Economy
Domestic Debt Servicing Gulps N3.7tr in Three Years
By Dipo Olowookere
Data by the Debt Management Office (DMO) has revealed that the sum of N3.73 trillion has been used by Federal Government to service domestic debts since 2015.
In 2015, a total of N1.02 trillion was spent on domestic debt servicing, while in 2016, N1.23 trillion was used to service the local debts and N1.48 trillion was spent by government on debt servicing.
According to the data obtained by Business Post, in 2017, Federal Government spent N180.6 billion to service local debts in January and N187 billion was used for the same purpose in March.
In May 2017, it used N73.1 billion for debt servicing and N217.3 billion for same purpose in July.
In September, N171.4 billion was used to service local debts, N92.7 billion used in November and N52.2 billion in December.
A recent statement released by the DMO disclosed that the total debt profile of Nigeria as at December 31, 2017 was N21.73 trillion.
The composition of the debt stock showed that external debt was 26.64 percent of the portfolio, up from 20.04 percent in 2016, while domestic debt was 73.36 percent, down from 79.96 percent a year earlier.
Further analysis showed that the domestic debt for the Federal Government was N12.59 trillion, while that of the states and the Federal Capital Territory was N3.35 trillion.
The external debt of the Federal Government, states and the FCT was N5.79 trillion, putting the total public debt as of December 31, 2017 at N21.73 trillion.
The debt office noted that the total public debt as of December 31, 2017 represented 18.2 percent of Nigeria’s GDP for the year, showing that Nigeria’s debt had continued to be sustainable and was well within the threshold of 56 percent for countries in her peer group.
Federal Government has been spending considerable resources in recent times on the servicing of domestic debts, thereby raising questions of the sustainability of the country’s debt burden.
However, the Federal Government has insisted that the nation’s debt burden is sustainable since it is less than 20 percent of the country’s Gross Domestic Product although lesser revenues have made the payment of interest burdensome.
This has motivated the government to move towards foreign borrowing since such loans attract less interest payment.
Among the various instruments Federal Government used to borrow from the domestic debt market, the highest interest was paid on the FGN Bonds.
In 2017, for instance, Federal Government paid N982.66 billion on the FGN Bonds and a total of N445.13 billion was paid on Nigerian Treasury Bills; N22.99 billion on Treasury Bonds; while N25 billion of the principal was repaid.
In addition, an interest of N442 billion was paid on Savings Bonds.
According to the DMO, restructuring of the country’s debt mix has led to an increase in foreign debts in order to minimise the high interest rate on local debts.
“The key benefits of the restructuring of the portfolio are the reduction of the government’s debt service costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.
“We repaid N198 billion Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances, and we have continued further implementation of the strategy in 2018, with the issuance of the S2.5 billion Eurobonds in February 2018, the proceeds of which are being used to repay maturing domestic debts, starting with N130 billion NTBs repaid on March 1, 2018,” the debt office said.
According to the DMO, the borrowings are for financing capital expenditure and stimulating the economy. The funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget, which helped the country to exit recession in 2017.
Additional information from Economic Confidential
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange further dropped 0.35 per cent on Tuesday, March 17, with the market capitalisation down by N8.80 billion to N2.471 trillion from the preceding day’s N2.480 trillion, and the NASD Unlisted Security Index (NSI) dipping by 14.71 points to 4,130.89 points from 4,145.60 points.
The loss recorded during the session was influenced by three securities, which overpowered the gains recorded by four stocks.
Okitipupa Plc lost N15.00 to sell at N215.00 per unit compared with the previous day’s N230.00 per unit, FrieslandCampina Wamco Nigeria Plc depreciated by N1.23 to trade at N122.32 per share versus Monday’s closing price of N123.55 per share, and Afriland Plc declined by 90 Kobo to quote at N17.05 per unit versus N17.95 per unit.
On the flip side, Central Securities Clearing System (CSCS) gained 36 Kobo to close at N75.43 per share versus the preceding session’s N75.07 per share, Geo-Fluids Plc added 6 Kobo to trade at N3.11 per unit compared with the previous day’s N3.05 per unit, Lighthouse Financial Service Plc improved by 5 Kobo to 60 Kobo per share from 55 Kobo per share, and Industrial and General Insurance (IGI) Plc rose by 1 Kobo to 55 Kobo per unit from 54 Kobo per unit.
Yesterday, the volume of securities surged by 97.5 per cent to 921,265 units from 265,610 units, the value of securities advanced by 64.6 per cent to N54.7 million from N33.2 million, and the number of deals went up by 46.2 per cent to 38 deals from 26 deals.
The most active stock by value (year-to-date) was CSCS Plc with 38.7 million units worth N2.4 billion, trailed by Okitipupa Plc with 6.4 million units valued at N1.2 billion, and FrieslandCampina Wamco Nigeria Plc traded 6.8 million units for N649.1 million.
The most traded stock by volume (year-to-date) was Resourcery Plc with 1.1 billion units sold for N415.6 million, followed by Geo-Fluids Plc with 130.9 million units exchanged for N505.1 million, and CSCS Plc with 38.6 million units worth N2.4 billion.
By Dipo Olowookere
A 0.54 per cent surge was witnessed by the Nigerian Exchange (NGX) Limited on Tuesday as a result of strong investor demand and broad-based gains in the banking and industrial goods sectors.
According to data from the bourse, the industrial goods space expanded by 4.44 per cent, and the banking index chalked up 4.30 per cent, offsetting the losses recorded by the three other indices due to profit-taking.
Business Post reports that the consumer goods sector depreciated by 1.30 per cent, the insurance counter shrank by 0.41 per cent, and the energy landscape lost 0.13 per cent.
At the close of business, the market capitalisation soared by N696 billion to N130.026 trillion from N129.330 trillion, and the All-Share Index (ASI) surged by 1,084.52 points to 202,559.41 points from 201,474.89 points.
BUA Cement ended the day as the best-performing equity after it jumped 10.00 per cent to N326.70, Premier Paints appreciated by 9.86 per cent to N23.40, Zenith Bank expanded by 7.91 per cent to N111.15, NAHCO moved up by 7.14 per cent to N175.60, and RT Briscoe grew by 6.67 per cent to N11.20.
Conversely, Presco was the worst-performing equity, with a decline of 10.00 per cent to quote at N1,875.60. Caverton dropped 8.70 per cent to N6.30, Secure Electronic Technology lost 7.69 per cent to trade at N1.20, Guinea Insurance shed 6.43 per cent to quote at N1.31, and International Breweries crashed by 6.35 per cent to N14.00.
During the session, 1.8 billion shares worth N88.1 billion exchanged hands in 62,654 deals compared with the 948.2 million shares valued at N49.2 billion traded in 72,735 deals a day earlier, implying a contraction in the number of deals by 13.72 per cent, and an expansion in the trading volume and value by 89.83 per cent and 79.07 per cent, respectively.
Dominating the activity chart was FCMB with a turnover of 516.2 million equities valued at N6.6 billion, Wema Bank transacted 213.4 million shares for N5.6 billion, Zenith Bank traded 163.1 million stocks worth N18.1 billion, Access Holdings sold 123.9 million equities valued at N3.2 billion, and GTCO exchanged 100.0 million shares worth N12.4 billion.
By Adedapo Adesanya
It was another outstanding performance for the Nigerian Naira in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, March 17, as it further appreciated against the US Dollar by N8.46 or 0.62 per cent to trade at N1,344.04/$1, in contrast to Monday’s closing rate of N1,357.77/$1.
It also gained N6.85 against the Euro in the official FX market during the session to sell at N1,551.46/€1 compared with the previous day’s N1,558.31/€1, but weakened against the Pound Sterling by N6.33 to close at N1,795.87/£1 versus Monday’s value of N1,789.54/£1.
At the GTBank forex counter, the Naira improved its value against the Dollar yesterday by N20 to settle at N1,365/$1 compared with the preceding session’s N1,385/$1, and in the black market, it remained unchanged at N1,395/$1.
With over $50 billion in foreign reserves, analysts assert that the outlook for the Naira is positive, powered by expectations of increased forex receipts from Nigeria’s hydrocarbon sales, as potential disruptions to global oil supply have increased volatility in energy markets.
The pressure that has piled on the local currency appeared to ease, buoyed by higher oil prices that have continued to bolster market sentiment.
Call for allies to help reopen the Strait of Hormuz was ignored, prompting traders to speculate that a continued closure is likely, which means oil prices will remain higher.
Meanwhile, the cryptocurrency market was in green ahead of a Federal Reserve meeting. There are no expectations that the US central bank will move rates at its Wednesday meeting, but Chairman Jerome Powell’s tone regarding the inflation outlook could prove a catalyst.
Analysts noted that a hawkish tone alongside hot February Producer Price Index (PPI) inflation data could weigh on equities and crypto, but Mr Powell’s signal that the Federal Reserve is treating rising oil prices as a temporary shock could extend the crypto rally.
Cardano (ADA) appreciated by 2.6 per cent to $0.2905, TRON (TRX) grew by 2.3 per cent to $0.3033, Ripple (XRP) jumped 1.2 per cent to $1.52, Ethereum (ETH) rose 0.9 per cent to $2,320.83, Dogecoin (DOGE) increased by 0.8 per cent to $0.1005, Solana (SOL) gained 0.6 per cent to sell at $94.11, and Bitcoin (BTC) went up by 0.3 per cent to $74,073.07.
However, Binance Coin (BNB) lost 0.3 per cent to close at $672.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
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