Director-General of the Debt Management Office (DMO), Mrs. Patience Oniha, on Thursday announced plans by the Federal Government to issue a $2.5bn Eurobond by mid-November, the latest in a series of debt sales as it seeks to fund the huge deficit in its 2017 budget amidst dwindling revenue from oil and non-oil sources.
Oniha, who spoke at the 2017 edition of Nigerian Debt Capital Markets Conference and Awards, organised by the FMDQ OTC Securities Exchange in Lagos, said that the proposed Eurobond issuance would complement the $1.5bn raised from the international market in March 2017.
She put the nation’s Treasury Bills portfolio at N3.7tr to be refinanced with foreign borrowing, thereby reducing pressure on the domestic bond market.
Such new borrowings, she assured would go into capital expenditure, rather than recurrent spending.
Despite the new debts, she assured that Nigeria’s “debt ratio is not tangible and adequate components of borrowing, because it is not going into fundings other than capital investment. Let us channel new borrowings into capital investment instead of consumption.”
In August, Finance Minister, Mrs. Kemi Adeosun said the country would seek to refinance $3bn worth of treasury bills denominated in the local currency with dollar borrowing to lower costs and improve its debt position.
“We are already working with transaction advisers and by the middle of November we should have issued $2.5 billion either in Eurobonds or a combination of Eurobonds and Diaspora bond,” Oniha assured.
Parliament will need to approve the debt, Oniha said, adding that the borrowing is part of a total of $4 billion allotted in the 2017 budget.
“The domestic debt is high in terms of cost and interest rate. We want to use the external borrowing to lengthen the maturity profile of our borrowing. We have done 15-years (bonds) and were told that we can look at 20- or 30-year tenor. We reduced our interest cost by about 10 percent.”
One European fund manager, according to Reuters questioned the size of Nigeria’s dollar debt, saying the country’s exports are not growing enough to bring in enough foreign currency to service the debt.
The planned new debt could be too much in too little time, the fund manager said on the sidelines of the conference, declining to be named so as not to affect their business.
Nigeria’s policymakers are also still debating the 2017 budget, despite it being signed into law in June.
On Tuesday, the Nigerian Senate said it would invite the ministers of finance and the budget to speak on “inadequate releases” in the budget and “the need to expedite releases in order to stimulate the economy.”