SFTAS: Gombe State Attracts N26bn World Bank Grants In 4 Years – Commissioner

Gombe State received N26 billion as grants on its achievements under the performance-based grant component of the World Bank-assisted States Fiscal Transparency, Accountability and Sustainability (SFTAS) programme in four years. The Commissioner for Finance and Economic Development, Mr Muhammad Magaji, made this known in Gombe shortly after the inaugural State Executive Council meeting. Magaji said that the grants were attracted as a result of the Fiscal Transparency, Accountability and Sustainability (SFTAS) programme reforms implemented in the state. “The various reforms initiated by the Gov. Inuwa Yahaya made the state transparent enough to attract such grants. “The grant has helped the state government execute a good number of projects from infrastructure to improved healthcare amongst others which had impacted positively on the lives of the people of the state. “We were able to implement the SFTAS reforms and earned over N26 billion for Gombe State in grants. “The grant is between 2019 and 2023, that’s the first administration of Gov. Yahaya and it had helped in executing good projects for the benefits of the people,” he said. This, he said, means Gombe state is more transparent, accountable and whatever we are doing is out in the public for people to see and we are not hiding any skeleton. “We have initiated reforms and abided by them. Our account books are there for everyone to see according to the national chart of accounts. “We publish our annual accounts for the state government. Our budgets are in order and also published on time and regularly for everyone to see.” He also added that the state government had adopted the SFTAS requirements that ensured that the state cleared up its arrears while paying contractors on time. The commissioner said the reforms had essentially helped the state government to continue to move forward in the transparency index. “We were also able to reform a lot of areas in governance and we achieved a lot making Gombe the first in ease of doing business, ranking Gombe in the transparency index from 36 to number seven. Magaji said that the state government going forward would concentrate efforts at driving in more investments that would lead to establishment of industries and creation of jobs for youths in the state. The SFTAS programme is a hybrid with two components of activities that support Nigerian states to achieve the key result areas of the programme. These are a performance-based financing component for state governments, which will be implemented as a PforR; and a technical assistance (TA) component for states and selected national-level institutions, which will be implemented as an investment project financing (IPF). The programme also supports the full and sustained implementation of a strategic subset of reforms from the FSP and the open government partnership (OGP) commitments that are implemented at the state-level. The programme also provides performance-based financing on an annual basis to states which have been verified through the annual performance assessments (APA) as having: (1) complied with the annual eligibility criteria; and (2) achieved the annual disbursement linked results. 

CBN opens FX price verification system portal

*Vows to sanction infractors   In a bid to address the constraints that has bedeviled the foreign exchange market, the Central Bank of Nigeria has introduced a foreign exchange price verification system, specifically for importers to access forex. The portal is scheduled to begin on August 31, 2023. The CBN’s Trade and Exchange Department said in statement that the price verification report from the portal is now mandatory for all ‘Form M’ requests. “Following the successful conduct of the pilot run and various trainings held with all the banks, the Central Bank of Nigeria hereby announces the Go- Live of the Price Verification System (PVS),” the statement reads. “All applications for Forms M shall be accompanied by a valid price verification report generated from the price verification portal. “For the avoidance of doubt, by this circular, the price verification report has become a mandatory trade document precedent to the completion of a Form M,” the statement said. The Apex Bank insisted that it would not fail to sanction any case of infraction. “Please, ensure compliance,” the Bank said.

NNPC secures $3bn loan from AFRIEXIM Bank to boost FX market, bolster naira

In a significant move, the Nigerian National Petroleum Corporation Limited (NNPCL) has entered into a substantial crude repayment loan agreement amounting to $3 billion with the esteemed AFRIEXIM Bank. This financial endeavor is set to play a pivotal role in the stabilization of the foreign exchange market and the support of the Nigerian currency, the naira. The NNPC Ltd., in collaboration with AfriEXIM bank, has formalized their commitment through the signing of a letter of commitment and a Termsheet for a crucial $3 billion crude oil repayment loan. This momentous event unfolded at the headquarters of the bank, situated in Cairo, Egypt. The loan’s provisions encompass immediate disbursement, thereby empowering NNPC Ltd. with the resources necessary to provide substantial backing to the Federal Government’s ongoing fiscal and monetary policy reforms. These reforms are meticulously crafted to achieve a fundamental goal: the stabilization of the exchange rate market. By securing this substantial loan, NNPC Ltd. has taken a substantial step towards reinforcing the Nigerian economy. A statement from the company on Wednesday read: “The NNPC Ltd. and AfriEXIM bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan. “The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.”

FG raises N4.46trn bonds in 8 months

The Federal Government raised the sum of N4.46 trillion from the bond market in the last eight months. The result is that the interest rate on 30-year FGN bonds increased to 15.85 per cent in August 2023 from 14.3 percent in July 2023. The Debt Management Office (DMO) received N5.42 trillion total subscriptions as against N2.88 trillion offered during the period amid monetary policy tightening by the Central Bank of Nigeria (CBN) and global uncertainties. An analysis of the bond market activity during the period revealed that FGN bonds recorded 53 percent oversubscription as interest rates continued on a steady trajectory. The DMO has conducted four auctions in 2023, which were oversubscribed despite a hike in inflation rate and investors’ diversification into the stock market. While the information on the buyers of corporate bonds are publicly disclosed, other publicly available reports indicate Pension Fund Administrators (PFA), asset managers, banks, and institutional/foreign investors are among the largest buyers of FGN Bonds. The auction results released by DMO indicate strong investors’ demand for FGN bonds, as the total amount allotted exceeded the total amount offered. It also suggests investor confidence in the Nigerian economy and the ability of the government to meet its debt obligations. A breakdown showed that in the first quarter (of 2023, total subscription to FGN bonds stood at N2.61trillion while the DMO allotted N1.996 trillion out of the N1.080 trillion offered to the investing public. In the second quarter of 2023, investors were also offered N1.080 trillion FGN bonds; it witnessed N2.503 trillion subscriptions. The DMO eventually allotted N2.23trillion. However, a July 2023 auction revealed that subscriptions stood at N945.14billion as against the N360 billion offered. The DMO allotted N657.84 billion. At the just concluded FGN bond auction in August, the four instruments were 14.55 per cent April 2029 FGN bond; 14.70 per cent June 2033 FGN bond; 15.45 per cent June 2038 FGN bond; and 15.70 per cent June 2053 FGN bond. They were valued at N90 billion each, making a total offer of N360 billion. In spite of current market conditions, the auction received a total subscription of N312.56 billion and amount allotted to successful bidders for the four instruments was N230.26 billion. Investors’ appetite for the 15.70 June 2053 (30-year bond) remained strong, with a bid-to-cover ratio of 2.71 times. Allotments were made at 13.85 per cent for the 14.55 per cent April 2029 instrument and 15.00 per cent for the 14.70 per cent June 2033 instrument. Also, “15.20 per cent was for the 15.45 per cent June 2038 instrument and 15.85 per cent for the 15.70 per cent June 2053 instrument,” the DMO said. The federal government had proposed to borrow over N11 trillion to finance the proposed 2023 budget deficit. Findings by Economic Confidential revealed that FGN Bonds auctioned were re-openings with rates below the inflation rate. The debt office in 2023 maintained four tenor bond auctions between January and June and each FGN bond offer was oversubscribed. Meanwhile, finance experts have attributed the strong demand for FGN bonds to attractive yields, which offer investors high returns on their investments. They added that the oversubscription also revealed that investors have confidence in the government’s ability to meet its debt obligations. The appetite for FGN bonds indicates that PFAs, and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment. But, in recent years, Nigeria’s rising debt profile has been a topic of concern, as Vice President, Highcap Securities Limited, Mr. David Adnori warned that the country’s debt levels are unsustainable. DMO stated in January that Nigeria’s public debt could rise to N77 trillion if the country’s “ways and means” are securitized. “Ways and means” refer to the CBN’s lending to the federal government. The DMO said that the securitization of ways and means” is not unusual and is a common practice in many countries, but it is not a decision that can be made by the DMO alone. Adnori expressed concerns that Nigeria’s rising debt levels could become unsustainable if not managed properly. The government has argued that borrowing is necessary to finance critical infrastructure projects and stimulate economic growth. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the FG had notified the general public of borrowing more in 2023. According to him, “With all the volatility and foreign exchange issues, it makes sense to borrow at the domestic market rather than borrowing from the international market. It is all a reflection of our macro economy environment challenges and weak fiscal policy of the government. All this borrowing also is a reflection of the weak financial position of the government and it will continue like that.” He noted that the oversubscription to FGN bond is a lucrative investment, stressing that the low risk involved attracted investors. He added, “Anything sovereign has the lowest risk and nothing will go wrong with it except the country is collapsing completely. All over the world, sovereign bonds have the lowest risk and secondly it is an investment outlet for investors to invest their money.” On his part, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said, “We know that previous government borrowing was high. Excessive borrowing by the previous government at the expense of the private sector, which is the engine room of the economy, brings to question the soundness of their economic strategy. “The careless use of debt as a financing tool is fraught with calamitous dangers. Even more disheartening is when the debts are principally used to finance consumption or to unwisely finance a few secondary infrastructures (Roads and Rail). “These will neither enhance the productive momentum of Nigeria’s light industries nor make the economy self-reliant. The disorderly growth of the economy the last administration pursued can only mislead the country into an abyss if public borrowing is not curtailed to lower cost of funds so that production will be competitive.”