World Business and Economic Analysis
World Business and Economic Analysis
Iran's Ministry of Finance has issued 5 trillion rials ($145 million at the free market exchange rate) of lease-based Islamic bonds, expanding the range of the government's funding tools and providing a much-needed pricing benchmark for corporate issuers.
The deal is the first time that Iran's government has issued sukuk using an ijara format, selling them through the country's over-the-counter securities market, known as Fara Bourse.
The four-year sukuk were listed on March 16 and pay a nominal rate of 18 percent, according to Fara Bourse data. The proceeds will be used to settle debts owed by the government to Ayandesaz Pension Fund and Mahan Air, according to Novin Investment Bank, which arranged the transaction.
The government would usually issue sukuk based on its own assets, but in this case the transaction was based on the creditors' assets, Fatemeh Khanahmadi, computational finance and risk manager at Novin Investment Bank, told Reuters.
"The creditors accepted it as the government is still guarantor to pay the principal and the interest to investors."
While officials have said foreigners are permitted to buy Iranian bonds, foreign portfolio investment in Iran is still very small, so all or almost all of this month's sukuk issue is likely to be held by domestic investors.
In the wake of the lifting of economic sanctions against Iran in January, authorities are rolling out a series of initiatives to develop the country's capital markets and reduce local firms' reliance on loans from a debt-laden banking sector.
The government has announced plans to issue 60 trillion rials worth of Islamic Treasury bills this year, after a maiden sale in September.
Iran's capital markets have developed differently from those in the rest of the Gulf after years of isolation, and only a handful of sukuk structures are available.
The municipality of Tehran issued the country's first sukuk in 1994 based on an investment partnership format known as musharaka, which has remained the main structure in use.
Six years ago, the capital market regulator introduced ijara and murabaha structures - the latter is a cost-plus-profit format - but they have been slow to catch on, even though they are widely used elsewhere in the Gulf. (Reporting by Bozorg Sharafedin and Bernardo Vizcaino; Editing by Andrew Torchia and Alexander Smith)
keywords: Islamic bonds
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Kemi Adeosun (r), Nigerian Finance Minister, at a joint press conference with IMF Managing Director Christine Lagarde last month. Adeosun denied reports Nigeria has requested a $3.5bn loan from the World and African Development Banks
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Nigeria’s Finance Minister has denied reports the country has requested a $3.5bn loan from the World Bank and the ADB
According to the Financial Times (FT), Nigeria has submitted a request to the African Development Bank (ADB) and the World Bank for emergency loans worth $3.5bn. Yet shortly after the report was published, several local news outlets shared a statement from the Nigerian Finance Minister, Kemi Adeosun, in which she denied such a move had been made.
The FT wrote that the request was submitted in order to fill the gap in Nigeria’s widening budget deficit, which has reached $15bn. Purportedly, $2.5bn was requested from the World Bank and $1bn from the ADB. The FT described it as the “cheapest way possible” to reduce the budget deficit, rather than being an emergency measure.
Purportedly, $2.5bn was requested from the World Bank and $1bn from the African Development Bank
However, in her rebuttal, Adeosun was quoted as saying: ““The truth is that Nigeria, as part of the plans to fund the 2016 budget currently undergoing the approval process of the National Assembly, has indicated an intention to borrow [NGN]1.8trn principally for investment in capital projects to stimulate the economy.”
Whether the loans have actually been requested or not is unclear. What is clear, however, are the mounting challenges facing Nigeria. With its oil and natural gas sector contributing 75 percent of government revenue and a total export revenue of around 95 percent (according to the US Energy Information Administration), Africa’s biggest economy continues to be badly hit by the global oil crisis.
Adding further pressure to the slowing economy are escalating financial problems, in addition to hefty social spending programmes under the leadership of President Muhammadu Buhari. These are aimed at providing an economic stimulus, yet so far have achieved the opposite.
Given the financial difficulties in which Nigeria finds itself, confirmed reports of loan requests from international organisations such as the ADB and the World Bank could well be expected in the coming year.
Source:Worldfinance
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The removal of sanctions on Iran may trigger at least $50 billion a year in foreign investment to finance a rebound in an economy hit by the oil slump, the country’s central bank governor said.
“Our country can absorb a great deal of foreign investment, considering its potential,” Valiollah Seif said in an interview with Bloomberg at his office in Tehran, days after the trade and financial curbs were lifted last weekend. “I think more than $50 billion per year isn’t far-fetched,” he said.
Iran has already reaped some benefits from the implementation of last year’s nuclear accord, negotiated with world powers including the U.S. and European Union that were the prime movers of the sanctions regime.
About $32 billion of oil revenues previously frozen in accounts overseas are now accessible, and will probably be used to buy commodities, Seif said. The coming months will see moves toward normalization of Iran’s currency regime and financial system, Seif said. He said the dual exchange rates should be unified within six months.
Sanctions coupled with loose monetary policy under former president Mahmoud Ahmadinejad have saddled Iran’s banks with one of the highest non-performing loan ratios in the region, behind Libya and Yemen, according to the International Monetary Fund. Seif said the problem is being addressed, with risky loans down to 12.6% of all credit, or about $30 billion, from 15% two years ago.
“One of the methods we’re assessing with regards to addressing this issue is setting up asset management companies which can buy some of these bad loans,” he said.
The bank chief said Iran will consider raising funds on international debt markets in the future via a euro-denominated bond issue, though that’s “not one of our first priorities” and would be contingent on how much foreign direct investment the country can attract.
Short Url : http://financialtribune.com/articles/economy-business-and-markets/34792/cbi-sees-50b-investment
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