By Yahaya Umar

Banks’ borrowing from the Central Bank of Nigeria, CBN, fell by 10.6 per cent, month-on-month ,M-o-M, in May to N10.9 trillion.

The CBN has two short term lending windows for banks namely the Standing Lending Facility ,SLF, and Repo lending.

While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate ,MPR, it also lends money to banks through Repurchase ,Repo, arrangement, which involves the purchase of banks’ securities with the agreement to sell back at   a specific date and   usually for a higher price.

On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility ,SDF, and pays an interest rate of 300bpts below the MPR.

According to CBN’s financial data, banks’ borrowing through the SLF dropped to N10.9 trillion in May from N12.2 trillion in April.

Banks borrowing from CBN has declined for two consecutive months since January when it rose by 268.7% to N3.6 trillion from N976.29 billion in December 2023.

On the other hand, banks’ deposits with the apex bank through the SDF rose MoM by 120% to N943.08 billion in May from N428.9 billion in April.

These developments were driven by improvement in the amount of idle cash (liquidity) in the interbank money market.   

According to the CBN, average daily opening liquidity in the interbank money market rose by 47% MoM to N321.9 billion in May from N218.6 billion in April.

Agency Report

Access Bank Plc has finally completed the acquisition of African Banking Corporation (Tanzania) Limited ,BancABC Tanzania, the company disclosed on Monday.

The long-awaited deal was initially announced in July 2023 as part of its expansion strategy.

The bank believes the completion marks another step in its journey to become the world’s most respected African bank.

Access said with the successful acquisition of BancABC Tanzania, the operations of the acquired bank would be merged with the consumer, private, and business banking operations of Standard Chartered Bank Tanzania at completion to form a new entity to be known as Access Bank Tanzania.

The lnder said the deal would promote its aspiration to be a strong player within the East Africa region while adding greater depth and breadth to Access Bank’s pan African operations.

Access Bank noted that its presence in over 22 countries presents a robust platform that could be leveraged to boost intra and inter-Africa trade and payments.

Access Bank’s Managing Director/Chief Executive Officer, Roosevelt Ogbonna said the “Strategic move represents a notable step towards setting a railroad in Tanzania for intra-African trade within the East African region, Africa and the rest of the world. It underscores our commitment to creating a robust East African banking network, driving positive change and innovation.

“We are excited about the opportunities this acquisition presents for our operations in Tanzania and are eager to leverage our combined strengths to deliver exceptional financial solutions and experiences to our customers.”

Commenting on the transaction, the Managing Director, African Banking Corporation (Tanzania) Limited, John Imani, said, “The completion of our transaction with Access Bank, not only underscores Access Bank’s strong confidence in our operations and the Tanzanian market but brings new and exciting opportunities for our customers, employees, and stakeholders.

“The new entity is poised to enhance our service offerings, leveraging Access Bank’s extensive resources and expertise to deliver even greater value to our clients. We look forward to an exciting and prosperous future as part of the Access Bank family, driving economic growth and financial inclusion across Tanzania”.

By Rotimi Asher, Lagos

A Lagos State high court has issued a temporary order restraining electricity distribution companies ,DisCos, and the Nigerian Electricity Regulatory Commission ,NERC, from increasing electricity tariffs.

The order, granted by Justice Lewis Allagoa on Monday, comes after the Manufacturers Association of Nigeria ,MAN, filed a lawsuit (FHC/L/CS/881/2024) challenging the recent tariff hike.

The lawsuit names all 11 DisCos as respondents, including the Abuja Electricity Distribution Company ,AEDC, the Ibadan Electricity Distribution Company ,IBEDC, the Eko Electricity Distribution Company ,EKEDC, the Ikeja Electricity Distribution Company ,IKEDC, and the Kaduna Electricity Distribution Company ,KAEDC.

Others are Kano Electricity Distribution Company ,KAEDC, Jos Electricity Distribution Company ,JEDC, Benin Electricity Distribution Company ,BEDC, Enugu Electricity Distribution Company ,EEDC, Port Harcourt Electricity Distribution Company ,PHEDC, and Yola Electricity Distribution Company ,YEDC.

The NERC is the second respondent in the suit, according to the court document.

The court’s interim order effectively puts a hold on the new tariff increase, requiring DisCos to continue using the previous rates.

“That the order is without prejudice to the obligation of the plaintiff from paying their electricity bill at the old rate”, the Justice Lewis said.

This is a significant win for consumers who faced a potential hike to N225 per kilowatt-hour (kWh) for Band A customers receiving 20 hours of daily power supply. The court adjourned the case to June 24 for hearing.

By Yahaya Umar

Nigeria’s trade with other African countries has seen improvement over the last three months with the country earning over N2.028tn as export proceeds from crude oil and bituminous minerals in the first quarter of 2024.

Nigeria spent only N201.8bn to import commodities from Africa while total exports to African countries were worth N2.236tn in the first three months of 2024.

According to the National Bureau of Statistics ,NBS, the major commodities exported to African countries in the review period were petroleum oils and oils obtained from bituminous minerals valued at N2.028tn.

The amount accounted for 90.67% of total exports to Africa.

The major exported commodities were petroleum oils and oils obtained from bituminous minerals valued at N2.028tn while electrical energy worth N58.65bn or 2.62%  was sold to neighboring countries.

Others were urea worth N30.42bn, cement clinkers N12.04bn or 0.54%, and flours and meals of soya beans N9.41bn or 0.42 l%.

South Africa imported commodities worth N957.06bn, Ivory Coast N744.59bn, Senegal N361.29bn, Benin Republic N55.67bn and Togo N38bn.

In West Africa, the total commodities exported by Nigeria were valued at N1.25tn while only N113.04bn worth of commodities were imported into the country.

A breakdown showed that Nigeria exported commodities worth N744.59bn to Ivory Coast; Senegal imported N361.29bn; Benin N55.67bn; Togo N38.01bn and Ghana N33.75bn.

The amount spent by the major export partners represents 98.61% of total export to ECOWAS countries.

Nigeria’s major export commodities to ECOWAS were petroleum oils and oils obtained from bituminous minerals worth N1.074tn or 85.9% of total exports to ECOWAS.

Electrical energy sold during the period was N58.65bn or 4.69% urea export was N29.45bn or 2.35%, flours and meals of soya beans (N9.20bn or 0.74%) and other excluding white cement N6.66bn or 0.53%.

By Charles Ebi

Nigeria has seen a significant surge in its foreign debt servicing costs, with an increase of 96% year-on-year, according to the latest data released by the Central Bank of Nigeria ,CBN.

By the end of May 2024, the country’s debt services and payments had reached $2.19 billion, a sharp rise from $1.12 billion recorded in the same period in 2023. 

The cumulative foreign debt servicing costs for the first five months of 2024 amounted to $2.19 billion, nearly doubling the amount spent in the same period in 2023.

It is also about 84% of the total external debt servicing costs recorded in 2022, which was $2.6 billion. 

In January 2024, Nigeria’s debt servicing costs amounted to $560.52 million, an increase of 399% compared to $112.35 million in January 2023. This significant jump underscores the growing burden of external debt on the country’s finances. 

February 2024 saw a slight decrease in debt servicing costs, totalling $283.22 million. This is a 1.8% decline from $288.54 million in February 2023. Despite the minor decrease, the overall trend indicates a steep rise in debt costs. 

In March 2024, debt payments were recorded at $276.17 million, a 31% decrease from $400.47 million in March 2023. This reduction suggests a temporary reprieve in the upward trend of debt servicing costs. 

However, April 2024 witnessed a substantial increase in debt servicing payments, which rose to $215.20 million from $92.85 million in April 2023. This marks a 132% increase year-on-year, reflecting the escalating debt obligations of the country. 

The month of May 2024 saw a further spike in debt servicing costs, reaching $854.37 million compared to $221.05 million in May 2023. This represents a significant 286% increase, highlighting the growing fiscal pressure on Nigeria’s economy. 

We further observed that Nigeria spent about 66% of its dollar payments to service external debts between January and May 2024. 

According to data from the CBN, out of the $3.31 billion in total outflows made during this period, about of $2.19 billion was directed towards servicing external debt. 

This figure represents a hefty slice of the nation’s financial resources and indicates a significant increase from the previous year when it was 44% in the same period. 

The soaring costs of servicing foreign debt have significant implications for Nigeria’s economy. The increased debt burden could potentially divert resources away from critical sectors such as healthcare, education, and infrastructure, exacerbating socio-economic challenges. 

The World Bank recently, expressed deep concern over the escalating debt service costs that are burdening developing countries worldwide. Indermit Gill, the World Bank’s Chief Economist, and Senior Vice-President, emphasized the gravity of the situation, highlighting the potential for a widespread financial crisis if immediate and coordinated actions are not taken. 

According to Gill, the combination of record-level debt and soaring interest rates has set many developing nations on a precarious path, one that could lead to economic distress and tough decisions regarding the allocation of resources. 

Fitch Ratings recently noted that pressure on interest-to-revenue ratios remains high at 38%, driven by higher interest rates and structurally low revenue-to-GDP ratios. 

The rating agency also projected a decline in Nigeria’s debt costs, although they are expected to remain significantly high. 

The Nigerian government needs to adopt more stringent fiscal measures and explore debt restructuring options to mitigate the impact of rising debt servicing costs.

Enhanced revenue generation strategies and prudent economic management will be crucial in addressing the growing debt burden.

By Charles Ebi 

Value Added Tax ,VAT, paid by Nigerians increased from N1.20 trillion in Q4, 2023 to N1.43 trillion in the first three months of 2024.

This represents an increase of 19.21% when compared quarter-on-quarter.

This is according to the latest VAT collection report published by the National Bureau of Statistics ,NBS. Nigeria charges a 7.5% VAT rate on specific goods and services.

When compared with the corresponding quarter of 2023, the VAT collection increased from N709.59 billion to its current figure. This denotes a year-on-year increase of 101.52%.

In Q1 2024, local payments totalled N663.18 billion, foreign VAT payments amounted to N435.73 billion, and import VAT contributed N332.01 billion. There was a marginal increase of 5.27% in local VAT payment when compared to the figure for Q4, 2023.

However, foreign VAT collection increased by 33.55% quarter-on-quarter from N326.26 billion in Q4 to the current figure. On a year-on-year basis, foreign VAT collection increased by 188.32%.

Furthermore, Nigeria Customs Service ,NCS, import VAT rose by 36.05% between the fourth quarter of 2023 and the first quarter of 2024 from N244.04 billion to N332.00 billion. When compared to the corresponding quarter of 2023, this increased by 171.31%.

The significant rise in the VAT collection for foreign VAT payment and NCS import VAT stems from the weakening of the naira as the exchange rate rose from N907/$ to N1306/$ during the quarter and reached a peak of around N1600 to the USD on the official market.

Quarter-on-quarter, the highest growth rates were recorded in accommodation and food service activities at 59.15%, followed by administrative and support activities at 47.79%.

Conversely, the lowest growth rates were in extraterritorial organizations and bodies at –57.01%, followed by human health and social work activities at –27.73%.

In terms of sectoral contributions for Q1 2024, the top three sectors were Manufacturing at 26.72%, Information and Communication at 17.42%, and Mining & Quarrying at 15.42%.

On the other hand, the smallest contributions came from activities of households as employers and undifferentiated goods- and services-producing activities for household use, which recorded the least share at 0.01%.

This was followed by activities of extraterritorial organizations and bodies at 0.03%, and water supply, sewerage, waste management, and remediation activities at 0.05%.

The manufacturing sector has consistently topped the sectoral contribution to VAT despite the problems bedevilling the sector.

The World Bank and IMF have called on the federal government to increase the VAT rate as a strategy to boost non-oil revenue. The IMF had asked the federal government to increase the VAT rate from 7.5% to 10% in 2025 and 15% by 2026.

The Tinubu administration currently targets a revenue-to-GDP ratio increase from around 10% to 18% by 2026 and an increase in VAT rate is part of the agenda.

… As NNPC, Golar, sign pact on floating LNG

By Cyril Ogar , Abuja

NLNG Shipping and Marine Services Limited ,NSM, a subsidiary of Nigeria Liquefied Natural Gas Limited ,Nigeria LNG Limited, has signed an agreement with Temile Development Company Limited for the management of Liquefied Petroleum Gas ,LPG, Alfred Temile 10 Vessel.

The LPG Alfred Temile 10, is a 23,000 cubic metres liquefied petroleum gas vessel owned by Temile Development Company Limited, with NSML designated as the technical vessel manager.

The landmark agreement which was signed by the two indigenous companies will not only boost maritime operations in the oil and gas sector, but will also deepen the LPG utilisation in the country.

Speaking at the agreement signing ceremony held on Tuesday in Abuja, the Executive Vice President, Gas, Power and New Energy of the Nigerian National Petroleum Company Limited ,NNPC LTD, Olalekan Ogunleye, assured Afred Temile that NSML was very capable, and would be given every support to manage any number of vessels the company would deliver.

Ogunleye who is also the Chairman of the Board of the NSML stated that the signing of the agreement demonstrated that the Board was satisfied with what the management of the NSML is doing, and would give every support to enable them expand their activities.

Represented by the Chief Investment Officer, NNPC Gas and Power Investment Services, Dr. Salihu Jamari, the EVP said, the Board would also ensure that NSML becomes dominant marine services provider in the region, not only in West Africa, but in the whole of Africa.

He, therefore, called on relevant stakeholders to give NSML support to able to operate across the region. “Because that has been the target given to them by the board. And the board is willing to go to any length to give them any support that they need in terms of manpower development, vessel management and all other marine services”.

Also speaking, the Chief Executive Officer ,CEO, of Temile Development Company Limited, Afred Temile expressed joy over the milestone agreement signed with the NSML.

Alfred narrated that when the company took delivery of first Afred Temile, a couple of years ago, “it was not a commercial decision, but a decision of we can do it”. And now the company has done it.

He assured that “there are many more to come. We are at a final stage of taking FID on another LPG tanker. There a lot of investment decisions we are taking in terms of deepening our participation in the gas sector”, he said.

Earlier, the General Manager, External Relations and Sustainability Development at NLNG, Andy Odey said, one key part of the company’s value chain is transportation, and NSML plays a very strong role in that space.

He noted that “in 19-year-old this year, NSML has done so much in such a short time, and transformed to such a point where 11 of our vessels are fully managed by the NSML.

“As a parent company we are proud of what our child is doing”, added.

Speaking on the contribution of Alfred Temile to the domestic utilisation of LPG in Nigeria, he said, “the Company plays a strategic role in ensuring that LPG or domestic cooking gas leaves our facility to every part of Nigeria, that today we are responsible for about 40 percent LPG that is consumed in Nigeria”.

NSML is a private Limited Liability company which provides shipping services including training, manning, fleet management and consultancy services to NLNG, Bonny Gas Transport ,BGT, and the sub-Saharan Africa maritime sector.

The company was established in response to rapid changes and challenges in the maritime business and the scarcity of competent ship board personnel worldwide.

Initially incorporated on October 9, 2008, as a manning company, NSML commenced full operations in August 2010 as NLNG Ship Manning Limited.

In October 2014, the company was renamed NLNG Ship Management Limited and repurposed as a full-fledged ship management company, following the integration of NLNG’s vessel management activities.

In 2017, its scope of services expanded to include the Maritime Centre of Excellence ,MCOE, and terminal management services. NSML changed its registered name in 2023 to NLNG Shipping and Marine Services Limited.

NSML is an integrated mar­itime services company provid­ing a wide range of top-notch maritime and shipping services including training, manning, fleet management and consul­tancy services. 

The LPG carrier vessel is the second that is being constructed by the Temile De­velopment Company and is a sequel to the first vessel which was delivered in 2020 currently chartered toNigeriaLNG Limit­ed for domestic LPG supply.

The first LPGvesseldelivered in 2020 and the newly awarded were part of a two-vessel-building project valued at over $120 million.

In the same vein the Nigerian National Petroleum Company Limited ,NNPC , has also executed a Project Development Agreement ,PDA, with Golar LNG of Norway to build a Floating Liquefied Natural Gas ,LNG, plant offshore Niger Delta, Nigeria.

This is in furtherance of the national oil company’s commitment to monetize Nigeria’s vast natural gas resources.

Currently, the country has about 209.26 trillion cubic feet ,TCF, of Associated and Non-Associated Gas reserves.

The reserves of Associated Gas and Non-Associated Gas were reported at 102.59 TCF and 106.67 TCF, respectively by the Nigerian Upstream Petroleum Regulatory Commission ,NUPRC, in its latest report.

According to the statement by the Chief Corporate Communications Officer of the NNPC Limited, Olufemi Soneye, the signing ceremony, which took place on Monday, June 10, 2024, was attended by the Chief Financial Officer, Umar Ajiya; Executive Vice President, Gas Power & New Energy, Olalekan Ogunleye and Executive Vice President, Upstream, Mrs. Oritsemeyiwa Eyesan while the Golar LNG team was led by – Karl Fredrik Staubo (CEO).

He said, the PDA is another major milestone achievement towards ensuring gas commercialization through deployment of an FLNG Facility in Nigeria, which is in line with Mr. President Bola Ahmed Tinubu’s resolve to rapidly commercialize Nigeria’s gas assets for the economic prosperity of the Nation.

Mr. Soneye said, the agreement aims to monetize vast proven gas reserves from shallow water resources offshore Nigeria, adding that the PDA also outlines the monetization plan that will utilize approximately 400-500mmscf/d and produce LNG, LPG and Condensate.

He revealed that the Partners, NNPC Limited and Golar LNG have both expressed their commitment to achieve Final Investment Decision ,FID, before end of Q4, 2024 and first gas by 2027.

Golar LNG Limited is a renowned independent owner and operator of LNG infrastructure, including carriers, floating storage and regasification units ,FSRUs,  and floating liquefaction ,FLNG, vessels.