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Nigerian bonding with debts

By Victor C. Ariole
25 January 2023   |   3:40 am
One of the reasons socialist French President – Hollande – declined from contesting for second term was that he wasn’t sure of facing a virtual opponent with great knowledge of how it operates: the financial world.

Dollar. Photo: FT

The yield on government bonds is the cornerstone of equity valuation models… For 30 odd years yields around the world have been falling… with high inflation… they aren’t any more… great interest for it. Merryn Somerset in FT.

One of the reasons socialist French President – Hollande – declined from contesting for second term was that he wasn’t sure of facing a virtual opponent with great knowledge of how it operates: the financial world. France rating was completely written-off, like Britain as of now, by that world. Macron who understands very much that world took over the mantle of leadership. Somehow, Nigerian leaders do not understand this world, as they make the CBN governor the Lord over it, whereas he is not.

Nigeria’s rating outlook, as per three rating agencies are: Standard and Poor B–, Moody B3, Fitch B–; and its bond yield hovers around plus/minus14%. Compared to a highly rated country like Canada with a stable AAA and bond yield of about 3% and world average of either dividing the sum of Zambia’s 30% and Switzerland’s 1%, it is still within 15%, or dividing the sum of the two among the rated B Croatia 3.6%, and Egypt at a weaker B 20%; it is about 12%, hence Nigeria is still on the wrong side of credit worthiness, at 14%.

Those regulating financial activities in this world, not local CBNs, know the equity value or contribution of each nation in the global economy. And as they encourage rating agencies, and as they give the world economy a value of about $100 trillion, they know how to rate Nigeria and price Nigeria’s bond to, further, push Nigeria to debt. Like Somerset mentioned above, when the leading economies of the world were experiencing almost zero inflation rate, floating bonds by developing or emerging economies was attractive as the yield could be less damaging for such economies but, now, it is no more. So, one wonders why Nigeria’s debt managers see this moment as time to float further bonds with already about $77 billion debt to contend with.

The current Finance Minister who replaced Mrs. Adeosun does not seem to understand the import of claiming that the debt stock is below 20% of GDP hence the need to borrow more.

While Adeosun was aiming to borrow to change the cutlass and hoe agriculture process to more mechanized and more conservation process, the current situation is that, insecurity and the discarding of silos allow more decay of farm products towards more loss of harvest; so how would Nigeria pay its mature yields when there are no assets, current or fixed, to guarantee such payment. Even the oil Nigeria depends on, has been valued as greatly depleted and, what is more, the youths that ought to be developed to take up wealth creating process have been declared by the highest authorities as lazy and not capable of productive activities.

With such attitude, valuation of Nigeria’s equity to the global economy is not viewed as capable of adding more value to the current capitalist driven world, except by allowing its best brains to migrate and serve as knowledge subsidy to the advanced world; subsidy in the sense that the huge amount used to train them is allowed to find usefulness elsewhere but Nigeria.

Somerset also mentioned that the investors are not patient for the great risk they see in those emerging or Nigeria-type economies, hence they prefer to operate “cash and carry” investment portfolio like the hedge fund managers do. Mrs. Adeosun knows them very well as she once claimed they move with smart funds and they shy away from delayed yield paying process.

French people have a better name for hedge fund managers that populate, currently, the Nigeria’s space. They are called “Vulture funds” managers. And, mind you, crypto currency sourcing is part of it. It is not that they are vultures but that they are experts in managing economic funeral ceremonies because economic ceremonies meant for the living is not their interest. That type of mindset finds reversal when emerging economies or developing nations claim they have a sovereign wealth to be managed by such hedge fund managers. It works as well as it could be made to suffer legal “detours”.

Nigeria’s dichotomy is that it has claims to sovereign wealth as well as claims to great level of trust as to float sovereign bond. Ghadaffi tried it and he is neither alive to witness the gains or Libya so buoyant to talk of both political and economic sovereignty. Somehow legal or freeze imposition rendered it useless.

And like the column of Ijeoma once stated about sexed-up figures, when you claim a re-based GDP so as to earn trust to borrow more money, it could only be a temporary deceit process that would further land you in poverty when your known asset are revalued and made valueless in the current knowledge driven dispensation that sees Nigeria having 30 million children out of school.

The 30 million that are expected to pay your debts that are to mature in the odd 30 years coming. Or, again, as the current Finance Minister claims that Nigeria’s problem is revenue challenges and at the same time removes NNPC from contributing to revenue drive in the name of claiming that the economy has been fully diversified; she injects another deceit in the system as budget deficit climbs to over N9trillion of estimated N21.83 trillion spending.

When traditional banking process ask you to make projections so as to know where you are headed if they want to give you loan, for their own sustenance, it has human capital connotation; and if 30 million Nigerians are out of school now and they must at least come out alive in 30 years either in full or partially decimated by hunger, they could still remain a remnant of Boko Haram that could threaten the credit value of Nigeria like it has been for Congo Democratic Republic or to some countries in South America for over 60 years.

Civil societies should rise up and say enough of further endangering the Nigerian leaders bonding mindset with bond floating, as it has never helped the nation for the known odd 30 years the military leaders had initiated it. The new parlance is that our GDP to debt ratio is still low, hence more borrowing, People like Olu Falaye, Idika Kalu, Chu-Okongwo, Michael Ani, all of them experts in “No Alternative to Structural Adjustment Programme” as well as the current Ominibus TSA, proposed by PMB-eye-on revenue, like “TINA”, should call a conference and start making their mea culpa on where and how they allowed the rain to be beating Nigeria, so as to stop the current Finance Minister’s drowning of Nigeria’s Finances.

Nigeria’s equity value or contribution to the world economy, as currently constituted does not reflect efficiently the great engine carrying capacity of Nigeria, both human and material resources. And French people will say it is heading to cul-de-sac, blind alley.
Ariole, Ph.D is Professor of French and Francophone Studies, University of Lagos.

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