FG plans fresh borrowing via Eurobond in June

The Federal Government has enlisted the expertise of leading global investment banks, including Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., to guide its forthcoming Eurobond issuance.

It also appointed Standard Chartered Bank and the Lagos-based financial advisory firm Chapel Hill Denham to consult on this venture.

The Eurobond issue which would be the first since 2022, marks the country’s return to the international bond market after a two-year pause. In March 2022, the country raised $1.25 billion through Eurobond issuances.

This development, as reported by Bloomberg and informed by sources close to the transaction, underscores the intent of Africa’s leading oil-producing nation to re-engage with global financial markets in order to bolster its fiscal budget

The report stated that the size of the Eurobond offer which is expected before June is yet to be determined, the people who requested anonymity because they weren’t authorised to comment publicly on the matter, said.

It further added that the nation might aim to accumulate up to $1bn in international loans throughout 2024.

This external funding is crucial for Nigeria as it seeks to finance a substantial budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending blueprint for 2024, targeting a fiscal shortfall of N9.8 trillion, or 3.8 per cent of its GDP.

The deficit is expected to be bridged through local and international borrowings and assistance from global financial institutions.

Last year December, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted that Nigeria was contemplating issuing Eurobonds later in the year if the rates are considerably lower, stating that major issuers have informed the country of the possibility this year.

He noted, “It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.”

President Tinubu has aggressively pursued policies to revitalise foreign investment inflows into Nigeria. These initiatives range from implementing two devaluations of the naira to foster a more flexible exchange rate regime, narrowing the disparity between the Central Bank’s policy rate and the yields on government securities, to the controversial elimination of fuel subsidies.

In a related development, the Federal Government says it seeks to borrow N450 billion from its third FGN bond auction of 2024, according to the latest circular from the Debt Management Office.

This figure is 82 per cent less than the N2.5 trillion target from the same bond auction in the previous month.

According to the circular published on the DMO website, the auction is set for March 18, 2024, with a settlement date of March 20, 2024.

The DMO’s circular detailed that the offer includes three different bonds: a new 3-year bond for March 2027, and re-openings of the 18.50 per cent FGN February 2031 and the 19.00 per cent FGN February 2034 bonds.

Each bond has an allocation of N150 billion, totalling the government’s N450 billion borrowing target for this month.

In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions which were used to finance the 2023 budget deficit of N11.34 trillion.

In January 2024, the Federal Government raised about N418.197 billion from the four bonds that were auctioned.

The Federal Government in February 2024 realised N1.49 trillion from the two FGN bond offer issued by the DMO below the target of N2.5 trillion.

With the budget deficit in the 2024 budget put at N9.18 trillion, the Federal Government seems committed to borrowing more from the domestic market.