The Federal Government of Nigeria is gearing up for a new round of borrowing through Eurobond issuance, enlisting the expertise of leading global investment banks such as Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., alongside Standard Chartered Bank and Lagos-based Chapel Hill Denham as advisors.
The upcoming Eurobond issuance, slated to take place before June, marks a significant move for Africa’s largest oil-producing nation as it seeks to re-establish its presence in global financial markets, according to reports from Punch.
This initiative is a crucial component of the government’s 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 shortfall of N9.8 trillion, equivalent to 3.8 percent of the GDP.
While the exact size of the Eurobond offer is yet to be finalized, insider sources suggest that Nigeria could target up to $1 billion in international loans throughout 2024. This external financing is deemed essential for managing the ambitious fiscal deficit, which will be covered through a combination of local and international borrowings, as well as support from global financial institutions.
In a related development, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, highlighted 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 implemented various policies aimed at attracting foreign investment and revitalizing the economy, including naira devaluations to establish a more flexible exchange rate regime and the controversial removal of fuel subsidies.
Additionally, the Federal Government has disclosed plans to borrow N450 billion from its third FGN bond auction of 2024, representing a significant reduction from the N2.5 trillion target set in the previous month. The auction, as announced by the Debt Management Office (DMO), 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 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.