Nigeria to service $1b Eurobond with N361b

Nigeria is considering a new debt service provisioning of N361 billion ($1.2 billion) for the $1 billion (N305.1 billion) Eurobond which was acclaimed to have been over-subscribed.

When consummated, the development will not only add to the country’s debt stock, its current debt service provision at over N1.4 trillion will rise, and it will deepen the troubled debt-to-revenue ratio which has been impeding the country’s ability to freely finance growth projects.

Government had said its 15-year Eurobond offer was priced at 7.875 per cent, with a lump sum repayment of the principal ($1 billion) at the due date – February 2032.

However, the aggregate cost for the deal at the offering rate may not be less than N361 billion at the prevailing official exchange rate, considering that investors would be paid in dollar, representing a yearly average cost of about N24.1 billion ($79 million).

A popular economist who would not want his name in print told The Guardian that the net proceeds of the Eurobond would naturally be less than the amount quoted due to service charges incurred in the process, “but we would be debited with $1 billion.”

“If you factor in these costs, you begin to ask whether we should have been here. It is irritating that in the midst of these challenges, misappropriation, huge governance cost and outright embezzlement of public fund still persist.

“The budget items of some ministries are clear fraud and these have put the country on an unsustainable path. What is there to celebrate about the Eurobond? Is it that we are now committing our young generations, even the unborn, to poverty and immediate struggle?” the economist queried.

But the Minister of Finance, Mrs. Kemi Adeosun, in a statement, said: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.

“We are establishing the building blocks for long-term growth and making the hard decisions that must be made to reset our economy appropriately.”

The Director-General of Debt Management Office, Dr. Abraham Nwankwo, also said: “Nigeria is delighted to have successfully priced its third Eurobond issue…The Eurobond is the latest step in a broader debt strategy designed to significantly re-balance our debt profile towards longer term financing and reduce the burden of interest on our annual budget.”

A director at Union Capital Markets Limited, Egie Akpata, said he was sure that the country would raise the amount and predicted an oversubscription earlier, but expressed worry on the pricing, which he said would have been a lot lower if the fundamentals did not get this bad.

“Eurobond is the easiest platform for international fund raising for the country now, because there is no string attached, unlike the International Monetary Fund and the World Bank.

“With the assurance that our daily oil earnings may be more or less this amount, it is not a ‘back breaking’ deal. But considering the exchange rate, local debts would be better off, as the total cost incurred would be less,” he said.

The Executive Director of Centre for Human Rights and Conflict Resolution, Idris Miliki, said with the President’s absence, investors’ risk assessments would always be on the high side.

Besides, he said that both investors and those in acting capacity would approach with caution any economic decision now, because the truth about the head of government is shrouded in uncertainty and that is a risk for investment.

Meanwhile, the Federal Government’s whistleblower policy has so far led to the recovery of $151 million and N8billion in looted funds.

The government yesterday said it would not disclose the identities of the whistleblowers or make public when they would receive the 2.5 to 5 per cent reward promised.

If the whistleblowing policy is well managed, it will boost the fight against corruption so that the nation’s resources can be used to develop the country rather than allowing corrupt leaders to siphon them for use only by their families.

In an interview with The Guardian, Minister of Information and Culture, Alhaji Lai Mohammed assured that government would not renege on its promise, arguing that disclosing the identities of the whistleblowers or when they would be rewarded would jeopardise the entire programme.

“We cannot disclose to you when where or how the whistleblowers will be paid, the moment we do that, we have blown their cover and this will jeopardise the entire programme so we have to protect their identities. But nobody will receive anything below 2.5 per cent, there is no question about that,” he said.

The Federal Ministry of Finance in December 2016 devised a whistleblower policy aimed at encouraging anyone with information about a violation, misconduct or improper activity that impacts negatively on Nigerians and government.

Reacting to the development, the lead Director, Centre for Social Justice (CSJ), Eze Onyekpere expressed reservations over the authenticity of government’s claim and demanded that it tells Nigerians where the recovered money would be deployed.

“They should tell us from who they recovered the money and where they want to deploy it. It’s quite difficult for anybody to believe, so he should tell us from who they recovered the money and what they want to do with it because it is a lot of money, you are talking of over N45 billion by the official exchange rate. He can claim anything, nobody is sure of what he is saying.”

FG To Raise N5bn Via Eurobond, Others To Plug Budget Deficit

The Minister of Finance, Mrs. Kemi Adeosun, has said that the Federal Government would raise about $4.5 billion from multiple external sources, including the Eurobond market, to plug its budget deficit.

 

The Minister speaking over the weekend at the KPMG CFO Forum held at Eko Hotel in Lagos said the aim was to overcome the country’s worst economic crisis in years through a record budget.

 

Nigeria, Africa’s biggest economy and top oil producer is still reeling from the fall in crude revenues, which before now accounted for the source of 95 percent of its foreign earnings, leading to the naira hitting record lows on the parallel market amid dwindling foreign exchange reserves.

 

According to Adeosun, “Our total borrowing expectations are now at N1.8 trillion ($9.1 billion) and we hope to raise approximately $4.5 – 5 billion from multiple external sources. This includes multilateral agencies, export credit agencies as we are also planning to tap the Eurobond market,”

 

She noted that the government was optimistic that it would receive the desired support after cutting government costs and improving revenue collection adding that the Muhammadu Buhari administration, intends to achieve this through four keys.

“We shall stimulate the economy to achieve a real GDP growth rate of 4.2 per cent in 2017; reduce cost of governance, extract efficiencies in the public service and enhance collection of internally generated revenue. Government would also increase infrastructure development and be able to fund the budget deficit and negate trade balance cost effectively,” she said.

According to her, the contentious issue of the exchange rate policy that will complement the fiscal policy of this administration will be a product of determining the real equilibrium exchange rate path of the naira. “The finance ministry expects that the monetary policy authorities will be in a position to determine the steps required to put the currency in equilibrium after considering a number of variables,” she added.

 

She noted that other prongs of government’s economic plan included greater coordination of fiscal and monetary policy, initiatives to achieve broad improvements in overall business environment, specific policy initiatives to catalyse Medium, Small Micro Enterprises (MSME) of 50 per cent GDP growth.

 

This the Minister said, would be actualised through tax harmonisation and incentives, inclusivity through increase in share of business awarded to MSME from government and social welfare programme to support lowest income demographics.

 

“In all, the target outcome is to achieve a real GDP rate of 4.2 per cent, infrastructure development to unlock economic growth, diversification the economy and growth of the non-oil sector, improvement in overall business environment and improvement in key socio-economic indicators,” she said.

 

She noted that there would be increased capital spending to address infrastructure deficit as government would increase expenditure on infrastructure to 30 per cent of total expenditure from the 10 per cent it was in 2015. “There would be investment of N1.8 trillion in transport, roads, housing, power and health; Selective use of private capital through PPPs with substantial increase in gross capital formation, enablement of industrialization and increased competitiveness of business coupled with acceleration of GDP growth, job and wealth creation,” she stated.

 

Credit: Today