Economy
Nigeria Still Safe to Borrow Additional N7.9trn—FSDH

By Dipo Olowookere
Some days ago, the Debt Management Office (DMO) released the public debt profile of the country and from their report, Nigeria’s debt stood at N24.4 trillion as at December 31, 2018.
The release of the report stirred another debate in the country, with different stakeholders appealing to federal government to reduce its borrowings.
But analysts at FSDH Research have said Nigeria still has room to borrow an additional N7.89 trillion before reaching a threshold of about N32 trillion.
In its report released this week, which was obtained by Business Post, the Lagos-based investment company said based on the fact that the public debt-to-GDP ratio of Nigeria, Africa’s largest economy, was still under 20 percent, precisely 18.89 percent, it can still get more loans to reach the 25 percent benchmark set for itself and the 56 percent international threshold set for countries in Nigeria’s peer group.
FSDH Research argued that countries like China, South Africa, India, UK and USA all have high debt-to-Gross Domestic Product (GDP) of over 50 percent, but stressed that they have successfully managed to deploy their borrowings into activities that can stimulate revenue generation including education, transportation, construction, security, technology, and other growth-enhancing infrastructure.
“By utilizing these borrowed funds in areas that improve the ease of doing business in their countries, they have been able to grow their economies further, create job opportunities, and create more avenues for their governments to grow their revenue,” the report said.
It advised the Nigerian government to diversify its revenue and create multiple sources so as to change the present narrative.
“Just as FSDH Research has suggested several times in our previous reports, there is an urgent need to expand the revenue base of the country through the growth of the non-oil sector.
“We suggest that the government should adopt strategies to increase and broaden its revenue. Some of these strategies include an increase in the tax base of the country (apart from an increase in the tax rate), removal of all administrative delays in obtaining licences and approvals (including titles to landed properties for building and agricultural purposes), the sale of unprofitable government assets and, removal of subsidies on electricity and Premium Motor Spirit (PMS).
“In addition, we emphasize that borrowing should be tied to specific projects that can improve the competitiveness of the country, such as the FGN Sukuk Bond.
“To conclude, as individuals and business entities in Nigeria, we can help government generate more revenue by paying our taxes and other dues as and when due. And government must surely reciprocate with the provision of appropriate facilities that will make life better for all,” it said.
Read the full report below
Have you ever had to borrow money and accumulate debt? Some individuals believe that debt is bad and as a result they live within their limited resources. But are debts really bad? Now, imagine that you run a chocolate-production business and you receive a large order to supply chocolates to a big customer who will surely pay you after supply.
After considering your resources, you find out that you do not have sufficient funds to purchase the raw materials required to produce the chocolates.
You are then faced with a decision to either borrow money from a willing lender to finance the operation and make your money later or not to borrow and lose the business. What will you do? It is your choice to make but borrowing is definitely a better option if the money is used for productive activities that have the capacity to pay back the debt as well as its associated interest.
Just as individuals and companies are faced with the dilemma of whether or not to borrow, countries also face the same problem.
Although it is difficult to find any country that does not borrow, there are key questions each country must ask. How much debt should they contract? What projects will the debt be used for? How will the loan be repaid on top of the associated interest? Whom should they approach to lend the money? What will be the impact of the loan servicing on the country’s ability to perform her obligations to the citizens? Some countries have shown that debt is not bad in itself. What truly matters is the productivity of the debt that is contracted.
Countries such as China, South Africa, India, UK and USA have high Debt-to-Gross Domestic Product (GDP) of over 50%. Our computation shows that despite the significant increase in Nigeria’s public debt in recent years, standing at N24 trillion, Nigeria’s Public Debt-to-GDP ratio is less that 20%. Based on this measure, Nigeria could borrow more.
The countries mentioned above, however, have managed to deploy their borrowings into activities that can stimulate revenue generation including education, transportation, construction, security, technology, and other growth-enhancing infrastructure. By utilizing these borrowed funds in areas that improve the ease of doing business in their countries, they have been able to grow their economies further, create job opportunities, and create more avenues for their governments to grow their revenue.
So, you might now be thinking, maybe debt is not bad after all. But, you must not be quick to say this. The matter of public debt must be weighed carefully and thoroughly. Just as there are countries that have done well because of increased borrowing, there are other countries whose high, unsustainable debt levels have not translated into economic development.
In reviewing Nigeria’s debt profile, FSDH Research observes that the level of debt has been on the increase over the years. As at December 2018, the total public debt increased to N24.39trillion. But this is not where the issue lies.
A further analysis shows that the Public Debt-to-GDP ratio is 18.89%, which is below the 25% benchmark the Federal Government of Nigeria (FGN) sets for Nigeria and the 56% international threshold set for countries in Nigeria’s peer group.
The 25% benchmark gives Nigeria a leeway to borrow an additional N7.89 trillion given her level of GDP. But before you are quick to celebrate, there is the need to consider one very important factor: the ability of the country to service the debt without causing untold hardship on the country.
In measuring the ability of a country to service her debt obligations, we look at the ratio of domestic debt service-to-FGN FAAC allocation.
This is where the problem lies for Nigeria. Low revenue generation makes it very difficult for the FGN to meet its debt obligations without sacrificing other important responsibilities of government.
FSDH Research notes that the current high debt service to revenue structure in Nigeria is unsustainably high and the high figure is due to the low revenue of the country. Although the strategies of the Debt Management Office (DMO) in debt management and the Central Bank of Bank of Nigeria (CBN) in monetary policy administration have reduced the interest burden of the government, Nigeria needs to accelerate revenue generation to enable it to meet all her debt obligations without stress.
The way to change this narrative is for Nigeria to diversify her revenue and create multiple sources. Just as FSDH Research has suggested several times in our previous reports, there is an urgent need to expand the revenue base of the country through the growth of the non-oil sector.
We suggest that the government should adopt strategies to increase and broaden its revenue. Some of these strategies include an increase in the tax base of the country (apart from an increase in the tax rate), removal of all administrative delays in obtaining licences and approvals (including titles to landed properties for building and agricultural purposes), the sale of unprofitable government assets and, removal of subsidies on electricity and Premium Motor Spirit (PMS).
In addition, we emphasize that borrowing should be tied to specific projects that can improve the competitiveness of the country, such as the FGN Sukuk Bond.
To conclude, as individuals and business entities in Nigeria, we can help government generate more revenue by paying our taxes and other dues as and when due. And government must surely reciprocate with the provision of appropriate facilities that will make life better for all.
Economy
NASD OTC Exchange Depreciates by 0.08%

By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange fell by 0.08 per cent on Monday, April 7, as the global market meltdown takes its toll on the local economy.
During the first trading session of the week, the market capitalisation of the bourse went down by N1.50 billion to N1.909 trillion from the N1.911 trillion quoted at the preceding session.
In the same vein, the NASD Unlisted Security Index (NSI) depreciated by 2.59 points at the close of business to 3,306.87 points from last Friday’s 3,309.46 points.
Business Post reports that there were two price losers at the session led by Nipco Plc, which crumbled by N20.20 to close at N199.80 per share compared with the previous closing value of N220.00 per share, and Geo-Fluids Plc retreated by 24 Kobo to settle at N2.46 per unit, in contrast to the N2.70 per unit it was traded at the last trading day.
However, the price of FrieslandCampina Wamco Nigeria Plc went up by N1.22 yesterday to N38.02 per unit from last Friday’s closing value of N36.80 per unit.
The volume of securities traded by the market participants decreased by 56.8 per cent during the session to 560,253 units from the 1.3 million units transacted in the previous trading day, but the value of trades rose by 232.3 per cent to N16.7 million from N5.02 million, and the number of deals contracted by 10 per cent to 18 deals from 20 deals.
Impresit Bakolori Plc remained the most active stock by volume (year-to-date) with 533.9 million units worth N520.9 million, Industrial and General Insurance (IGI) Plc occupied the second spot with 71.2 million units sold for N24.2 million, and the third position was taken by Geo Fluids Plc with 44.4 million units valued at N89.8 million.
Also, FrieslandCampina Wamco Nigeria Plc maintained its position as the most traded stock by value (year-to-date) with 14.2 million units valued at N549.9 million, followed by Impresit Bakolori Plc with 533.9 million units worth N520.9 million, and Afriland Properties Plc with 17.8 million units sold for N364.2 million.
Economy
Naira Plunges 3.5% to N1,628/$1 at Official Market on FX Liquidity Squeeze

By Adedapo Adesanya
The Naira experienced a significant decline against the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, April 7, amid a wider roil caused by tariffs from the United States, which has severely affected markets, while efforts to cushion this has so far not yielded a direct resolve.
At the official market yesterday, the Nigerian currency lost N55.66 or 3.5 per cent against the American currency to settle at N1,628.89/$1, in contrast to the preceding session’s rate of N1,573.23/$1, according to data from the Central Bank of Nigeria (CBN).
Equally, the Naira depreciated against the Pound Sterling at NAFEM during the session by N25.39 to close at N2,056.41/£1 versus last Friday’s value of N2,031.02/£1 and shed N36.24 against the Euro to sell for N1,761.53/€1 compared with the preceding trading day’s N1,725.29/€1.
In the parallel market, the value of the domestic currency declined against the US Dollar on Monday, by N15 to sell for N1,580/$1 versus the preceding session’s N1,565/$1.
Over the weekend, the CBN revealed that it boosted the market with $197.71 million through sales to authorised dealers.
According to the apex bank, the move is in line with its commitment to ensuring adequate liquidity and supporting orderly market functioning, adding that the measured step aligns with its broader objective of fostering a stable, transparent, and efficient FX market.
It raised worry about declining oil prices – which accounts for over 70 per cent of Nigeria’s FX earnings – which has dropped below $65 per barrel and could hit the country’s FX reserves.
Meanwhile, the cryptocurrency market turned bullish yesterday as the US President, Mr Donald Trump, while adamant of not reversing the tariffs on countries around the world, said some countries are ready to come to the table, helping to ease some of the panic with the European Union also confirming that it was planning to negotiate with the US.
Solana (SOL) gained 8.0 per cent to trade at $109.50, Cardano (ADA) rose by 7.7 per cent to $0.5876, Dogecoin (DOGE) appreciated by 7.2 per cent to $0.1495, and Litecoin (LTC) grew by 6.9 per cent to $71.51.
Further, Ripple (XRP) jumped by 6.8 per cent to $1.87, Bitcoin (BTC) expanded by 4.2 per cent to $79,397.68, Binance Coin (BNB) went up by 3.4 per cent to $560.40, and Ethereum (ETH) added 3.3 per cent to close at $1,575.33, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
Economy
NGX All-Share Index Drops Below 105,000 Points After 1.23% Fall

By Dipo Olowookere
The Nigerian Exchange (NGX) Limited further depreciated by 1.23 per cent on Monday following persistent selling pressure amid global financial markets crisis.
All the major key sectors of Customs Street were in red on the first trading session of the week, with the insurance index down by 7.56 per cent.
Further, the banking sector went down by 5.48 per cent, the consumer goods space shrank by 0.79 per cent, the energy index shrank by 0.65 per cent, the commodity counter declined by 0.10 per cent, and the industrial goods industry tumbled by 0.01 per cent.
Consequently, the All-Share Index (ASI) crashed by 1,295.02 points to 104,216.87 points from 105,511.89 points and the market capitalisation depreciated by 1.00 per cent or N658 billion to N65.489 trillion from last Friday’s N66.147 trillion.
Business Post reports that the bourse was under heavy profit-taking yesterday, resulting in nine stocks finishing on the gainers’ chart, with 51 stocks on the losers’ table. This showed a negative market breadth index and weak investor sentiment.
The quartet of Oando, Secure Electronic Technology, Cornerstone Insurance, and RT Briscoe lost 10.00 per cent each to trade at N37.80, 45 Kobo, N2.97, and N2.16, respectively, and Honeywell Flour crumbled by 9.98 per cent to N10.19.
On the flip side, VFD Group gained 10.00 per cent to quote at N62.70, TotalEnergies expanded by 9.61 per cent to N745.00, Guinea Insurance grew by 9.52 per cent to 69 Kobo, International Energy Insurance improved by 9.33 per cent to N1.64, and Abbey Mortgage Bank surged by 8.88 per cent to N5.15.
Banking shares dominated the activity chart during the trading day, with FCMB selling 65.5 million units worth N589.0 million, Fidelity Bank traded 42.5 million units for N818.4 million, GTCO exchanged 34.5 million units valued at N2.3 billion, Access Holdings transacted 31.8 million units worth N687.2 million, and Zenith Bank traded 31.7 million units valued at N1.5 billion.
At the close of transactions, investors bought and sold 444.1 million equities for N11.2 billion in 15,690 deals versus the 348.3 million equities valued at N8.1 billion traded in 11,444 deals in the preceding session, representing a surge in the trading volume, value, and number of deals by 27.51 per cent, 38.27 per cent, and 37.10 per cent apiece.
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