If you follow events around the world closely particularly in Europe then you should be familiar with the association of the above percentages and the countries before them. It is their bond rates, which most think is highly unsustainable leading to the respective countries seeking a huge bail out. The world financial market believes these countries (including Greece) cannot continue to borrow at yields of 7% and above because they will not be able to pay. NOT BE ABLE TO PAY?? AT JUST 7%???
Ok what about our dear country Nigeria? What do we pay for interest rates whenever we borrow in Naira and when we borrow in dollars.
Table 1: This below is the most recent bond offering, which as indicated has a coupon of 15%-16% depending on the tenor. Now that is different from the yields which could be 2% more or perhaps less.
Table 2: This is the list of FGN Bonds traded on the NSE as at last week. We have some that are 9% though. But none at 7%
Table 3: What about States?? Well here they are below. Our dear State Government also borrow. As you can see, none borrow below 12%
Table 4: What about businesses who issue bonds? What rate do they pay? That is a no brainer. It is double digits too.
Table 5: Euro Bonds: Ok I know it can’t be that bad. We also get to borrow in dollars and off course can’t pay at double digits. We do 6.75%, still un affordable by European Standards, but with out ratings of BB- I have to say it is not bad.
Table 6: The recent yield for Euro Bonds also come below 6%. But remember this come with its disadvantages. For example, our petro-dollars will be used to repay these loans putting a lot more pressure on our foreign reserves and off course exchange rate.
