 16 foreign partners to create 5.9m jobs from new agriculture scheme

    ALGON, 16 foreign partners to create 5.9m jobs from new agriculture scheme

    As part of steps to boost agriculture in the country, the Association of Local Government of Nigeria(ALGON) and 16 foreign partners and institutes are expected to float a new scheme which will create 5,959, 800 jobs nationwide.

    The scheme will lead to the generation of 7,700 jobs in each of the 774 local government areas in the country.

    But the new initiative called Comprehensive Agricultural Plans for Local Government Areas (CLAP) will begin with a seminar on October 26 and 27.

    A statement last night said ALGON has initiated the process of C-LAP at grassroots level to prepare a Comprehensive Local Agriculture Plan (C-LAP) through participatory process involving various organizations and stakeholders.

    The statement said: “The project is expected to generate direct employment of 2700 in nursery production, pack houses and integrated model farms, mega food parks processing units and indirect employment of 5000 persons per LGA is as follows: Managerial and scientific manpower (100 persons); Skilled manpower in Mega Food Park (600 persons); Unskilled manpower (2000 persons) and Indirect employment like transport, marketing etc. (5000 persons).

    The heavyweight international partners of ALGON are Global AgriSystem Pvt Ltd; Progressive Research Organization for Welfare (PROW); Ananya Seeds (P) Ltd; International Tractors Limited; Horticulture Produce Management Institute, HPMI (India); Population, Women & Environment Development Organization(Nepal); International Rice Research Institute(Philippines); Ananya Seeds (P) Ltd.; Top Greenhouses Limited; and International Tractors Limited.

    Others are Michigan State University; G.B. Pant  University of Agriculture and Technology; Carrier Point University; New Age Green Solution Pvt Limited; Afghan Agro Services; eEco Solutions Pvt Limited; Horticulture Produce Management Institute; M.S. Swaminathan Research Foundation.

    The statement explained why ALGON decided to collaborate with the 16 foreign partners.

    It added:  “Nigeria is an agrarian society, with agriculture contributing about 24 percent of the gross domestic product (GDP). About 70 percent of the population live in rural areas and depend on agriculture for livelihood.

    “Nigeria is presently facing several challenges in Agriculture sector.  These problems can be attributed to natural and human cause, affecting overall economic development and growth.

    “This has consequently undermined socio-economic growth and thus constitutes a threat to the Federal Government of Nigeria’s “Vision 2020”. Recent assessments of the situation in the country confirm that the scale of the problem rise above what communities, Local Governments, States and Federal Government can address without help from development partners.

    Consequently, The Association of Local Governments of Nigeria (ALGON) is adopting a bottom-up approach through a Comprehensive Plan for Development of Agriculture (C-LAP) at “Local Government Level” in 774 LGAs of Nigeria towards the improvement of the agricultural sector.

    “Thus C-LAP is an integrated and participatory action plan for the development of LGAs in agriculture and allied sectors. CLAP will add value to Nigeria’s agricultural raw materials and integrate Nigeria into world agricultural markets.

    “ALGON has initiated the process of C-LAP at grassroots level to prepare a Comprehensive Local Agriculture Plan (C-LAP) through participatory process involving various organizations and stakeholders.

  • ‘Foreign investors need incentives’

    ‘Foreign investors need incentives’

    The economy has been upbeat since the Central Bank of Nigeria (CBN) introduced the Investors’ & Exporters’ Forex Window. With improvement in forex inflow, investors who complained bitterly of not being able to repatriate their funds, except through the parallel market, now have a better deal. In this interview with COLLINS NWEZE, Managing Director, Afrinvest Asset Management Limited, Ola Belgore, says the market has responded positively to the change in policy, going up by over 36 per cent from what was negative in the first quarter. This is about 50 per cent growth within the last four months.

    The impact of foreign fxchange (forex) on the market has always been significant. What is your take on the current forex situation in the country?

    In January 2017, Afrinvest published our economic outlook clearly indicating the need for reforms. Fortunately, the Central Bank of Nigeria (CBN) came up with the Investors’ & Exporters’ (I&E) FX Window which made it easier for foreign investors to repatriate their funds. Prior to its launch in April, investors complained bitterly that after liquidating their investments, funds was repatriated through the parallel market where the dollar was sourced leading to great loss in value.

    Since April, the foreign portfolio investment has increased and there has been positive impact on the market. A clear indication of this impact is the growth in the Nigeria Stock Exchange (NSE) market capitalisation to close to N13 trillion.

    Do you believe that the market now enjoys enough liquidity?

    When the I&E FX Window was introduced, many investors cautiously tested the market to ensure it would work. Now, we have more investors coming on board because they have had a better experience repatriating their profits. We must, however, recognise that improvement is a gradual process, and today, portfolio investors are more confident. With the right – and stable – government policies, I believe investors will get even more confident to come in, especially when there is an assurance that the rules will not change in the middle of the game.

    Our observation on the stock market shows that there has not been new capital rising by local companies in recent months. Can we attribute this to the recession?

    Activities in the investment environment largely depend on whether you are raising equity or debt. For debt, the environment is rather stiff, and with Monetary Policy Rate (MPR) currently at 14 per cent, this may not change soon. There have, however, been one or two bond issuances, including the recent Lagos State Government bond issued at 16.5 per cent which was competing against Federal Government’s Treasury Bills at 18 per cent.

    Regardless, we must give foreign investors incentives to invest in the economy. The average rate for Treasury Bills is 18.5 per cent. However, once you mark it up with risk premium, you are approaching 20 to 22 per cent, which is a challenge within the operating environment, especially when you consider what cost manufacturers will borrow.

    When you look at equities, in the first quarter of 2017, the market was at 16.5 per cent negative, which naturally affected investors’ appetite, with many of them losing huge sums of money. Consequently – and as expected – that was not the right time to introduce fresh offers.

    However, the market has responded positively to change in policy and has gone up by over 36 per cent from what was negative in first quarter of 2017, implying that there has been about 50 per cent growth within the last four months.

    Fortunately, the growth will likely be sustained because corporate earnings are coming up strong, and with most of the stocks trading below their book value, the market evidently shows potential to sustain the growth. We can then expect a boost in investors’ interest in new offerings. For instance, Guinness and Unilever just concluded their rights issues which they would have been hard-pressed to do in the past. If they are successful as we expect, it will encourage others to test the waters and ultimately boost market performance.

    Can you tell us about Afrinvest West Africa Plc?

    Afrinvest West Africa Plc (Afrinvest) is an independent investment banking firm, focusing on the four principal areas of investment banking, securities trading, asset management and investment research. It has been in existence for 22 years, and is the parent body to two subsidiaries: Afrinvest Securities Limited and Afrinvest Asset Management.

    We see ourselves as a ‘financial supermarket’ of sorts, considering that we are licensed by the Securities and Exchange Commission (SEC) to operate as an issuing house and underwriter as Afrinvest West Africa; a broker-dealer as Afrinvest Securities Limited; and a portfolio manager as Afrinvest Asset Management. Underlying these services is in-depth research, innovation and a passion to deliver invaluable financial solutions.

    Could you tell us more about Afrinvest Asset Management?

    Afrinvest Asset Management – under my leadership – manages two listed mutual funds. The Afrinvest Equity Fund (AEF), which invests in shares of blue chips listed on the Nigerian Stock Exchange (NSE) and the Nigeria International Debt Fund (NIDF), which invests in Federal and State Government bonds. The NIDF – which started out as a closed-ended fund till it was restructured in 2010 as an open-ended fund – was created 19 years ago.

    It has consistently paid dividend to investors twice annually. As you may be aware, we just paid the 2017 interim dividend of the fund making it the 39th dividend in the history of the NIDF.

    What exactly is NIDF? Is it a Federal Government instrument and does it target only high net-worth Individuals (HNIs)?

    The issue of the NIDF’s primary target audience is one that has been consistently raised over time. Before now, one would be correct to say the NIDF was for the high net-worth investors as new a subscriber would require about a minimum of N1 million to meet the minimum units of 500.

    With a record of consistent payout and superior performance, we were inundated with requests to make the fund more accessible to the retail investors. These requests inspired us to review this amount downwards in a 10 to one stock split in 2016.

    That way, we are able to accommodate more retail investors without losing the core focus of the fund. Today, the NIDF is no longer exclusive to any singular class, and investors with a little over N100, 000 can gain easy entry.

    How easy is it to liquidate the fund and how could this be done?

    Any investor can liquidate his funds easily at any time, and it will take a maximum of five days. To liquidate, you simply complete and submit the redemption form, which can be downloaded on our website. Once this is done, your signature is verified by the registrar, and investment proceed is paid to your bank account on record.

    Subscribing to the NIDF is just as easy.  You simply complete the subscription form, provide your Know Your Customer (KYC) requirements – identity card and address, inclusive – make payment into the account, and you are all set. You can also track the performance of your investment by monitoring NIDF prices we circulate to all investors daily.

    What do you think accounts for the success of the NIDF and its consistent coupon payment over the last 19 years?

    For any mutual fund, you have what is called the trust deed which clearly states how the fund would be managed and what assets it can invest in. So, what we do is actively following market trend and strategizing to meet fund objective per time. We distribute 25 per cent of the income, while the rest is re-invested in the fund, making it easy for us to pay coupon.

    Tell us more about the Afrinvest Equity Fund.

    As earlier stated, the AEF tracks stocks quoted on the Nigerian Stock Exchange. With a minimum initial subscription of N50,000 and subsequent investments of N10,000, investors can subscribe to the AEF with returns greatly affected by the returns on the stock market. Regardless, the AEF has enjoyed impressive performance over the years due to our superior mix of service, research and management.

    Another recent trend in the market is the banks’ move to substitute costly assets out of their balance sheets in preference for cheaper deposits to reduce their cost of fund. What could be responsible for this move?

    It becomes increasingly clear that retail is the future. In many countries of the world – including Nigeria – about 50 per cent of the population is unbanked, with a lot of cash in the informal sector. From our own experience, we have seen people test the markets with smaller amounts of money to ascertain that they will not lose out, before introducing the more substantial sums. For instance, we had a subscriber to one of our mutual funds who invested less than N200,000 in the AEF.

    After a time of consistent performance, he made a move to withdraw his funds, to test our promise of easy entry and exit. Based on his success in dealing with us, he made the move to entrust us with over N20 million, simply because he trusts us to give value. The importance investors place on liquidity and confidence building, therefore, has a significant impact on designing products and services for the market.

    In line with this experience, players have recognised a need to widen the client base, with even the Federal Government going for cheaper funds, with the Federal Government of Nigeria (FGN) Savings Bond offering less than 14 per cent to investors, as against Treasury Bills rate of around 18.5 per cent.

    Currently, we have what is called investor apathy. When we design a mutual fund, we approach a group of people and encourage them to invest. At the same time, Bank ‘A’ conducts a Public Offer, targeting the same group of people. It gets rather tiresome. However, with retail customers all players can market different products comfortably, and because the market is so huge, we can both take a market share that is completely exclusive.

    More so, with retail, the sustainability of the funds is more stable. If the bank has a balance sheet built by a select few, a withdrawal of funds by any singular client will have a significant effect. Conversely, if there are 100,000 customers each depositing N10,000 you will still have N1 billion, but if 10 of them decide to move their funds, the impact is greatly reduced.

    The banks also have the resources to support the retail end of the market with the advent of Financial Technology (FinTech). Today, a customer can open an account with his mobile phone, and go ahead to handle virtually all transactions without physically visiting the bank.

    Are there other difficulties faced in managing HNIs?

    Many banks have realised that HNIs require more resources to manage. For instance, with deposits as high as N300 million, you have customers demanding 18 to 20 per cent interest rate on their funds, whereas, the retail customer will accept five per cent happily. With more retail accounts, the banks can, therefore, lend cheaper and make higher profits.  When you put this side by side the manpower required to service HNIs who typically demand one-on-one service, the retail customer generally seems more attractive. I would, however, state that HNIs should be highly valued and should receive the deserved attention, while technology is deployed to capture the millions of unbanked in the society.

    Another factor that boosts confidence is ‘rating’. What is significant about an investment being rated?

    The significance of credit rating is the credibility it shows to the investor. When there are multiple players asking for your money, you must decide who you will trust sometimes with no prior experience. The rating, therefore, becomes significant because it basically says, from our own experience as fund managers and our valuation of company ‘A’, we believe this is its expected performance and the level of guarantee we can provide on a return, as opposed to company ‘B’ with a lower credit rating.

    The credit rating is mostly premised on the track record of its borrowing and debt instruments, and there are several recognised organisations that provide this stamp of confidence including Fitch, GCR and Agusto, to name a few.

    Based on the above, would you say the NIDF rating is better than the sovereign rating of the country?

    This is an argument that has existed over time: should an entity within a sovereign nation have a higher rating than the sovereign itself? The fact is, investors are looking for credibility. If Lagos State issues a bond at the exact time the Federal Government issues same, investors will go after the body that has shown higher credibility over time. However, we must remember that there are several factors that can affect the payback of such debt, ranging from economic, to social, and to political issues.

    In determining the credit rating of the NIDF, it is recognised that it has not defaulted in its obligations for several years and has consistently met its dividend payment. These have certainly contributed to its credit rating today.

  • CBN: Foreign reserves hit 30-month high at $31.6b

    CBN: Foreign reserves hit 30-month high at $31.6b

    • Apex bank injects $297m into forex market

    The nation’s foreign exchange reserves have stood at a 30-month high at $31.59 billion, as at August 18. The Central Bank of Nigeria(CBN) data have shown.

    Nigeria’s dollar reserves have climbed back to a level they last reached in January 2015, shortly before the general elections. The bank, however, did not provide the reason for the increase.

    Nigerian assets, largely shunned by foreign investors over the past three years, have attracted significant amounts of capital after the CBN in April liberalised the exchange rate for investors.

    The forex buffer stood at $25.73 billion, up by 20.77 per cent from a year ago, but is still far off a peak of $64 billion hit in August 2008.

    Also, the naira was boosted as the CBN yesterday, with $297 million injection into the Retail Secondary Market Intervention Sales (SMIS) segment of the forex market raising the total intervention for the week to $547 million.

    Confirming the figures, the CBN spokesman, Isaac Okorafor, disclosed that the bank was resolute in its determination to intervene in the forex market with the aim of uplifting the naira exchange rate, boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

    Okoroafor, an acting director in the Corporate Communication department of the apex bank, expressed confidence that the interventions would continue to guarantee stability in the market and ensure forex availability to individuals and business concerns with genuine demand.

    The CBN had earlier intervened in the Inter-Bank Foreign Exchange Market to the tune of $195 million in three segments of the market. In the wholesale segment of the inter-bank Forex market, it sold $100m and uplifted the Small and Medium Enterprises (SMEs) and invisible segments, with $50 million and $45 million respectively.

    Responding to enquiries earlier in the week, Okoroafor had hinted that the apex bank would increase liquidity in the market in the coming days, noting that the move was necessary to enhance stability in the forex market.

  • States lose easy access to foreign, local loans

    States lose easy access to foreign, local loans

    States will no longer have easy access to foreign or local borrowing windows due to the drop in their earnings from the Federation Account.

    Debt Management Office (DMO) Director-General  Ms. Patience Oniha broke the news yesterday when she hosted Edo State Governor Godwin Obaseki.

    Oniha said the decision was taken because there was no longer huge allocation to states shared at the end of the monthly Federation Accounts Allocation Committee (FAAC) meetings “from where borrowed funds could be deducted, hence continuous exposure to new lines of borrowings may no longer be sustainable”.

    She advised states to imbibe frugality and a new strategic way of fiscal plans and implementation

    Oniha lamented that oil mineral resources had continued to be the dominant contributor to the Federation Account.

    She said states should “deploy new strategic thinking on how to address the financing of their already bloated debt stocks as well as how to generate funds to execute their plans aside from borrowings.

    “Previously, we could rely on funds from FAAC and in addition to that we could borrow both at the Federal and at the State levels because there wasnt a challenge. But I think the times have changed. Revenues are under severe pressures, we are still dependent on oil revenues, non oil revenues are picking up, but that is still a journey.”

    She noted that what this “means  now, and in future, is that we need to do things so much differently, we must be more strategic in the management of public finance so the language I always use in my previous work where I was at the Efficiency Unit is that its no longer business as usual.”

    Oniha warned that “we can’t collect money from FAAC, borrow, continue and wait until the next month. So at various levels, we need to be more strategic and more creative in the things that we do.”

    Oniha said the federal government had “initiated several measures to increase non-oil revenue and control cost.”

    The DMO boss said “the law recognises the states for being responsible for fiscal laws relating to the states, but we decided to parther with them in the belief that Nigeria is one project, hence we should not be looking at the centre, we should be looking at the various tiers of governments.”

    Regarding the states’ compliance to generating debt data, the DMO boss said “we have major challenges. At the DMO, we have done a lot with the states in terms of assisting in developing their debt data, passing debt laws leading to the establishment of Debt bureaux and so on. As we speak, we have a good understanding of the debt portfolios at the sub- national levels.”

  • More foreign borrowing by Nigeria

    More foreign borrowing by Nigeria

    (Moves from low risk to medium risk borrower)

    I have over the years written extensively to express my concerns about our country’s propensity for increased domestic and foreign borrowing. Last year, in an article in this paper, I urged caution on the federal government on foreign borrowing when President Buhari concluded a loan agreement of US$6 billion with China for the construction of the Lagos-Calabar railways project. I am not opposed to that loan as I consider it vital to the development of our woeful transport and other infrastructure. It should have been done long before now. Nigeria’s financing gap has widened considerably because of the delay and past neglect in executing vital development projects. Loans should be taken when needed badly for the upgrade of projects vital for our economic development. But the Chinese loan means we now have a total loan agreement of about US$18 with China alone, now our largest foreign lender.  In fact, apart from multilateral lenders, China is one of the few remaining countries still willing to lend Nigeria money. Our foreign borrowing is not a subject that I approach lightly as the burden of a huge foreign debt has grave implications for our future prosperity as a nation. I find it disturbing and disappointing that I have to return to this subject again. And this is because Nigeria is looking to borrowing from abroad again nearly N2.5 tr. or more this fiscal year. The loan is needed to balance  the  2017 FG budget and for infrastructure development.

    Our national experience with huge foreign debts has not been a happy one. Now, twice in the last three decades, Nigeria has found itself in the critical situation of not being able to service or repay its domestic and foreign debt, with the potential of being declared, like Greece, technically insolvent and bankrupt. In 1984, when Buhari seized power from the inept and financially profligate civilian government of President Shagari, Nigeria’s foreign debt was close to US$40 billion. This placed our country in a financial blind from which neither the military regime of Buhari, nor that of his successor, Babangida, was able to extricate the country. Tough economic and financial stabilisation measures, including a sharp devaluation of the naira, had to be introduced to cut imports. The effect of these draconian economic measures on the country was devastating. Mass poverty deepened further as public expenditure and investment fell sharply. The GDP growth rate fell sharply and growth prospects declined. The industrial sector was on the verge of total collapse. Many manufacturing industries were forced to close down, leading to a severe loss of jobs in the manufacturing sector. Even today, we have not yet recovered fully from the industrial dislocation and loss of jobs caused by that financial crisis.

    It was not until in 2007, during the civilian regime of President Obasanjo, that Nigeria was able to exit from its London and Paris Clubs of creditors by paying about US18 billion of its debt, with the rest of it being written off, or ‘forgiven’ by our European creditors, For an oil producing and exporting country this was hugely embarrassing and damaging to our image in international financial circles. But there was little or nothing to show for the huge foreign loans we had taken. Rather than help create jobs we ended up losing more jobs because the borrowed funds were not allocated efficiently in the economy. Most of the loans were simply frittered away, with some of it ending up in private pockets. We were never really able to establish how the loans taken were spent, and for which projects they were used. But it was the surge in oil exports and revenue at the time that made it possible for President Obasanjo to take the courageous step of liquidating our foreign debt. Some analysts even criticised him at the time for exiting the creditors’ club arguing, that despite its huge foreign debt,  Nigeria was still under borrowed, and that there was really no need for him to have paid  off the debt owed the London and Paris Clubs.

    In retrospect, had he not done so Nigeria’s foreign debt profile would be worse now and virtually unsustainable. We would be literally bankrupt now as a nation. In fact, Obasanjo’s decision to liquidate our foreign debt was the only significant achievement of his government. And when he left office shortly after Nigeria had nearly US$50 billion in foreign reserves. But this fiscal discipline was regrettably not maintained by his two successors, Presidents Yar’Adua and Jonathan, both of whom failed abysmally to pay the necessary attention to our external sector and resumed the foreign borrowing spree. Despite a record surge in oil exports and revenue, President Buhari’s new civilian government, like the previous one, inherited some US$18 billion in foreign debts from the Jonathan PDP government. He came into office when oil exports and revenue began to fall sharply. The foreign debt had increased and planning of any kind became difficult if not impossible. The economy went into a swift recession from which it has not yet recovered fully. Government revenues fell sharply. To cut imports, an exchange rate adjustment of the naira became inevitable with the economy still largely import dependent. That is broadly the situation in which the country now finds itself, with the federal government struggling desperately to end the recession and move the nation towards a modest economic growth. Our economic situation today is broadly similar to that of the mid-1980s when our country faced economic and financial paralysis because of its huge and unsustainable foreign debt.

    So far, despite its best efforts, the Buhari APC federal government cannot be said to have recorded any impressive success in tackling these major economic challenges. Data on sectoral GDP growth of the economy released last week end by the National Bureau of Statistics do not give us any room for optimism about the short term prospects of the domestic economy at all. In the final quarter of 2015 the total GDP growth rate was 2.11 per cent. By the end of 2016, it had declined to a negative growth rate of 1.30 per cent. Sectorally, only the agricultural sector seems to have recovered slightly, moving up from 3.46 per cent in the final quarter of 2015 to a mere GDP growth rate of 4.03 per cent. For the other major sectors of the domestic economy the data does not show any significant growth at all. Mining recorded a negative growth rate of 12.04 per cent at the end of 2016, manufacturing GDP actually fell from 0.38 in the last quarter of 2015 to -2.54 per cent in the last quarter of 2016. Services did not fare any better either. It fell to a negative growth rate of 1.52 per cent at the end of 2016. Only a few days ago the MPC of the CBN warned that economic growth in Nigeria could stall up to the first quarter of next year, and beyond.

    Now, the government’s strategy for growth is to spend its way out of the recession, with a huge budget such as that of the current fiscal year, even if this means resorting increasingly to more domestic and foreign borrowing. The options of the government are limited if the country is to return to the path of economic growth. But borrowing heavily, at home and abroad, is no guarantee that the economy will resume growth in the short-medium term. In its 2016 report last week, the Debt Management Office (DMO) issued a warning that the nation had moved from a low risk debt distress country to a medium risk debt distress one. This, coming from an agency that had always routinely endorsed Nigeria’s foreign borrowing, calls for caution in foreign borrowing. As at March, 2017, Nigeria’s external debt stock was put at US$13.8 billion or N4.23 trillion. Its domestic debt stock stood at US$39.08 billion, or N11.97 trillion. The total amount of domestic and foreign debt outstanding as at March, 2017, was put at US$62.87 billion, or N19.16 trillion. The foreign component of the debt estimated at US$13.8 billion appears understated if the huge Chinese loans are included. This is a huge debt that could in future prove to be a huge and unsustainable financial burden to our country. As the Debts Management Office (DMO) warned the nation in its recent report. ‘the rate of growth did not impact proportionately on the revenue accruing to the government’, and this made the financial portfolio of the federal government highly sensitive to external shocks’. This is a clear warning to the federal government. The Minister of Finance, Kemi Adeosun, alluded to this danger last week when she complained publicly that Nigeria’s huge domestic and foreign debt was becoming unsustainable, and that the government should show greater caution in borrowing. It is not difficult to understand her frustration and financial dilemma as the federal Finance Minister. But without borrowing, recovery from the economic and financial slump will be quite difficult. At the same time resort to excessive borrowing will impose on our country a crushing foreign debt that can easily become unsustainable in the short to medium term.

    What the situation calls for is increased diversification of our export base and a  gradual but steady reduction in our foreign borrowing, except for the most critical infrastructure projects, such as power generation, the railways and roads. And these project tied loans should be stringently monitored and controlled to ensure that, unlike previous foreign loans, they are scrupulously used for the purpose for which the loans were obtained.  This is our responsibility, and not that of the lender who, no matter what happens, will get his money back at the agreed interest rates. Secondly, we should avoid further short term loans. Instead, we should seek loans with longer term maturities that will be easier to service and repay. We should not continue to mortgage our future growth and prosperity on foreign loans that will impose a crushing burden on us. The next generation deserves something better from us, not a nation crippled by huge foreign debts.

  • ‘Foreign, local debt rises to $62bn, may jump to $90billion’

    Nigeria’s foreign and domestic debts stand at about $62 billion and may rise to about $90 billion, chairman Senate Committee on Foreign and Domestic Debt, Shehu Sani, has stated.

    Speaking in an exclusive interview with our correspondent, Sani said the profile will rise because almost all states have approached the National Assembly through the Presidency for approval of additional foreign loans.

    The Kaduna Central Senator lamented previous loans collected by states over the years have not been properly accounted because the projects are not verifiable.

    Sani said: “Nigerian’s total debt, both domestic and foreign stands at over $62 billion.

    “$40 billion of that is domestic debt while the rest is foreign debt. Actually, foreign debt stands at about $10.2 billion.

    “With the approvals before us for different infrastructural projects and from states applying for loans, we may shoot up to as high as between $80- 90 billion.”

    Sani said the National Assembly will carefully verify all the requests for foreign loans to stand down the debt profile.

    “That is why we have to be very cautious. Our experts will say that we are within the safe threshold of debt.

    “But we should also know very well that this could skyrocket to an unbeatable limit,” he explained.

    To get approvals, he said the requests must meet certain requirements.

    “We will be guided by a number of things.  First is expert opinion on these loans applications, then conditions attached to the loans, payment plans and public opinion.

    “We should know that debt is a new form of colonialism where the western developed world are colonising us by making sure that we are pinned down to debt.

    “Most of these debts are still about us, our children and our grand children irrespective of who is giving it.”

  • Foreign investor to raise stake in Union Bank

    Foreign investor to raise stake in Union Bank

    •To increase holding from 31 to 44.5%

    Co-founder of Atlas Mara Ltd, Diamond Bob, will raise his investment in Union Bank of Nigeria Plc, from 31 per cent to 44.5 per cent.

    To achieve this, he plans to sell his stake in Atlas Mara, which has dropped almost 80 per cent since an initial public offering. He will raise more than the company’s market value by selling a 35 per cent stake to Fairfax Africa Holdings Corp.

    Union Bank is Atlas Mara’s single biggest investment in Africa. The bank announced plans to raise capital through a rights issue in November as Nigeria’s small- and mid-sized lenders struggled to cope with a contraction in the economy of Africa’s biggest oil producer.

    Atlas Mara agreed to acquire an indirect 13.4 per cent shareholding in Lagos-based Union Bank from the Clermont Group for $55 million, it said. Union Bank is going through regulatory approvals and will then start the share sale, spokeswoman Ogochukwu Ekezie told Bloomberg.

    It said Atlas Mara, which owns banks in seven African countries, has plunged in value since its December 2013 Initial Public Offering (IPO) after growth across the continent slumped and currencies weakened amid a commodities rout.

    “The firm expects to get $200 million from selling new stock to existing shareholders and Fairfax Africa and will also issue a fresh convertible bond to the Toronto-based investment company, the company said in a statement on Wednesday. Atlas Mara will use the proceeds to boost its holdings in Union Bank of Nigeria Plc to 44.5 per cent from about 31 per cent,” Bloomberg report said.

    Diamond, 65, in February ousted Chief Executive Officer John Vitalo and pledged to cut annual operating costs by $20 million after rising expenses threatened the company’s ability to expand through acquisitions.

    “A strategic partnership with Fairfax Africa creates a strong relationship between two like-minded, long-term investors in Africa. Each is focused on capitalizing on the long-term growth potential of Africa and provides permanent capital to support growth,” Atlas Mara said

    The partnership with Fairfax Africa, which last year bought Zurich Insurance Group AG’s South African business and rebranded it Byte Insurance, will give Fairfax four of the nine seats on Atlas Mara’s board. A new management incentive plan will also be put in place, while Diamond will continue as Atlas Mara’s executive chairman, the company said. Existing investors face a dilution of about 35 percent, according to data compiled by Bloomberg.

    Fairfax Africa agreed to buy at least 30 percent of the $100 million of new shares at a price of $2.25 apiece, representing an implied purchase price of 0.33 times book value, the company said in a separate statement. Atlas Mara’s stock has traded at an average this year of $2.26, according to data compiled by Bloomberg. The shares rose 1 percent to $2.54 as of 1:05 p.m. in London, giving the company a market value of $197.5 million.

    “Banks are at the forefront of economic development in sub-Saharan Africa,” Prem Watsa, Fairfax Africa’s chairman, said in the statement. “Atlas Mara represents a unique opportunity to invest in many profitable banks in the region at a very attractive valuation.