FG To Seek Fresh Borrowing Through Eurobond

FG To Seek Fresh Borrowing Through Eurobond

The Federal Government of Nigeria has unveiled plans to launch a Eurobond, signaling its re-entry into the international bond market after its last issuance in March 2022……READ ALSO FG Clarifies: Student Loan Scheme Postponement Not Indefinite

For this endeavor, the government has engaged top global investment banks such as Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., along with Standard Chartered Bank and Lagos-based Chapel Hill Denham, to act as advisors.

According to reports from Punch, the upcoming Eurobond issuance, slated to take place before June, holds significant importance for Africa’s largest oil-producing nation as it aims to reconnect with global financial markets.

This move forms part of a broader strategy to finance the substantial budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending plan for 2024, which anticipates a fiscal gap of N9.8 trillion, equivalent to 3.8 percent of the GDP.

The exact size of the Eurobond offer is yet to be finalized. However, sources familiar with the matter, who preferred anonymity, disclosed to the platform that Nigeria could target up to $1 billion in international loans throughout 2024.

This external financing is deemed crucial for the country to manage its ambitious fiscal deficit, with the shortfall expected to be covered through a combination of local and international borrowings, as well as assistance from global financial institutions.

In a related development, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, explained that the decision to issue Eurobonds was driven by the potential for lower interest rates and ongoing economic reforms.

Since assuming office in May 2023, President Tinubu has introduced various policies to attract foreign investment and rejuvenate the economy, including two naira devaluations to establish a more flexible exchange rate regime and the contentious removal of fuel subsidies.

Additionally, the Federal Government has announced plans to borrow N450 billion from its third FGN bond auction of 2024, marking a significant reduction from the N2.5 trillion target set in the previous month.

According to the Debt Management Office (DMO), this auction will feature a new 3-year bond and the reopening of existing bonds, aimed at financing the 2024 budget deficit.

With the DMO’s recent circular detailing the auction specifics, including the offer of three different bonds, each with an allocation of N150 billion, the government’s borrowing target for March 2024 is established.