FG plans additional borrowings from non-interest markets

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PRESIDENT TINUBU
  • NGX: Investors gain N305.61bn, ASI up by 0.78%

BY FESTUS OKOROMADU, ABUJA

The Federal Government is considering an option to project financing from the non-interest market to resolve funding challenges and reduce the country’s debt-to-revenue ratio.

It also said a non-debt and equity financing mechanism that does not require payments of interest is the only way to solve the fiscal exhaustion experienced in the country.

The Minister of Finance and the Coordinating Minister of the Economy, Wale Edun, disclosed this in a keynote at the first annual Securities Exchange Commission Nigeria international forum on the non-interest capital market held on Wednesday in Abuja.

Earlier, the Director General of the Securities and Exchange Commission, Lamido Yuguda, revealed that Nigeria makes up only $2.9bn representing 0.9 per cent of the estimated size of $3.25 trillion of the Islamic finance global market industry, which indicates the dire need for more growth.

He added that with the country boasting a large population and a significant proportion of unbanked, the long-term potential for Islamic finance in Nigeria is immense.

“In Nigeria, the Islamic finance segment of the financial industry reached an estimated size of $2.9bn as of the end of 2022, with outstanding sukuk forming the largest part at 57 per cent, followed by Islamic banks at 42 per cent (total assets), and the remaining 1 per cent split between Islamic funds (total assets) and takaful (total contributions).

“This shows that the Nigerian market makes up just 0.9 per cent of the global non-interest market, indicating the dire need for more growth. With the country boasting a large population and a significant proportion unbanked, the long-term potential for Islamic finance in Nigeria is immense,” Yuguda stated.

The Director General said that the Non-Interest (Islamic) Capital Market in Nigeria offers a distinctive platform for ethical and Shari’ah-compliant investments.

He noted that since Nigeria’s first Sukuk issue in 2017, the Debt Management Office has raised almost N1 trillion to finance over 5,000 kilometers of important roads and bridges which were oversubscribed.

Yuguda added that Nigeria could become one of the world’s leading Islamic finance jurisdictions if low awareness, unified regulations, and the lack of laws that boost legal certainty and clarity are resolved.

He also said that with the country’s current problems with foreign exchange funding, the non-interest finance market should be looked at to bring in more foreign currency.

He said, “The non-interest capital markets have a huge role to play in the current economic program being pursued by this administration. We believe that the country’s economy cannot reach its target size without a lot of investments in critical infrastructure. Nigeria has the potential to join the league of global Islamic finance jurisdictions if we could address issues, such as inadequate awareness, regulatory harmonization, and enactment of legislations that enhance legal certainty and clarity similar to what prevails within the conventional financial architecture.”

In response, the Finance Minister reaffirmed the government’s commitment to fine-tuning sustainable forms of financing in line with the global climate action agenda, as well as the participatory opportunity provided by equity and non-interest finance

He said, “Non-interest financing is a critical part of funding and that is because as we all know, we are faced with three crises right now which are the climate, and biodiversity.

“But there is also a debt crisis in major countries and of course, the available solution is non-debt, equity and financing mechanisms that will eliminate the pains of paying interest on loans. Rather, it is better to have a participatory opportunity that equity and non-interest finance gives.

“And so what we are saying here is a critical piece of the solution to the crises of the world currently, including the fact that for the rapid and inclusive growth this administration desires, we need to have green projects so we don’t only need to have projects funded by equity.

“As we all know, our debt service levels and revenue to debt service ratio are so high and currently constrained. There is fiscal exhaustion in many parts of the world and there is also a need to finance green projects. So the only way to grow our economy is not just relying on foreign direct investments, and domestic investments but tap into the world of non-interest financing.”

In his remarks, the Secretary-General of the Islamic Financial Services Board, Bello Lawal Danbatta, stressed that the non-interest finance industry can capitalize on a multitude of available opportunities.

He added that non-interest and Shariah-compliant financial institutions possess significant potential for effectively addressing emergent challenges and maintaining their relevance amidst dynamic landscapes.

The highlight of the event was the signing of a memorandum of understanding between the SEC and IFSB.

Investors gain N305.61bn as NGX-ASI buoys up by 0.78%

Equities trading activities on the Nigerian Exchange Limited sustained its upbeat move on Wednesday as banking stocks attracted investors’ interest leading to a gain of 558.47 basis points to close the market on a positive breadth.

The NGX All Share Index soured by 0.78 percent closing at 71,808.64 points compared to previous day’s gain of 0.43 percent, which closed at 71,250.17 basis points.

Consequently, the year-to-date gain of the index peaked at 40.11 percent, as the NGX market capitalization gained N305.61 billion to close at N39.30 trillion.

The Exchange accounted for more gainers (34) than losers (22). The bullish momentum was particularly driven by share price appreciation of the top gainers for the day, amongst which are; THOMASWY (+9.93 percent), FBNH (+9.91 percent), MULTIVERSE (+9.90 percent), ETI (+9.88 percent) and INFINITY (+9.70 percent).

However, moving to the sectors, performance was quite bearish as three out of the five sub-sector gauges tracked closed in the red zone. NGX Insurance, NGX Consumer Goods and NGX Industrial Goods indices suffered losses of 2.00 percent, 0.11 percent and 0.02 percent, respectively, while the Oil/Gas sector had a lull performance.

Notwithstanding, the Banking sector recorded a massive 5.01 percent gain, and this was mostly attributed to the TIER 1 banks (GTCO, UBA, ACCESSCORP, ZENITHBANK), as they recorded the biggest volume and highest value for the day, thus contributing to the overall bullish market performance.

Trading activity remained quite robust, as the total deals, volume and value surged by 19.90 percent, 59.15 percent and 8.88 percent to 8,412 deals, 690.01 million units, valued at N12.10 billion, respectively. GTCO emerged as the most actively traded security in terms of volume and value, with 76.70 million units, worth 3.04 billion, exchanged in 260 deals.