New Telegraph

FG Plans Fresh Borrowing Through Eurobond

The Federal Government is collaborating with major global investment banks such as Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc. for its upcoming Eurobond issuance.

New Telegraph reports that the Federal Government has also engaged Standard Chartered Bank and Chapel Hill Denham, a Lagos-based financial advisory firm, to provide consultation on this initiative.

This Eurobond issuance, the first since 2022, signifies Nigeria’s reentry into the international bond market after a two-year hiatus.

In March 2022, the country successfully raised $1.25 billion through Eurobond offerings.

According to Punch, the upcoming Eurobond issuance, expected to occur before June, represents a pivotal moment for Africa’s largest oil-producing nation as it seeks to re-engage with global financial markets.

There are indications that Nigeria may target accumulating up to $1 billion in international loans throughout 2024.

This external funding is vital for Nigeria as it looks to finance a significant budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending plan for 2024.

The government aims to bridge the deficit through a combination of local and international borrowings and assistance from global financial institutions.

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Last December, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted at Nigeria’s potential issuance of Eurobonds later in the year, depending on favourable interest rates.

He expressed confidence in receiving support for the issuance due to the country’s ongoing reforms.

Since assuming office in May 2023, President Tinubu has actively pursued policies to attract foreign investment into Nigeria.

These efforts include implementing naira devaluations, narrowing the gap between the Central Bank’s policy rate and government securities yields, and discontinuing fuel subsidies.

In a separate development, the Federal Government plans to borrow N450 billion from its third FGN bond auction of 2024, as indicated in the latest circular from the Debt Management Office.

This amount represents an 82% reduction from the N2.5 trillion target set for the previous month’s bond auction. The auction is scheduled for March 18, 2024, with a settlement date of March 20, 2024, according to the DMO website.

The auction will feature three bonds: a new 3-year bond maturing in March 2027, along with re-openings of the 18.50% FGN February 2031 and the 19.00% FGN February 2034 bonds, each with an allocation of N150 billion, totalling the government’s borrowing target for the month.

In 2023, the Federal Government raised around N5.49 trillion through FGN bond auctions to finance the budget deficit of N11.34 trillion.

In January 2024, about N418.197 billion was raised from four bonds auctioned, while in February 2024, N1.49 trillion was realized from two FGN bond offers, slightly below the N2.5 trillion target.

With the 2024 budget deficit projected at N9.18 trillion, the Federal Government appears determined to increase domestic market borrowing.

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