Economy

Is Nigeria’s Economy Strong Enough for N33trn Debt?

Published

6 years ago

18/03/2020

By Adedapo Adesanya

Nigeria’s debt profile has been a source of worry to many and recently, with the current reality in the global economy as a result of the coronavirus pandemic, which coincided with President Muhammadu Buhari’s request for an additional $22.7 billion external loan, there have fresh reservations on the capability of the country to incur more debts.

Recently, the Debt Management Office (DMO) warned that the country could not hold its own especially with the impact that the virus is having on the country’s economy, making it impossible to service the debts on ground.

According to analysts, the country’s poor revenue generation and annual budget deficit were compounding the debts, as the country has to borrow to balance the shortage which as at September 2019 stood at $26 trillion.

With the Senate approval of the loan after much deliberations earlier this month, the total debt of the country could rise to N33 trillion and this has worried the same Senate, which expressed its displeasure as the loans intended to help the economy are on track to land the country in a crisis.

As such, the Deputy Chairman of Senate Committee on Local and Foreign Debts, Mr Muhammad Bima Enagi, pointed this out while speaking at the one-day public lecture organized by the National Institute for Legislative and Democratic Studies (NILDS), on Public Debt in Nigeria: Trend sustainability and management.

“With the recent approval of the 2016-2018 External Borrowing Plan, the total debt stock would be about N33 trillion and 21 percent Debt to GDP ratio.

“What do we have to show as a people for these huge debts accumulated over the last four decades or so?” he asked.

“Clearly, Nigeria needs to get its public finance in order to avoid the potential fiscal and financial crisis ahead of the nation.

“The current debt situation in Nigeria needs to be properly managed and every borrowed Naira or Dollar, carefully deployed, especially in the face of the continued dependence of the nation’s economy on exported crude oil, with its usual price volatility.

“Borrowings must be project-tied and not just to support budget deficit. Furthermore, the projects must be such to grow the economy and bequeath laudable infrastructure and not debt for future generations,” he had further said.

DMO’s Director-General, Ms Patience Oniha, has, however, called for calm, saying despite these worries, there was no cause for alarm.

She explained that in order to ensure that the public debt was sustainable, the Debt-to-GDP Ratio was set at 25 percent, lower than the 56 percent advised by the World Bank and IMF, adding that the total public debt-to-GDP had remained within the 25 percent limit, standing at 18.47 percent in September 2019.

“This is, however, only one measure of debt sustainability, the other equally important measure is the debt service-to-revenue ratio and this is where Nigeria needs significant improvement.

‘’Actual Debt Service to Revenue Ratio has been high at over 50 percent since 2015, although it dropped to 51 percent in 2018 from 57 percent in 2017.

“The relatively high Debt Service to Revenue Ratio is the result of lower revenues and higher debt service figures.”

But the pertinent question remains on the lips of many, considering the realities on ground with oil prices pointing south: can Nigeria sustain the debt?

Mrs Oniha noted: “Whilst Nigeria’s debt is sustainable, recent developments in the global environment induced by COVID-19, already suggest a less than favourable economic outlook with implications for Nigeria.”

This week, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, announced the federal government has suspended its plans to do the $22.7 billion external borrowing. The House of Representatives is yet to approve the request, only the Senate has.

Economy

NGX Seeks Suspension of New Capital Gains Tax

Published

1 minute ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.

Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.

Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.

The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”

According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”

“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”

Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.

He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.

Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.

Economy

Food Concepts Return NASD OTC Exchange to Danger Zone

Published

10 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.

Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.

This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.

Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.

Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.

At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.

InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.

Economy

Investors Gain N97bn from Local Equity Market

Published

10 hours ago

05/12/2025

Dipo Olowookere

By Dipo Olowookere

The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.

This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.

UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.

On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.

Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.

Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.

A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.

This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.

For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.