Economy

FG Must Reduce Debt Burden Ratio Below 20%—FSDH

Published

8 years ago

21/06/2017

By Modupe Gbadeyanka

Federal Government has been advised to development ways to reduce its debt burden ratio below 20 percent, at least in the main time.

FSDH Research, in its latest report titled ‘Nigerian Public Debt: A Comparative Analysis,’ said the fact that interest payment is such a significant part of government revenue limits the revenue left for the government to undertake other developmental projects in the short-term.

“We expect this position to improve as government revenue increases as a result of the ongoing economic measures in the country to raise the level of revenue.

“We are of the opinion that government should develop strategies to reduce the ratio of interest payment to revenue below 20 percent in the medium-term,” the firm suggested.

It said further that although the debt stock in Nigeria has increased substantially, it believes this is sustainable in the short-to-medium term given the economic growth potential of the country.

In the short-to-medium-term, government will need to borrow both from external and domestic sources in order to augment the low revenue facing the country as a result of the current economic challenges.

The FGN needs to improve critical infrastructure in the country to increase the competitiveness of the economy to attract investments. This requires more money than current government revenue. The FGN is also working to diversify its revenue base through the issuance of the FGN Savings Bond, Diaspora Bond, and Sukuk.

The efforts of the FGN coupled with the improvement in the macroeconomic environment should help to lower interest rate, it noted.

“We will also continue to encourage the government to partner with the private sector in the provision of critical infrastructure. In addition, government should ensure that any debt contracted is judiciously utilised on projects that promote economic growth and development,” FSDH Research said.

The firm said it observed that the public debt (total of both external and domestic debt) in Nigeria has been increasing over the last five years and the issue of the sustainability of the debt level has generated a lot of debate.

A comparative analysis of the debt-to-Gross Domestic Product (GDP) of a number of countries shows that the ratio of debt-to-GDP is very low in Nigeria.

“Amongst the countries we monitored, Japan recorded the highest debt-to-GDP of 250.40%. This was followed by the United States of America (U.S) with 104.17%; France 96%, United Kingdom (UK) 89.30%; and Germany 68.30%. India and China have a debt-to-GDP of 69.50% and 42.90% respectively. South Africa and Venezuela have debt-to-GDP of 50.10% and 49.80% respectively,” it said.

Available data from the Debt Management Office (DMO) shows that Nigeria’s total debt stock as at March 2017 stood at N19.16trn, representing an increase of 10.37% from the December 2016 figure of N17.36trn.

This also represents growth of 153.63% from N7.55trn in 2012. A breakdown of the debt stock shows that external debt accounted for 22.08% (N4.23trn), while domestic debt stock accounted for 77.92% (N14.93trn).

The increase in the total debt is attributable to the following factors: the need to fund infrastructure and to supplement the declining government revenue. Many analysts have argued that the increase in government’s appetite for borrowing has crowded out the private sector.

The proportion of domestic debt to total public debt dropped consistently between 2013 and Q1

2017.

On the average, the proportion of domestic debt to total debt was 85% between 2012 and 2015; but reduced to 78% between 2016 and Q1 2017.

The increase in external borrowing and the impact of exchange rate depreciation were the main reasons for the reduction in the proportion of the domestic debt stock. The FGN has set what it believes to be an optimal domestic debt to external debt ratio at 60:40. At the current (external to domestic debt) level of 78:22, it appears that there is still room to increase the external debt component of the total debt stock.

The debt-to-GDP in Nigeria as at December 2016 stood at 17.11%. This is far below the critical limit of 40% the FGN has set for the Nigerian economy.

This means that, by this metric alone, there is substantial room for the government to increase its borrowing.

However, the debt-to-GDP ratio is not the only issue. The major stress point is the rising level of interest payment relative to government revenue. The ratio of interest payment-to-government-revenue increased from 24.48% in 2012 to an estimated 35.32% in 2016.

The FGN expects that this ratio will moderate slightly to 33.67% in 2017.

Economy

FrieslandCampina, Afriland Properties Weaken NASD Index by 0.24%

Published

2 days ago

26/04/2025

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange fell by 0.24 per cent on Friday, April 25 after the duo of FrieslandCampina Wamco Nigeria Plc and Afriland Properties Plc landed on the losers’ table.

FrieslandCampina Wamco Nigeria Plc depreciated by N2.58 to sell at N35.37 per unit compared with the previous day’s N37.95 per unit, and Afriland Properties Plc lost 2 Kobo to close at N17.78 per share versus Thursday’s closing value of N17.80 per share.

However, Geo-Fluids Plc appreciated by 10 Kobo during the trading day to sell for N1.80 per unit, in contrast to the preceding session’s N1.70 per unit. The rise in the price of the stock could not prevent the fall of the bourse yesterday.

Consequently, the market capitalisation of the trading platform went down by N4.64 billion to N1.914 trillion from N1.918 trillion and the NASD Unlisted Security Index (NSI) declined by 7.92 points to 3,269.06 points from 3,276.98 points.

The final trading session of the week ended with a surge of 1,695.8 per cent in the volume of securities transacted to 3.7 billion units from the 206.2 milion units transacted in the previous trading day.

Equally, the value of transactions jumped by 2,592.6 per cent to N9.5 billion from N354.1 million on Thursday, and the number of deals decreased by 47.4 per cent to 20 deals from the 38 deals recorded a day earlier.

Impresit Bakolori Plc remained the most active stock by volume on a year-to-date basis with 533.9 million units sold for N520.9 million, followed by Geo-Fluids Plc with 259.3 million units worth N456.1 million, and Okitipupa Plc with 153.6 million units valued at N4.9 billion.

Also, Okitipupa Plc remained the most active stock by value on a year-to-date basis with 153.6 million units valued at N4.9 billion, trailed by FrieslandCampina Wamco Nigeria Plc with 15.6 million units worth N598.5 million, and Impresit Bakolori Plc with 533.9 million units sold for N520.9 million.

Economy

Nigeria’s Stock Market Gives up 0.30% Friday

Published

2 days ago

26/04/2025

Dipo Olowookere

stock market how to invest in US stocks in South Africa

By Dipo Olowookere

A 0.30 per cent fall was recorded by the Nigerian Exchange (NGX) Limited on Friday as a result of profit-taking in the industrial goods sector.

This was mainly caused by sell-offs in Dangote Cement Plc, which released its financial statements for the first quarter of 2025 yesterday.

The cement maker lost 10.00 per cent during the session to trade at N432.00, Regency Alliance lost 8.06 per cent to close at 57 Kobo, VFD Group depreciated by 7.57 per cent to N17.10, Chams declined by 7.27 per cent to N2.04, and Sovereign Trust Insurance crashed by 6.12 per cent to 92 Kobo.

Conversely, International Breweries, Legend Internet, and Ikeja Hotel gained 10.00 per cent each to sell for N7.70, N6.82, and N12.10 apiece, Vitafoam Nigeria surged by 9.93 per cent to N44.85, and Eterna rose by 9.92 per cent to N39.90.

The industrial goods index was down by 4.73 per cent on Friday, as the others finished in green territory.

The consumer goods space rose by 2.21 per cent, the banking sector appreciated by 1.55 per cent, the insurance counter expanded by 1.50 per cent, the energy sector increased by 0.07 per cent, and the commodity industry went up by 0.04 per cent.

At the close of transactions, the All-Share Index (ASI) went down by 321.21 points to 105,753.05 points from 106,074.26 points and the market capitalisation shrank by N202 billion to N66.465 trillion from N66.667 trillion.

The level of activity increased yesterday as the trading volume, value, and number of deals grew by 30.40 per cent, 94.23 per cent, and 17.64 per cent, respectively.

This was because investors transacted 428.1 million shares worth N20.2 billion in 14,284 deals compared with the 328.3 million shares valued at N10.4 billion in traded in 12,142 deals a day earlier.

GTCO led the activity chart with 60.7 million equities sold for N3.8 billion, Fidelity Bank traded 41.4 million stocks worth N829.3 million, Access Holdings exchanged 40.6 million shares valued at N968.3 million, MTN Nigeria sold 33.0 million equities for N8.2 billion, and Zenith Bank transacted 22.9 million stocks worth N1.1 billion.

Economy

Naira Now N1,599/$1 at Official Market, N1,605/$1 at Black Market

Published

2 days ago

26/04/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira extended its gains against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, April 25 by 0.22 per cent or N3.59 to sell for N1,599.42/$1 compared with the N1,603.01/$1 it was traded in the previous session.

The Nigerian currency also improved its value against the Euro in the official market by N1.36 to close at N1,818.53/€1 compared with Thursday’s closing price of N1,819.89/€1.

However, the domestic currency depreciated against the Pound Sterling in the same market segment yesterday by N1.90 to wrap the session at N2,130.44/£1 versus the preceding session’s rate of N2,128.50/£1.

At the black market segment, the Naira appreciated against the greenback on Friday by N2 to quote at N1,605/$1, in contrast to the previous day’s value of N1,607/$1.

In the cryptocurrency market, a possible regulatory progress about digital assets in the US spurred buying interest among investors during the trading session.

The chairman of the US Securities and Exchange Commission, Mr Paul Atkins, was at a crypto roundtable on Friday and he devoted his inaugural speech to assuring the industry that he will continue to remake securities policy to favor digital assets innovation.

The agency and industry have been awaiting congressional action to establish crypto market-structure oversight that will likely set guardrails, and Atkins told an audience at the SEC’s Washington headquarters that the regulator will work toward delivering “a rational, fit-for-purpose framework” for crypto.

Litecoin (LTC) rose by 3.0 per cent to $87.24, Dogecoin (DOGE) grew by 2.7 per cent to $0.1862, Bitcoin (BTC) increased by 1.3 per cent to $94,687.84, Ethereum (ETH) jumped by 1.2 per cent to $1,797.51, Cardano (ADA) improved by 0.9 per cent to $0.7235, and Ripple (XRP) gained 0.6 per cent to close at $2.20.

On the flip side, Solana (SOL) depreciated by 0.9 per cent to $151.64, and Binance Coin (BNB) lost 0.8 per cent to sell for $602.89, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.