FG makes U-turn on Eurobonds, says it will issue some more

Just a day after Patience Oniha of the Debt Management Office (DMO) disclosed that the Federal Government has no plan to return to Eurobonds market this year (2019), the debt office said it might issue some Eurobonds after all.

Nairametrics had reported that the Federal Government was ruling out Eurobonds, at least, for the next year.

According to the new development, the debt office confirmed that the Nigerian government may issue Eurobonds if necessary to help finance its 2019 budget.

Why the U-turn? While foreign borrowing for the 2019 budget was set at N824.82 billion ($2.7 billion), the Federal Government said it wants to tap concessionary long-term loans to finance its 2019 budget in addition to borrowing locally.

The Government is first looking at accessing any cheaper funding from multilateral and bilateral lenders. A statement from the Debt Management Office noted that in line with financing the 2019 budget, “any balance will be raised from commercial sources which may include security issuance such as Eurobonds.”

Note that in 2016, the Federal Government of Nigeria approved a three-year plan to borrow more foreign debts. The plan was to ensure that 40 percent of its loans come from outside the country sources as part of an effort to lower borrowing costs whilst funding record-high budgets.

Tracking Nigeria’s Debt: In 2017, Nigeria sold $3 billion in Eurobonds, part of which was used to fund its budget that year. It then followed that up with a $2.5 billion Eurobond sale last year (2018) which was used to refinance local currency bonds at a lower cost.

Meanwhile, just recently the DMO had, on behalf of the Federal Government, listed some Eurobonds in a dual-tranche of $2.50 billion and a triple-tranche of $2.86 billion on both the FMDQ Securities Exchange and the Nigerian Stock Exchange (NSE).

Purpose of the Eurobonds: Speaking during the listing on the FMDQ in  Lagos, Oniha said that the bonds were raised for the refinancing of the country’s domestic debt.

According to her,  the $2.50 billion Eurobonds issued in February 2018 was meant for the refinancing of domestic debt, while  $2.86 billion dollars Eurobonds floated in November 2018 was purposely for the financing of the capital project of the budget.