Post by olukumi on Mar 1, 2016 12:54:47 GMT
Syndicated Loans: IMF or AIIB for the Nigerian Economy? How about Both?
January 18, 2016 • 16 Views • 1 Like • 0 Comments
Syndicated Loan
"A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government). The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the term of the loan or floating based on a benchmark rate such as the London Interbank Offered Rate (LIBOR)." 2.
Asian Infrastructure Investment Bank (AIIB)
"The incoming head of the new China-led Asian Infrastructure Investment Bank has vowed to run a “clean, lean and green” institution operating to the highest international standards but with greater speed than its rivals.
Jin Liqun, the president-designate of the AIIB, said it would abide by the toughest environmental and social standards in its lending and model itself in many ways on existing multilateral development banks." 1.
"Chinese President Xi Jinping on Saturday inaugurated the Asian Infrastructure Investment Bank, saying the Asian power will take more international responsibility with the birth of the new lender.
“This is a historic moment,” Xi said, adding that China wants to improve the investment environment in Asia through the 57-member AIIB that he says embodies a high degree of internationality and norms.
He made the remarks at a ceremony in Beijing to mark the inception of the bank, which symbolize China’s rise and is seen as a challenge to the U.S.-dominated global financial architecture." 3.
The International Monetary Fund (IMF)
"IMF loans are meant to help member countries tackle balance of payments problems, stabilise their economies, and restore sustainable economic growth.
This crisis resolution role is at the core of IMF lending. At the same time, the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. A key objective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with more effective tools for crisis prevention.
The IMF is not a development bank and, unlike the World Bank and other development agencies, it does not finance projects." 4
"This truth is being reinforced by the emergence of the China-led Asian Infrastructure Investment Bank (AIIB), which currently has over 57 members including South Africa, the only African member. Since this is where the future of infrastructure financing lies, it is highly advisable that President Buhari gets briefed on why Nigeria should consider becoming a member of AIIB. This is important since it is in our best interest to take full advantage of the presence of AIIB in addressing our current infrastructure deficit.
Without expecting loans from the IMF it is obvious that the Fund’s assessment of Nigeria’s present macroeconomic challenges will remain neutral. So will the Fund’s advice to our government never mandatory.
Countries like China where major part of the country’s foreign loans are expected already have their own independent macroeconomic assessment tools and their own lending conditions quite different from the IMF’s. For example, China is almost always interested in--and insistent on--loans having projects attached to them.
This means that Chinese loans are mostly for infrastructure project financing. But to get the loan, Beijing demands that Chinese companies are given the first offer of refusal either to wholly or substantially execute the projects funded with Chinese loans. 5.
My view, is based on Greece's experience with syndicated loans, and may I ask what's wrong with the IMF sitting on my side of the negotiation table?
References:
1. AIIB Head Vows to be Clean, Lean, and Green - FT News.
2. Syndicated Loan Definition - Investopedia.
3. China Inaugurates AIIB - The MarketPlace News.
4. About The IMF: Work: Lending.
5. The visit of IMF Boss to Nigeria.
Written by
Martin W. Haughton
Martin W. Haughton
LinkedIn Market Research Analyst
January 18, 2016 • 16 Views • 1 Like • 0 Comments
Syndicated Loan
"A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government). The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the term of the loan or floating based on a benchmark rate such as the London Interbank Offered Rate (LIBOR)." 2.
Asian Infrastructure Investment Bank (AIIB)
"The incoming head of the new China-led Asian Infrastructure Investment Bank has vowed to run a “clean, lean and green” institution operating to the highest international standards but with greater speed than its rivals.
Jin Liqun, the president-designate of the AIIB, said it would abide by the toughest environmental and social standards in its lending and model itself in many ways on existing multilateral development banks." 1.
"Chinese President Xi Jinping on Saturday inaugurated the Asian Infrastructure Investment Bank, saying the Asian power will take more international responsibility with the birth of the new lender.
“This is a historic moment,” Xi said, adding that China wants to improve the investment environment in Asia through the 57-member AIIB that he says embodies a high degree of internationality and norms.
He made the remarks at a ceremony in Beijing to mark the inception of the bank, which symbolize China’s rise and is seen as a challenge to the U.S.-dominated global financial architecture." 3.
The International Monetary Fund (IMF)
"IMF loans are meant to help member countries tackle balance of payments problems, stabilise their economies, and restore sustainable economic growth.
This crisis resolution role is at the core of IMF lending. At the same time, the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. A key objective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with more effective tools for crisis prevention.
The IMF is not a development bank and, unlike the World Bank and other development agencies, it does not finance projects." 4
"This truth is being reinforced by the emergence of the China-led Asian Infrastructure Investment Bank (AIIB), which currently has over 57 members including South Africa, the only African member. Since this is where the future of infrastructure financing lies, it is highly advisable that President Buhari gets briefed on why Nigeria should consider becoming a member of AIIB. This is important since it is in our best interest to take full advantage of the presence of AIIB in addressing our current infrastructure deficit.
Without expecting loans from the IMF it is obvious that the Fund’s assessment of Nigeria’s present macroeconomic challenges will remain neutral. So will the Fund’s advice to our government never mandatory.
Countries like China where major part of the country’s foreign loans are expected already have their own independent macroeconomic assessment tools and their own lending conditions quite different from the IMF’s. For example, China is almost always interested in--and insistent on--loans having projects attached to them.
This means that Chinese loans are mostly for infrastructure project financing. But to get the loan, Beijing demands that Chinese companies are given the first offer of refusal either to wholly or substantially execute the projects funded with Chinese loans. 5.
My view, is based on Greece's experience with syndicated loans, and may I ask what's wrong with the IMF sitting on my side of the negotiation table?
References:
1. AIIB Head Vows to be Clean, Lean, and Green - FT News.
2. Syndicated Loan Definition - Investopedia.
3. China Inaugurates AIIB - The MarketPlace News.
4. About The IMF: Work: Lending.
5. The visit of IMF Boss to Nigeria.
Written by
Martin W. Haughton
Martin W. Haughton
LinkedIn Market Research Analyst