The Nation Newspaper

Tag: LOAN

  • Japan extends $700m loan to ADF

    The Japan International Cooperation Agency (JICA) has signed a loan agreement with the African Development Fund (ADF) designed to provide an Official Development Assistance (ODA) loan to the tune of 73.601 billion Japanese Yen (about $700.9 million).

    The loan is part of Japan’s contribution to the African Development Fund’s Fourteenth Replenishment (ADF-14). This is the first JICA loan provided to the ADF.

    The loan will provide the ADF with resources to support recipient countries during the ADF-14 period (January 1, 2017 to December 31, 2019), and contribute to economic growth as well as poverty alleviation in Africa’s least developed countries.

    The President of the African Development Bank Group, Akinwumi Adesina, expressed the bank’s gratitude and appreciation to the government of Japan.

    Signing the notes of exchange, Adesina said: “One often hears about many international pledges of development cooperation remaining unfilled. I would like to commend the full accomplishment of Japan’s commitments to Africa’s development. With its $700-million loan, which came on top of $328 million in the form of a grant, Japan has significantly contributed to the ADF commitment capacity for the period 2017-2019.”

    Adesina said Japan was a longstanding development partner for Africa, with a significant portion of its aid commitments to the continent channeled through the African Development Bank Group. “Japan is the second-largest contributor to the ADF in cumulative terms, and it has increased its contributions significantly over time,” he said.

  • AfDB’s loan to Nigeria to cross $8b mark

    AfDB’s loan to Nigeria to cross $8b mark

    The African Development Bank (AfDB) plans to increase its loans to Nigeria by more than $2 billion next year thereby raising the total loans to the country above $8 billion mark, its President Akinwumi Adesina said.

    The investment will go to  energy, infrastructure and agriculture.

    “The total portfolio we have in Nigeria is $6 billion. We expect that by the year 2019, we will grow that into a little bit over $8 billion,” Adesina told Bloomberg during the opening of AfDB’s headquarters in Abuja.

    The Abidjan, Ivory Coast-based lender will pump more than $800 million into Nigeria this year, most of which will fund investments in power. Among them is a $250 million support to revamp power-transmission lines and electricity sub-stations as well as fund a $200 million solar-power project in Jigawa state in the north, Adesina said.

    The $400 million balance from a $1 billion loan for budget support will be disbursed directly to industries identified by the government after projects have been vetted by the bank, he said.

    Nigerian economy is recovering from its worst economic slump in 25 years. It will also receive budget support and public financial management assistance from the lender, he said.

    The AfDB forecasts the economy will grow by 2.1 per cent this year as the output of and the price of oil, its main export, recover. The country depends on crude exports for two-thirds of government revenue and most of its foreign income. Brent crude, which compares with Nigeria’s export grades, has gained 26 percent in the past year, helping the recovery. It traded at $69.87 a barrel as of 5:03 p.m. in London.

    Nigeria remains vulnerable to oil price shocks because of its dependence on the commodity. As prices continue to rally, the government of Africa’s biggest economy needs to invest more in infrastructure and boost funding to non-oil industries, which account for about 90 per cent of gross domestic product, Adesina said.

  • Africa Infrastructure Fund secures $100m loan from AfDB

    Africa Infrastructure Fund secures $100m loan from AfDB

    In a bid to reduce the huge infrastructure financing gap in Sub-Sahara Africa, the African Development Bank (AfDB) has approved US $100 million to the Emerging Africa Infrastructure Fund (EAIF), a Public Private Partnership (PPP) company, a statement has said .

    It will be recalled that EAIF granted credit facility to   Indorama Eleme Fertilizer and Chemicals Ltd (IEFCL) for  construction of its  new US$1.2 billion fertilizer plant in Port Harcourt, River State.

    Through a US$325-365 million debt raise, EAIF intends to develop the fund’s strategy of growing its loan portfolio over the next 3-5 years and to become a sustainable and concrete alternative to development finance institutions and commercial banks.

    Since its inception, the Fund has played a key role in the infrastructure landscape in Africa, investing in structuring and long-term infrastructure projects to the tune of over US$1.2 billion in about 70 transactions.

  • Kwara councils to get N2b loan for Nov salary

    The 16 council chairmen in Kwara State have decided to obtain a N2.1 billion loan from commercial banks to pay November salary and settle other needs.

    According to them, this followed the delay in November allocation from the Federation Account Allocation Committee (FAAC).

    Commissioner for Local Government, Chieftaincy Affairs and Community Development Haruna Tanbiri Muhammad spoke in Ilorin after the emergency Joint Account Allocation Committee (JAAC).

    He said the chairmen applied for the loan in anticipation of November allocation, noting that the delay in disbursement from FAAC had aggravated workers’ suffering.

    He explained that the salary of State Universal Education Board (SUBEB) teachers stand at N900 million, and pensions N278.9.

    Muhammad maintained that the statutory allocation is N2.1 million, as against N1.6 million in October, and 10 per cent IGR is N37.3 million.

    The commissioner said N280 million was deducted at source as repayment for the N4.8 billion loan councils obtained in 2015 to pay salary, adding that they shared N676.8 million in November.

    “The Kwara State government has not received its November allocation from the federation account and the council chairmen felt getting a loan became necessary to alleviate workers’ plight,” he added.

  • Afreximbank finances trade with 100m Euros loan

    Afreximbank finances trade with 100m Euros loan

    The African Export-Import Bank (Afreximbank) yesterday got 100 million Euros credit line from the European Investment Bank (EIB).

    The fund, received at African Union-European Union Summit, in Abidjan, will be used by the lender to boost trade finance in Africa.

    This facility will help the lender in financing trade-related long-term productive investments by private sectors or commercially operated public sector entities in Afreximbank member countries.

    In a statement, the bank said the seven-year loan will finance trade-related investments and projects in Africa, with particular emphasis on small and medium-sized enterprises (SMEs) engaged in export manufacturing.

    “It is expected to enhance intra-African trade, Africa’s value-added exports, as well as trade with the European Union, thereby strengthening trade as a key driver of economic growth and competitiveness. The facility agreement will add strong impetus to our drive for expanded intra-African trade and for the promotion of industrialisation and export manufacturing across Africa,” President of Afreximbank, Benedict Oramah, said.

    He was delighted that the EIB decided to partner with Afreximbank in the pursuit of Africa’s trade development. “We are confident that, with the facility, we can look forward to mutually beneficial development outcomes for our two institutions and to the further strengthening of the relationship between Africa and Europe,” he said.

    Oramah said that the purpose of the facility was fully aligned with Afreximbank’s current strategy which prioritised intra-African trade, intra–African investments and export manufacturing, expressing the view that it would contribute to employment creation, increased economic activities, and increase in tax revenues for fiscally constrained governments, amongst other outcomes.

  • ILO seeks fresh loan strategies for SMEs

    ILO seeks fresh loan strategies for SMEs

    Enterprises, using bank loans as significant share of their working capital, tend to have higher wages, productivity and lower unit costs. But Small and Medium E,nterprises (SMEs) according to International Labour Organisation (ILO), often, cannot obtain or afford such financing.

    To the ILO, 10 percentage point of larger proportion of bank loans in working capital is associated with 2.2 per cent higher wages, 5.9 per cent higher labour productivity and  3.9 per cent lower unit labour costs.

    ”SMEs play a crucial role in creating jobs, but often lack access to the external funding they need,” said Deborah Greenfield, ILO deputy director-general for policy

    She lamented that in many cases SMEs cannot get bank loans or only get credit at comparatively high rates, because they lack audited financial statements, repayment history and business assets for use as collateral.

    “Policymakers need to consider strategies that would help SMEs access such funds, including bank loans for their working capital, which can have strong benefits for both workers and employers,” she added.

    The ILO’s ‘World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs”, released recently, showed that firms were more likely to make greater use of bank loans for working capital in countries that have stronger creditor rights protection.

    The same is true of countries that have addressed issues such as poor accountability, lack of respect for the rule of law and corruption.

    Some innovative practices have proven beneficial in allowing firms access additional capital for growth, while supporting vulnerable groups and broader social and environmental issues.

  • ‘How govt plans to get $5.2b World Bank loan’

    ‘How govt plans to get $5.2b World Bank loan’

    The Federal Government  is adopting ‘’home-grown’’ strategy, to seek  $5.2billion loan from the World Bank, the Minister of Power, Works and Housing, Mr Babatubde Fashola, has said.

    He said the loan will be used to improve  electricity generation, distribution and transmission in the country, when finally approved  by the World Bank.

    Speaking at an interactive forum with the media and members of civil society in Lagos recently,  Fashola said the loan will help the economy to recover from its contraction, once it is well utilised.

    Under the terms for seeking the loan,  Fashola said the private sector  arm of  World  Bank would invest $1.3 billion in power projects and electricity distribution companies, while the bank’s political insurer known as the Multilateral Investment Guarantee Agency would provide equity of $1.4 billion for gas and solar power programmes.

    Also, the lender will provide $2.5billion ro improve distribution of power, expand transmission capacity and increase access to electricity in  rural areas.

    According to him, the home-grown strategy requires that government present a paper on the problems, inhibiting the growth of  the sector.

    He said the idea has endeared the Federal Goverrnment to the World Bank, which has promised to support the sector financially, when times come.

    He said the bank was impressed   that the government understands the peculiarities and the magnitutude of the problems facing the industry and the capacity to proffer solution to them, when the matter was tabled before it.

    Fashola said: “The home-grown initiative has paid off, as the World Bank was satisfied with the level  of  understanding of the challenges in the sector by the Nigerian government and has in the process  promised to support the Nigerian  govenment on the issue. The bank  told the government that it knows the problems facing the sector and that it would not be out of place, if the government is left to provide a home-grown soution to the problems. It is on the basis of this that the government hopes to get the needed loans for the sector soon.”

    He said the government  hopes to continue to leverage on its understanding of the probelms in the industry to get the World Bank loan.

    According to the minister, prior to  meeting the World Bank on the issue, he, the State Minister of Power and the Permanent Secretary in the ministry met and asked questions on the probelms inhibiting the growth of the sector and how to solve them.

    “After seeking the inputs of other stakeholders in the value chain, we arrived at the conclusion that the sector has not delivered on its promise, four years after it was privatised. Everbody knows that the power distribution companies (DisCos) are facing problems such as shortage of meters, huge bills, among others. They know that the DisCos do not have enough money to provide meters, transformers and other equipment needed to supply power to the customers. They know that the sector has not delivered on its promise, since privatisation,” he added.

    Fashola said the government, armed with these information presented them to the World Bank.

    He said the issue of understanding the structures of World Bank, is another factor that the government is banking on to get the loan.

    He said, prior to the evolvement of home-grown method, the sector held a wide consultation with stakeholders, including the government.

    He said through the consultation, stakeholders were able to understand the peculiarities and magnititude of the problems in the electricity industry, adding that the development has helped the sector to provide a formidable force to the World Bank on the issue of accessing  the loan.

    ‘’ Our knowledge of the industry is one thing that has endeared us to the World Bank. The bank has promised to assist us financially, after seeing the level of our understanding,’’ Fashola said .

    According to him, the government knows that it is only the private arm of World Bank that can easily provide loan to the power sector and, did not waste time in approaching the section for the $5.2billion loan.

    The minister assured that the government would get the loans for the power sector, as its able to provide strategies that cannot be easily ignored by the bank.

    Fashola said the power generation companies (GenCos) are planning to leverage on solar to improve electricity supply to customers.

  • Why govt gave N701b loan to power sector, by Fashola

    Why govt gave N701b loan to power sector, by Fashola

    The Federal Government has given reason for the N701 billion loan given to the power sector.

    The Minister of Power, Works and Housing, Babatunde Fashola, SAN, said the loan was given to save the sector from collapse  under heavy debts.

    The aim was to assist Bulk Electricity Trading Plc (NBET) to meet its debt obligations to power generation companies (GenCos) and by extension the gas suppliers and the financing banks.

    Fashola in an exclusive interview with The Nation, explained why government took the decision it did. He said: “The N701 billion is not a loan to the privatised power sector. It is a loan by government to one of its own agencies – Nigerian Bulk Electricity Trading Plc (NBET).

    “When the power sector was privatised in 2013, one of the companies created was NBET to buy bulk power from the generation companies (GenCos) in order to create a market situation. NBET entered into power purchase agreement (PPA) with any GenCo that puts power into the national grid. NBET uses the Transmission Company of Nigeria (TCN) to transport that power to the distribution companies to sell under another contract called “vesting contracts.” Go and do this retail business.

    “DisCos are supposed to make a profit of about 30 per cent, return the bulk money to NBET just like any retail business – you buy wholesale, retail and send the money back to the manufacturer. So there are two contracts here – a contract by NBET with the power producers, and a contract with DisCos to vend the power. The assumption was that NBET will pay from what it collects from the DisCos in order to discharge its contract with the GenCos. But some many things happened.

    “The economy tumbled and tariff increase was halted in court. There was a big gap in collection. So from collections of about 56-58 per cent dropped to about 25-29 per cent and NBET became a debtor to the GenCos. The GenCos, the thermal power plants that use gas, were owing their gas suppliers and their gas suppliers were owing their banks. In this situation, we said to the government “you are the debtor here because NBET is a 100 per cent government owned company.”

    “ Before the N701 billion, NBET had tried to raise a bond of N301 billion when parliament stopped it. That was why government got the N701 billion and said to NBET go and discharge your contract. The decision was taken for many reasons, one it was a contractual obligation and NBET is a 100 per cent government company, so you must pay. This is one of the liquidity issues in the sector, so if government defaults, there will be no power sector. Secondly, don’t let this debt spiral the gas and banking sectors, otherwise, it will spiral into the entire economy. Because it was critical, Federal Executive Council approved it because it is a no-go-area. That doesn’t mean you write-off the debts owed by the DisCos because they are two separate contracts.

  • $5.5b loan: Moody’s downgrade raises borrowing cost

    The Moody’s Investors’ Service downgrade of Nigeria’s long-term issuer and senior unsecured debt rating to B2 from B1 (with a stable outlook) means higher cost of international borrowing, top financial analyst Bismarck Rewane has said.

    In an email report, the Financial Derivatives Company Limited boss, said Moody’s action means that the Federal Government’s plan to raise $5.5 billion through Eurobonds sales within this fourth quarter will attract higher pricing.

    This will bring the total funds raised through the Eurobond–International Capital Market (ICM) by the Federal Government to $7 billion in less than one year. A total of $1.5 billion was previously raised in two tranches of $1 billion and $500 million.

    Moody also lowered the senior unsecured MTN programme rating and the provisional senior unsecured debt rating to (P)B2 from (P)B1. The rating outlook remains stable.

    In a report, Vice President – Senior Analyst Moody’s Investors Service, Lucie Villa, said Nigerian authorities’ efforts to address the key structural weakness exposed by the oil price shock by broadening the non-oil revenue base have so far proven largely unsuccessful.

    But in a swift reaction, the Federal Ministry of Finance (FMF), Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) said the challenges that are highlighted in Moody’s rating are clear, and are being addressed by the government with the environment having improved significantly since the last period of assessment.

    Sub-Saharan Africa Economist, at Renaissance Capital (RenCap), Yvonne Mhango, said the plan to borrow $5.5 billion through Eurobonds will raise the country’s debt service to revenue cost beyond 62 per cent.

    She said capital releases for the 2016 budget continued into the first quarter of this year while public debt has increased by seven percentage points of Gross Domestic Product (GDP) since 2014.

    On the debt service/revenue, she said: “Nigeria’s debt service/revenue has risen sharply in recent years to 62 per cent as at June 2017 against 29 per cent in 2014. This largely reflects the Federal Government’s low revenue/GDP target of four per cent this year. The Federal Government plans a $5.5 billion Eurobond issuance before year-end 2017, as part of its efforts to lower local interest rates, by reducing domestic debt/total public debt to 60 per cent, against over 70 per cent today.”

    Mhango said budget performance in the first seven months of this year and debt developments showed there were no capital releases for the 2017 budget, because it was passed late. She said the Federal Government’s 2017 budget of N7.4 trillion was 6.2 per cent of GDP, and was signed by the executive, after being passed by the Senate in May.

    Of this, N3.1 trillion (2.5 per cent of GDP) was spent in seven months. “Expenditure in seven months was 30 per cent below the (pro-rata) target and was entirely made up of recurrent spending. There were no capital releases from the budget because of its late approval. However, capital releases did take place in seventh month, as the 2016 budget continued to be implemented into first quarter of this year,” she said.

    Mhango said revenue came in on target at N2.6 trillion (2.1 per cent of GDP) because of a one-off refund from the Paris Club. “When this is stripped out, there was a 20 per cent shortfall in revenue. Below-target spending – due to delayed capital releases – explains the small budget deficit for seven months of 0.8 per cent of GDP, by our estimate, as against the 1.5 per cent (pro-rata) target,” she said.

    She disclosed that the federation account revenue was one-third below target, and that three-quarters of the FGN’s planned revenue for this year is expected to come from the Federation Account, of which two-thirds will stem from oil revenue.

    She, however, said Nigeria’s public debt/GDP is low as against the Sub-Saharan African average of 45 per cent, but it has seen a strong increase in recent years, adding that since 2014, it has risen by seven percentage points of GDP to 16.4 per cent of GDP in June 2017, with 70 per cent of the increase due to domestic debt.

  • Senate okays $350m World Bank loan for Ogun

    The Senate yesterday approved $350 million World Bank loan for Ogun State Development Policy Operation (DPO), as contained in the 2016-2018 Rolling Plan.

    The approval followed the presentation of a report on the loan by the Chairman, Senate Committee on Local and Foreign Debts, Shehu Sani.

    Sani said the committee observed that the DPO budget for the loan was approved by World Bank in 2016.

    The senator noted that the loan was captured in the 2016-2018 borrowing plan as approved by the National Assembly.

    He said the committee observed that the credit facility had an attractive low financing rate of 125 per cent interest, moratorium of five years and a five-year maturity term.

    Sani said: “The facility has already been captured in the 2016-2018 Medium Term Expenditure Framework. It also has low and acceptable loan sustainability level. Therefore, it is eligible to borrow.

    “The DPO loan will further help to enhance the capacity of the state government. The state has met the various conditions laid by the World Bank and, as such, it is qualified for the loan. It has also put in place institutional framework for transparent and accountable budgetary and financial purpose.”

    Sani said the projects to be funded with the facility would engender economic growth, increase revenue generation and create employment opportunities.

    He said: “The committee recommends that the Senate should go ahead and approve the loan, as contained in the 2016-2018 external borrowing rolling plan of President Muhammadu Buhari.”

    Deputy Senate President Ike Ekweremadu, who presided over plenary, put the report to voice vote and it was adopted by the senators.