The Federal Government has unveiled its strategy to introduce domestic bonds denominated in foreign currency in a bid to address the ongoing foreign exchange crisis. The initiative is scheduled to kick off in the second quarter of the year, specifically in June.
During a meeting with business leaders in Lagos, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed this development. The move aims to attract additional foreign exchange inflows to stabilize the Nigerian currency.
The Nigerian economy has been grappling with a scarcity of US dollars, leading to a significant depreciation of the naira. However, recent foreign exchange reforms by the Central Bank and the Federal government have resulted in the naira gaining ground against the United States dollar, currently exchanging at N1,255/$.
Edun emphasized that the government intends to offer forex bonds to both local and international investors who lack confidence in the local currency and prefer to hold and save in dollars. He highlighted the government’s focus on targeting funds held in diaspora accounts as part of this initiative.
Addressing concerns about debt servicing, Edun admitted that it keeps him awake at night, indicating the government’s commitment to tackling the issue. He underscored the importance of establishing confidence in fiscal policy to attract investors and assuage citizens’ skepticism.
The decision to issue domestic dollar bonds aligns with President Bola Tinubu’s executive orders last October, which paved the way for the domestic issuance of financial instruments in foreign currency. This move aims to channel cash held outside the formal banking system into the banks.
This announcement marks the second time the government has expressed its intention to allow domestic issuance of financial instruments. Last year, the Coordinating Minister of the Economy highlighted the need to explore alternative means of raising funds beyond borrowing.
The government’s plan to tap into funds held in domiciliary accounts and by Nigerians abroad underscores its commitment to rejuvenating the economy. With Nigeria facing challenges in oil production due to various factors, including pipeline vandalism and insufficient investment, the government aims to reduce its reliance on debt to cover the deficit.
As the government strives to manage its debt burden, the issuance of domestic dollar bonds represents a strategic move to attract foreign investment and stimulate economic growth while addressing the ongoing foreign exchange crisis.
