Chief Bola Ahmed Tinubu has engaged the expertise of prominent global investment banks, such as Citibank NA, JPMorgan Chase & Co., and Goldman Sachs Group Inc., to oversee its upcoming Eurobond issuance.
He has designated Standard Chartered Bank and the Lagos-based financial advisory firm Chapel Hill Denham to provide consultation for this endeavor.
This Eurobond issuance, the first since 2022, signifies the country’s reentry into the international bond market after a two-year hiatus. In March 2022, Nigeria successfully raised $1.25 billion through Eurobond issuances.
According to sources close to the transaction, as reported by Bloomberg, this development underscores the commitment of Africa’s leading oil-producing nation to re-engage with global financial markets to fortify its fiscal budget.
The size of the forthcoming Eurobond offer, anticipated before June, has yet to be determined, as stated by individuals who requested anonymity due to lack of authorization to comment publicly on the matter.
Moreover, the report suggests that Nigeria may target up to $1 billion in international loans throughout 2024.
This external funding is crucial for Nigeria as it endeavors to finance a significant budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending plan for 2024, aiming for a fiscal shortfall of N9.8 trillion, equivalent to 3.8 percent of its GDP.
To bridge this deficit, the country plans to utilize a combination of local and international borrowings, along with assistance from global financial institutions.
In December of the previous year, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, hinted at Nigeria’s potential issuance of Eurobonds later in the year if the rates become considerably more favorable, citing discussions with major issuers who have indicated the possibility for 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.”
Since assuming office in May 2023,Tinubu has been vigorously pursuing policies aimed at rejuvenating foreign investment inflows into Nigeria.
These strategies encompass various measures, including the implementation of two naira devaluations to foster a more flexible exchange rate regime, narrowing the gap 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 has announced its intention to borrow N450 billion from its third FGN bond auction of 2024, as stated in the latest circular from the Debt Management Office.
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This amount marks an 82 percent decrease from the N2.5 trillion target set for the same bond auction in the previous month.
According to the circular published on the DMO website, the auction is scheduled for March 18, 2024, with a settlement date of March 20, 2024. The offering comprises three different bonds: a new 3-year bond maturing in March 2027, along with re-openings of the 18.50 percent FGN February 2031 and the 19.00 percent FGN February 2034 bonds.
Each bond is allocated N150 billion, totaling the government’s borrowing target of N450 billion for this month.
In 2023, the Federal Government raised approximately N5.49 trillion through FGN bond auctions, which was utilized to finance the N11.34 trillion budget deficit.
In January 2024, the Federal Government raised about N418.197 billion from the four bonds auctioned.
In February 2024, the Federal Government realized N1.49 trillion from two FGN bond offerings issued by the DMO, falling below the N2.5 trillion target.
With the budget deficit for the 2024 fiscal year estimated at N9.18 trillion, the Federal Government appears determined to continue borrowing from the domestic market.
