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

EFCC Intercepts Eight Trucks With Illegally Mined Minerals in Benue

Published

19 hours ago

21/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The Economic and Financial Crimes Commission (EFCC) has intercepted eight trucks transporting suspected illegally mined solid minerals in Benue State as it intensifies the crackdown on illegal mining activities in the North Central region of the country.

This was disclosed in a statement by the anti-graft agency, on its official X handle, where it confirmed the arrests of the individuals involved.

The EFCC stated that the trucks were seized on Wednesday, March 19 in the Katsina-Ala Local Government Area of Benue State.

According to the EFCC, preliminary investigations revealed that the minerals—believed to be fluorite and iron stones—were mined from unauthorized sites in Logo Local Government Area of the state.

Business Post reports that the Benue State government had paused all mining activities, as it was responsible for some of the crisis in the state.

“We are determined to combat the illegal mining of Nigeria’s mineral resources and bring perpetrators to justice. The suspects will be charged to court as soon as investigations are concluded,” EFCC tweeted on X, formerly known as Twitter.

Illegal mining has been a growing concern in Nigeria, with authorities warning that the illicit extraction of solid minerals deprives the country of valuable revenue and contributes to environmental degradation.

The EFCC was involved in the issue of mining to quell further economic losses facing the nation.

According to the Minister of Solid Minerals, Mr Dele Alake, the government is losing trillions of Naira to unregulated and illegal mining activities.

He disclosed earlier this week that the Federal Executive Council (FEC) had approved N2.5 billion for the procurement of an integrated solution framework to combat illegal and unregulated mining activities.

He also disclosed that his ministry had opted for dialogue and collaboration with state governors rather than confrontation, saying many governors were initially unaware of the constitutional framework governing mining, but have now been engaged through discussions facilitated by the Nigeria Governors’ Forum (NGF).

Mr Alake noted that states must collaborate with federal authorities in addressing illegal mining and related criminal activities.

Economy

NGX, CBN, MinieMoney Teach Over 200 Students Money Management Tips

Published

20 hours ago

21/03/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

As part of the 2025 Global Money Week celebration, over 200 students were recently selected and equipped with essential financial literacy skills.

This seminar on money management tips was put together by the Nigerian Exchange (NGX) Group Plc, in collaboration with the Central Bank of Nigeria (CBN) and MinieMoney.

It underscored a shared commitment to fostering financial inclusion and equipping young Nigerians with the knowledge required for long-term financial well-being.

The event was organised to mark the Global Money Week, is a global initiative currently in its 13th edition designed to promote financial education among young people, ensuring they develop the critical thinking skills needed to make informed financial decisions.

The 2025 theme, Think Before You Follow, Wise Money Tomorrow, reinforces the importance of strategic financial planning from an early age.

The Head of Trading and Products at NGX, Mr Abimbola Babalola, highlighted the transformative power of financial literacy in shaping students’ futures.

“The financial choices you make today will determine the quality of your life tomorrow. Understanding saving, investing, and responsible money management early on will put you on the path to financial success,” he stated.

Also, the Assistant Director of the Consumer Protection Department at CBN, Mr Christian Mordi, introduced the CBN’s ‘Sabi Money’ platform, designed to enhance financial education nationwide.

“Financial literacy extends beyond numbers; it is about developing discipline, patience, and informed decision-making skills that foster economic security,” he noted.

On his part, the chief executive of MinieMoney, Mr Gbolahan Faniran, emphasized the importance of early investment habits and leveraging the power of compound interest.

“Achieving financial success is not about following trends but about making intentional money choices today that ensure a secure future,” he said.

Business Post reports that students from Vivian Fowler Memorial College for Girls, Dansol High School, Kith and Kin Educational Schools, Caleb British International School, Lagos Preparatory and Secondary School, and The Bells Comprehensive Secondary School attended the programme.

They engaged in insightful discussions on financial literacy, investment strategies, and capital market operations, with the added opportunity to experience firsthand the dynamics of the NGX trading floor.

Economy

Geo-Fluids, Two Others Weaken NASD OTC Exchange by 0.13%

Published

21 hours ago

21/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The trio of Geo-Fluids Plc, Food Concepts Plc, and Industrial and General Insurance (IGI) Plc were extended the stay of the NASD Over-the-Counter (OTC) Securities Exchange in the red region for another trading day, weakening the alternative stock exchange further by 0.13 per cent on Thursday, March 20.

Geo-Fluids Plc lost 15 Kobo to trade at N2.70 per unit compared with the previous day’s N2.85 per unit, Food Concepts Plc declined by 6 Kobo to close at N1.49 per share versus Wednesday’s closing price of N1.55 per share, and IGI Plc tumbled by 2 Kobo to settle at 37 Kobo per unit, in contrast to the 39 Kobo per unit it traded a day earlier.

As a result, the NASD Unlisted Security Index (NSI) went down by 4.36 points to close at 3,373.62 points, in contrast to the previous trading day’s 3,377.98 points.

In the same vein, the market capitalisation of the bourse depreciated by N2.51 billion to settle at N1.948 trillion compared with the preceding day’s N1.951 trillion.

During the trading session, the volume of securities traded at the bourse crumbled by 99.4 per cent to 201,873 units from the 31.3 million units recorded on Wednesday, the value of securities bought and sold by the market participants moderated by 97.7 per cent to N776,509.51 from the N33.3 million quoted a day earlier, and the number of deals carried out by investors decreased by 26.1 per cent to 17 deals from 23 deals.

When the market closed for the day, Impresit Bakolori Plc remained the most active stock by value (year-to-date) with 533.9 million units sold for N520.9 million, followed by FrieslandCampina Wamco Nigeria Plc with 13.0 million units valued at N505.1 million, and Afriland Properties Plc with 17.5 million units worth N359.5 million.

In the same vein, Impresit Bakolori Plc remained the most active stock by volume (year-to-date) with 533.9 million units valued at N520.9 million, trailed by IGI Plc with 69.9 million units sold for N23.7 million, and Geo-Fluids Plc with 44.1 million units worth N88.9 million.