In a move to bolster its fiscal budget, the Federal Government has enlisted the expertise of top global investment banks, including Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., to guide its upcoming Eurobond issuance.
This marks Nigeria’s re-entry into the international bond market after a hiatus of two years, following its last Eurobond issuance in 2022, which raised $1.25 billion.
Sources close to the transaction, as reported by Bloomberg, reveal that Standard Chartered Bank and Lagos-based financial advisory firm Chapel Hill Denham have also been appointed to consult on this venture.
While the size of the Eurobond offer, expected before June, is yet to be determined, insiders suggest that Nigeria may aim to accumulate up to $1 billion in international loans throughout 2024.
This external funding is deemed critical for Nigeria as it endeavours to finance a significant budget deficit outlined in President Bola Tinubu’s N28.8 trillion ($18 billion) spending blueprint for 2024.
The deficit, pegged at N9.8 trillion, or 3.8 percent of GDP, is anticipated to be bridged through both local and international borrowings, as well as assistance from global financial institutions.
Since assuming office in May 2023, President Tinubu has pursued aggressive policies aimed at revitalising foreign investment inflows into Nigeria.
These initiatives include two devaluations of the naira to foster 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 tandem with this move, the Federal Government has announced its intention to borrow N450 billion from its third FGN bond auction in 2024, as per the latest circular from the Debt Management Office (DMO). This amount represents an 82 percent reduction from the N2.5 trillion target set for the same bond auction in the previous month.
The auction, scheduled for March 18, 2024, with a settlement date of March 20, 2024, will offer three different bonds: a new 3-year bond for 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 will have an allocation of N150 billion, totaling the government’s N450 billion borrowing target for the month.
In 2023, the Federal Government raised approximately N5.49 trillion through FGN bond auctions, which were instrumental in financing the 2023 budget deficit of N11.34 trillion. Subsequent bond auctions in January and February 2024 realized N418.197 billion and N1.49 trillion, respectively, aiding the government’s ongoing efforts to address the budget deficit in the 2024 fiscal year.
