Economy
It’ll be Difficult to Sell Proposed FG’s N22.7trn 40-year Bonds at 9%—BudgIT
By Dipo Olowookere
A Nigerian civic company, BudgIT, has said, based on findings, it would be difficult for the federal government to get buyers for the proposed securitisation of the N22.7 trillion overdrafts of the Central Bank of Nigeria (CBN) at 9 per cent per annum coupon rate.
President Muhammadu Buhari on Tuesday appealed to the National Assembly to reconsider his request to convert the ways and means into securities.
The bonds, to be sold to interested investors in local denomination, would have a maturity of 40 years at a coupon rate of 9 per cent.
Last week, the Senate rejected the proposal, pointing out that it must know what the government spent the money on.
The government violated the CBN act as regards the overdrafts as it was supposed to get 5 per cent of the revenue it generated in the previous fiscal year as ways and means, which must be paid back before another is given.
However, these requirements were not met by the federal government but the central bank, under the leadership of Mr Godwin Emefiele, went ahead to give more loans to the government to fund the budget deficits.
While signing the 2023 budget into law on Tuesday, Mr Buhari begged the parliament to approve the conversion of the loans to bonds to avoid the payment of an extra N1.8 trillion as interest.
“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.
“Failure to grant the securitization approval will, however, cost the Nigerian government about N1.8 trillion in additional interest in 2023, given the differential between the applicable interest rates, which is currently MPR plus 3 per cent, and the negotiated interest rate of 9 per cent and a 40-year repayment period on the securitised debt of the Ways and Means,” he had pointed out.
But BudgIT said the claims by Mr Buhari that the 40-year bonds would be sold at 9 per cent may not be totally true.
Business Post reports that the FGN savings bond currently being offered for sale by the Debt Management Office (DMO) has coupon rates higher than what the government is claiming.
The debt office is offering the 2-year FGN savings bond maturing on January 11, 2025, at 9.60 per cent and the 3-year paper maturing on January 11, 2026, at 10.60 per cent.
At the last FGN bonds held in December 2022, the debt office sold a 10-year bond at 14.75 per cent and a 20-year bond at 15.80 per cent. Based on this, it would most likely be difficult to lure investors to purchase 40-year bonds at 9 per cent when a shorter-tenor paper can be bought at almost double the coupon rate.
In a series of tweets via its official Twitter page on Thursday, BudgIT said it would be a herculean task for the government to get buyers for the bonds at the “specified rate.”
“@MBuhari has asked @nassnigeria to approve the securitization of FG’s N22.7tn debt to @cenbank, is it legal for @nassnigeria to approve the request of the FG to securitize the Ways & Means, which goes against the CBN Act?
Since 2015, the FG has asked @cenbank to provide advances to fund its fiscal deficit without any requirement for cost-cutting measures/fiscal control. The law stipulates that such advances should be limited to 5% of the previous year’s revenues. This law has not been followed.
“Also, Section 38 of the CBN Act mandates the FG to repay all advances made by the CBN to it at the end of the financial year in which the advances were received. Failure to repay the advances in full implies that the FG will not be eligible for further advances by the CBN.
“While FG has continuously breached the CBN Act, it now seeks the @nassnigeria’s approval to offload N22.7tn debt for 40 years at a 9% interest rate. Findings have shown that it will be difficult to sell such debt at the specified rate.
“Currently, the FG has been on a borrowing binge as domestic debt increased from N8.3tn in June 2015 to N21.6tn as of June 2022, & foreign debt rose from $10b in 2015 to $39.66b in 2022.
“Similarly, interest paid in Ways and Means (CBN Debt to FG) grew from N9.51b in 2017 to N1.22tn in 2021. In the meantime, the CBN’s new debt adds at least N2.5tn annually to Nigeria’s debt servicing costs.
“According to a recent MTF, Nigeria’s debt servicing cost is projected to reach N10tn in 2025. If National Assembly approves this action, FG’s public debt will rise from its current state by 59% – from $89.5b to $142 billion.
“In 2021, FG used 91% of its N4.64tn revenue to service public debt. Unless something drastic happens with revenue growth, the FG will spend more on servicing debt. This has implications for inflation, economic confidence, higher interest rates & weakened exchange rates.
“Is it legal for the National Assembly to approve the request of the Federal Government to securitise the Ways and Means, which is in clear breach of the CBN Act? More importantly, what were the borrowings used for?” the company asked.
By Adedapo Adesanya
Three bellwether stocks lifted the NASD Over-the-Counter (OTC) Securities Exchange by 0.62 per cent on Friday, December 12 with the NASD Unlisted Security Index (NSI) jumping by 22.20 points to 3,600.43 points from 3,578.23 points.
In the same vein, the market capitalisation of the trading platform increased by N13.28 billion to close at N2.154 trillion from the previous day’s N2.140 trillion.
During the session, Central Securities Clearing System (CSCS) Plc went up by N2.53 to close at N39.71 per share compared with the previous day’s N37.18 per share, Geo-Fluids Plc added 35 Kobo to its price to finish at N5.00 per unit versus Thursday’s closing price of N4.65 per unit, and FrieslandCampina Wamco Nigeria Plc appreciated by 23 Kobo appreciation to sell at N60.23 per share versus N60.00 per share.
It was observed that yesterday, the price of Golden Capital Plc went down by N1.05 to N9.45 per unit from N10.50 per unit, and UBN Propertiy Plc declined by 21 Kobo to N2.01 per share from the N2.22 per share it was traded a day earlier.
There was a significant improvement in the level of activity for the day, as the volume of transactions increased by 6.2 per cent to 37.4 million units from the previous day’s 35.2 million units, the value of trades went up by 265.1 per cent to N4.9 billion from N1.4 billion, and the number of deals soared by 13.80 per cent to 33 deals from 29 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the last trading day of this week as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, the second spot was taken by Okitipupa Plc with 178.9 million units traded for N9.5 billion, and third space was occupied by a new comer in MRS Oil Plc with 36.1 million units worth N4.9 billion.
InfraCredit Plc also finished the session as the most active 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 valued at N420.3 million, and Impresit Bakolori Plc with 537.0 million units sold for N524.9 million.
By Dipo Olowookere
The bullish run on the Nigerian Exchange (NGX) Limited continued on Friday with a further 1.00 per cent growth buoyed by gains recorded by Guinness Nigeria, Champion Breweries, and others.
Data showed that the consumer goods space expanded by 1.53 per cent during the last trading session of the week, as the insurance counter grew by 0.51 per cent, and the industrial goods sector marginally gained 0.01 per cent.
However, the banking index depreciated by 0.54 per cent due to a pocket of profit-taking, and the energy industry shrank by 0.09 per cent, while the commodity sector closed flat.
Guinness Nigeria gained 10.00 per cent to trade at N217.80, Morison Industries rose by 9.84 per cent to N4.69, Champion Breweries jumped by 9.69 per cent to N14.15, Austin Laz grew by 9.66 per cent to N2.27, and C&I Leasing appreciated by 9.62 per cent to N5.70.
Conversely, eTranzact lost 10.00 per cent to finish at N12.60, Chellarams slumped by 9.00 per cent to N13.20, Eunisell depleted by 9.89 per cent to N75.15, Africa Prudential moderated by 9.77 per cent to N12.00, and DAAR Communications decreased by 9.18 per cent to 89 Kobo.
The busiest stock on Friday was Access Holdings with 107.6 million units sold for N2.2 billion, Consolidated Hallmark traded 59.9 million units worth N245.8 million, Zenith Bank transacted 48.2 million units valued at N3.1 billion, Transcorp Power transacted 42.8 million units for N13.1 billion, and Champion Breweries exchanged 36.4 million units valued at N510.2 million.
At the close of business, a total of 602.8 million units worth N30.7 billion exchanged hands in 20,550 deals yesterday, in contrast to the 529.7 million units valued at N12.3 billion traded in 18,159 deals on Thursday, representing a surge in the trading volume, value, and number of deals by 13.80 per cent, 149.59 per cent, and 13.17 per cent apiece.
Business Post reports that the All-Share Index (ASI) soared during the session by 1,485.89 points to 149,436.48 points from 147,950.59 points and the market capitalisation moved up by N945 billion to N95.264 trillion from N94.319 trillion.
By Adedapo Adesanya
An intervention of the Central Bank of Nigeria (CBN) in the foreign exchange (FX) market eased the pressure on the Naira on Friday.
The apex bank sold forex to banks and other authorised dealers in the official window to defend the domestic currency, helping to calm the FX demand pressure, with the Nigerian currency appreciating against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) by 0.11 per cent or N1.57 to sell at N1,454.50/$1 compared with Thursday’s closing price of N1,456.07/$1.
Also, the domestic currency improved its value against the Pound Sterling in the official market yesterday by N3.95 to close at N1,946.15/£1 versus the previous day’s N1,950.11/£1 but lost 10 Kobo on the Euro to quote at N1,706.46/€1 compared with the N1,706.36/€1 it was exchanged a day earlier.
At the black market segment, the Nigerian Naira maintained stability against the Dollar during the session at N1,470/$1 and also traded flat at N1,463/$1 at the GTBank forex counter.
Despite the sigh of relief, demand pressures outweighed the robust supply from the CBN and inflow from offshore players looking to participate at the OMO bills auction.
Gross FX reserves increased for the twenty fifth consecutive week, growing by a strong $396.84 million week-on-week to $45.44 billion.
As for the cryptocurrency market, it was down on Friday as pressure remained after Federal Reserve chair Jerome Powell’s speech on Wednesday, which hinted at a possible rate cut pause in January. As a result, markets now expect only two rate cuts in 2026 instead of three.
However, Chicago Federal Reserve President Austan Goolsbee, who was against a December rate cut, said he expects more in 2026 than the current median projection.
Ethereum (ETH) slumped by 5.1 per cent to $3,090.61, Solana (SOL) declined by 4.5 per cent to $132.79, Cardano (ADA) depreciated by 3.8 per cent to $0.4103, and Dogecoin (DOGE) dropped 2.5 per cent to trade at $0.1373.
In addition, Bitcoin (BTC) lost 2.4 per cent to sell at $90,342.74, Litecoin (LTC) tumbled by 1.9 per cent to $81.86, Binance Coin (BNB) fell by 0.6 per cent to $886.93, and Ripple (XRP) slipped by 0.5 per cent to $2.02, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
-
Feature/OPED6 years agoDavos was Different this year
-
Travel/Tourism9 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz3 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking7 years agoSort Codes of GTBank Branches in Nigeria
-
Economy3 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking3 years agoFirst Bank Announces Planned Downtime
-
Banking3 years agoSort Codes of UBA Branches in Nigeria
-
Sports3 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn