The federal government is considering issuing a $2.5 billion Eurobond before the end of the year, the latest in a series of debt sales as the government seeks to fund a record budget for 2017.
The Director General of the Debt Management Office (DMO), Patience Oniha, said this at the 2017 Nigerian Debt Capital Markets Conference & Awards organised by the FMDQ OTC Securities Exchange in Lagos.
The federal government’s N7.44 trillion budget is meant to fuel growth after the economy pulled out of its first downturn in a quarter of a century in the second quarter of 2017. The mid-November issue would complement the $1.5 billion raised in Eurobond sales in February and March.
She said Nigeria needed to build stronger and responsive institutions that could support infrastructure agenda of the government. According to her, the government had proposed to channel new borrowings into capital investments instead of consumption.
Oniha explained: “We are already working with transaction advisers and by the middle of November we should have issued $2.5 billion either in Eurobonds or a combination of Eurobonds and Diaspora bond.
The debt ratio is not tangible and adequate components of borrowing because it is not going into funding others than capital investment.”
But the National Assembly would need to approve the debt, Oniha said, adding that the borrowing would be part of a total of $4 billion allotted in the 2017 budget.
“The domestic debt is high in terms of cost and interest rate. We want to use the external borrowing to lengthen the maturity profile of our borrowing. We have done 15-years (bonds) and were told that we can look at 20- or 30-year tenor. We reduced our interest cost by about 10 per cent.”
Nigeria now has a treasury bill portfolio worth N3.7 trillion, Oniha added.
On the N100 billion Sukuk Bond, the director-general said the federal government had identified 25 road projects to be funded with the proceeds. These include the Ore-Sagamu road, Kaduna by-pass, Enugu Port Harcourt road, Kano Maiduguri, Benin Lokoja road, among others.
According to her, government has also decided to finance other trunk A, roads that would provide support that is needed to accelerate nation’s developmental goals.
“We need to build the business in terms of products that meets specific needs of investors,” she added.
Oniha said the acceptance of the Sukuk offerings was an indication of the viability of the instrument as an investment option as well as a demonstration of utmost faith in the economy.
She also commended the federal government for the policy support that led to the success of this initial offer, adding that it had been encouraged to introduce new instruments to aid government’s funding.