Nigeria’s Finance Minister, Kemi Adeosun will today in London meet with bond investors to pitch for foreign denominated funding. The Nigerian government plans to fund about half of its debt needs via foreign loans. The government also plans to borrow N900 billion locally to fund part of its budget deficit of about N2.2 trillion.
An article on Bloomberg explains that the Minister is likely to face very tough questions with Bond Investors over Nigeria’s forex policy which they believe has hindered capital inflows into Nigeria.
While they’re interested in plans to revive growth, investors said they will also demand to know when and how the central bank will end capital controls and a currency peg that have starved the country of dollars and slowed foreign investment to a trickle. Tapping the offshore bond market this year is crucial for Nigeria to fund a budget of 6.1 trillion naira ($31 billion) meant to stimulate the economy, according to Rand Merchant Bank. Bloomberg
We believe the Minister in a bid to woo foreign investors might be forced to give an insight into how the new forex policy might play out. For Bond Investors who may be looking to buy Nigerian bonds, the key issue for them is how they intend to repatriate their funds even if the government decides to introduce a dual exchange rate. Liquidity will be a factor on their minds considering the billions in dollar backlogs waiting to be filled by the Central Bank. United Airlines and Iberia both recently decided to stop flying into Nigeria partly because of their inability to repatriate funds.
JP Morgan, in 2015 yanked Nigeria off its emerging bond index due to capital controls as it believed investors tracking its index required liquidity in the market to assure that their returns are guaranteed. For Kemi Adeosun her work will not just end at sweet talking investors to think Nigeria again. She will have to part with something tangible as regards the new forex policy otherwise her mission abroad will be an exercise in futility. And by parting with something, she is likely to reveal key details of the forex policy ahead of the CBN’s announcement sometime this week.
The CBN says it will reveal details of the policy “in due course”.
