Business Africa
2019 elections: Portfolio investors may pull out funds
Against the backdrop of the huge debt service costs being incurred by the Federal Government, one of the nation’s Deposit Money Banks, Guaranty Trust Bank Plc, has highlighted the need for the government to reduce its borrowing cost.
The lender, in its ‘Macroeconomic and banking sector themes for 2018’ released on Tuesday, also expressed concerns that the upcoming 2019 elections might trigger repatriation of capital by foreign portfolio investors.
The bank noted that the Federal Government in February 2017 successfully issued $1bn 2032 notes and tapped an additional $500m a month later, adding that it raised another $300m through Diaspora Bond issuance in June 2017 and then issued $3bn dual-tranche notes comprising of 10 and 30-year Eurobonds of $1.5bn each.
The DMB said the offering of a N10.69bn Sovereign Green Bond for subscription by the Debt Management Office in December “effectively brought total funds raised to over $4.8bn in a single financial year.”
It stated that while the debt to Gross Domestic Product was low at 16.2 per cent (in June 2017) relative to Sub-Saharan African average of over 40 per cent, debt to revenue stood at over 62 per cent in the same period.
According to the report, the DMO revealed that the country spends 34 per cent of its revenue on debt servicing, while acknowledging concerns about the country’s rising debt profile and the need to bring this ratio to much lower levels.
GTBank added, “A portion of these funds has been earmarked for refinancing existing domestic debt (which accounts for around 80 per cent of total debt) to shift towards lower-priced FX external debt.
“We expect the government to work towards reducing its borrowing cost and also utilise these borrowings (net of debt servicing) to fund infrastructural investments to stimulate and reposition the economy.”
Citing the Q3 2017 report released by the National Bureau of Statistics, the report said capital inflows increased to $4.15bn, which represented a 127.5 per cent year-on-year and 131.3 per cent quarter-on-quarter increase from $1.82bn in the third quarter of 2016 and $1.79bn in the second quarter of 2017.
“We expect that the sustenance or otherwise of these capital inflows will be largely dependent on the stability of the prevailing FX and interest rate policies. In addition, the upcoming 2019 elections might drive exit concerns of foreign portfolio investors premised on political uncertainty and might trigger repatriation of capital,” the lender said.
It noted that external reserves had increased by 48 per cent year-on-year from $25.8bn in December 2016 to a 37-month high of $38.2bn in December 2017 on the back of increased foreign investments, successful $3bn Eurobond issuance as well as higher crude oil prices and production volumes.
“We expect that this commendable accretion will be sustained throughout 2018 with positive investor confidence and FX stability as key drivers,” the bank added.
The Nigerian Union of Petroleum and Natural Gas (NUPENG) has issued a two-week strike notice to the federal government, raising the possibility of fuel scarcity across the country in the coming weeks.
This was contained in a statement jointly signed by NUPENG President, Williams Akhoreha, and General Secretary, Olawale Afolabi, Monday.
The union said the notice of strike was one of the decisions reached at its special national delegates conference Thursday.
It listed non-payment of workers’ salaries and benefits, among others, as reasons for its resolution.
One of the issues, NUPENG said, was the outstanding payment of terminal benefits to its members that were declared redundant in 2012 by the management of Chevron Nigeria limited.
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The Lagos Chamber of Commerce and Industry has said it aims to promote intra-African trade at the 35th edition of its annual Lagos International Trade Fair.
The Director-General of the LCCI, Dr. Chinyere Almona, said in a statement on Wednesday that this year’s edition would feature business-to-business meetings simultaneously with the general interest fair.
She said, the focus this year is to encourage intra-African trade and position Africa as the preferred investment destination and an economic powerhouse adding that The exhibition will also facilitate networking amongst exhibitors and between exhibitors and visitors.
She said corporate organisations, including multinational corporations, indigenous conglomerates, financial institutions, and small and medium businesses, had indicated interest in participating at the fair and relevant agencies and departments of government would also be available to exhibit and attend to other exhibitors and visitors.
She said agencies that had confirmed attendance to provide information and educate exhibitors and visitors were the Bank of Industry and Nigerian Export Promotion Council, among others.
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The Nigerian Export Promotion Council has organised a workshop for over 60 operators of Small and Medium-scale Enterprises in Osun State on how to make their products fit for export.
The workshop, which was held in Osogbo, was tagged ‘Facilitating strategic export market access programme in collaboration with the trade support institutions.’
The Assistant Director, Policy and Strategy Department, NEPC, Aliu Saddique, said the participants were SMEs owners with the potential to export to the international market.
He said the council was using the model developed by the Centre for the Promotion of Imports from Developing Countries to train the participants so as to enable them to have a good understanding of the demands of the international market.
While speaking, The Osun State Commissioner for Commerce, Cooperatives, Industries and Empowerment, Dr. Bode Olaonipekun, called for serious planning ahead of the time when crude oil would no longer bring revenue for the country again.
Olaonipeokun, who also blamed the current economic hardship on the neglect of non-oil export, said planning for the era without oil must start immediately to avert economic crises.
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