The Federal Government has announced plans to issue a Eurobond, marking its return to the international bond market since its last issuance in March 2022.
For this, it enlisted the expertise of leading global investment banks, including Citibank NA, JPMorgan Chase & Co, Goldman Sachs Group Inc., as well as Standard Chartered Bank and the Lagos-based financial advisory firm Chapel Hill Denham to consult on the venture.
The Eurobond issue which would be the first since 2022, marks the country’s return to the international bond market after a two-year pause. In March 2022, the country raised $1.25 billion through Eurobond issuances.
This development, as reported by Bloomberg and informed by sources close to the transaction, underscores the intent of Africa’s leading oil-producing nation to re-engage with global financial markets in order to bolster its fiscal budget.
According to anonymous sources, the size of the Eurobond offer which is expected before June is yet to be determined.
It further added that the nation might aim to accumulate up to $1bn in international loans throughout 2024.
This external funding is crucial for Nigeria as it seeks to finance a substantial budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending blueprint for 2024, targeting a fiscal shortfall of N9.8 trillion, or 3.8 per cent of its GDP.
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The deficit is expected to be bridged through local and international borrowings and assistance from global financial institutions.
Last year December, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted that Nigeria was contemplating issuing Eurobonds later in the year if the rates are considerably lower, stating that major issuers have informed the country of the possibility this year.
“It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms,” he had said.
Since taking office in May 2023, President Tinubu has introduced several policies to attract foreign investment and revitalise the economy.
These include two devaluations of the naira to establish a more flexible exchange rate regime and the controversial removal of fuel subsidies.
Furthermore, the Federal Government has disclosed plans to borrow N450 billion from its third FGN bond auction of 2024, a significant reduction from the N2.5 trillion target of 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, with the collective aim of financing the 2024 budget deficit.
With the DMO’s recent circular announcing the auction details, including the offer of three different bonds, each with an allocation of N150 billion, the government’s N450 billion borrowing target for March 2024 is set.
