Federal Government Of Nigeria To Seek Additional Funding Through Eurobond Issuance In June

Federal Government Of Nigeria To Seek Additional Funding Through Eurobond Issuance In June....KINDLY READ THE FULL STORY HERE▶

The Federal Government has tapped the expertise of prominent global investment banks such as Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., to navigate its upcoming Eurobond issuance. Additionally, it has engaged Standard Chartered Bank and Lagos-based financial advisory firm Chapel Hill Denham to provide consultation on this endeavor.

This Eurobond issuance, the first since 2022, signifies Nigeria’s reentry into the international bond market after a two-year hiatus. In March 2022, the country successfully raised $1.25 billion through Eurobond issuances.

According to sources close to the transaction as reported by Bloomberg, the size of the Eurobond offer expected before June has yet to be determined. These sources, who preferred to remain anonymous, revealed that Nigeria may target accumulating up to $1 billion in international loans throughout 2024.

The acquisition of external funding holds significant importance for Nigeria as it aims to finance a considerable budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending plan for 2024. This plan targets a fiscal shortfall of N9.8 trillion, equivalent to 3.8 percent of the GDP, which is anticipated to be filled through both local and international borrowings as well as assistance from global financial institutions.

Last December, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted at Nigeria’s contemplation of issuing Eurobonds later in the year if rates are considerably lower. He expressed confidence in garnering support for the move, citing ongoing reforms.

President Tinubu, who assumed office in May 2023, has actively pursued policies to attract foreign investment inflows into Nigeria. These initiatives include implementing two devaluations of the naira to establish a more flexible exchange rate regime, narrowing the disparity between the Central Bank’s policy rate and government securities yields, and the contentious elimination of fuel subsidies.

In a related development, the Federal Government aims to borrow N450 billion from its third FGN bond auction of 2024, as per the latest circular from the Debt Management Office. This figure represents an 82 percent decrease from the N2.5 trillion target of the previous month’s bond auction.

The auction, scheduled for March 18, 2024, with a settlement date of March 20, 2024, encompasses three different bonds: a new 3-year bond for March 2027, and re-openings of the 18.50 percent FGN February 2031 and the 19.00 percent FGN February 2034 bonds. Each bond has an allocation of N150 billion, totaling the government’s N450 billion borrowing target for the month.

In 2023, the Federal Government raised about N5.49 trillion through FGN bond auctions, which were instrumental in financing the 2023 budget deficit of N11.34 trillion. Additionally, in January 2024, the Federal Government raised approximately N418.197 billion from four bonds auctioned. However, in February 2024, it realized N1.49 trillion from two FGN bond offers issued by the DMO, falling below the N2.5 trillion target.

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