The Federal Government of Nigeria is gearing up for a fresh round of borrowing through Eurobond issuance, enlisting the expertise of prominent global investment banks such as Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc. Additionally, Standard Chartered Bank and Lagos-based financial advisory firm Chapel Hill Denham have been appointed to advise on the venture.
This forthcoming Eurobond issuance, the first since 2022, signifies Nigeria’s return to the international bond market after a two-year hiatus. In March 2022, the country successfully raised $1.25 billion through Eurobond issuances.
Sources close to the transaction, who preferred anonymity due to lack of authorization to comment publicly, revealed to Bloomberg that the size of the Eurobond offer, expected before June, is yet to be determined. The nation aims to secure up to $1 billion in international loans throughout 2024.
This external financing is crucial for Nigeria as it seeks to fund a substantial budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending blueprint for 2024. The fiscal shortfall of N9.8 trillion, equivalent to 3.8 per cent of GDP, is expected to be bridged through local and international borrowings, as well as assistance from global financial institutions.
Last December, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted at Nigeria’s contemplation of issuing Eurobonds later in the year if the rates were considerably lower. He expressed confidence in garnering support, citing ongoing reforms.
Since assuming office in May 2023, President Tinubu has pursued policies aimed at revitalizing foreign investment inflows into Nigeria. These initiatives include implementing two devaluations of the naira to foster a more flexible exchange rate regime and narrowing the disparity between the Central Bank’s policy rate and government securities yields, alongside the controversial elimination of fuel subsidies.
In related news, the Federal Government plans to borrow N450 billion from its third FGN bond auction of 2024, according to the latest circular from the Debt Management Office (DMO). This figure marks an 82 per cent decrease from the N2.5 trillion target of the previous month’s bond auction.
The auction, scheduled for March 18, 2024, with a settlement date of March 20, 2024, will include three different bonds: a new 3-year bond for March 2027, and re-openings of the 18.50 per cent FGN February 2031 and the 19.00 per cent FGN February 2034 bonds. Each bond has an allocation of N150 billion, totaling the government’s N450 billion borrowing target for the month.
In 2023, the Federal Government raised approximately N5.49 trillion through FGN bond auctions to finance the N11.34 trillion budget deficit. In January 2024, it raised about N418.197 billion from four bonds. However, in February 2024, the realization from two FGN bond offers by the DMO was below the N2.5 trillion target, at N1.49 trillion.
With the budget deficit for 2024 set at N9.18 trillion, the Federal Government remains committed to increasing borrowing from the domestic market.
