$3.3 Billion Eurobond Cheaper Source Of Financing Budget Deficit – DMO

The Debt Management Office (DMO) has said that the $3.3 billion Euro-bond sale proposed by the federal government is a relatively cheaper source of financing the N2.175 trillion deficits in the 2020 budget.

President Muhammadu Buhari had on Tuesday  during the plenary session, requested the approval of $3.3 billion Eurobond from the National Assembly, amidst the nation’s increasing foreign debt profile which rose to $22.208 billion in the second quarter of 2019,  a 114% increase from $10.32 billion recorded in 2015.

The DMO said this in a statement published on its website on Friday, adding that the federal government is mindful of the country’s rising debt cost.The statement said the DMO was mindful of the need to moderate Debt Service Cost, adding that “the plan for the raising of the USD2.780 billion capital is to first maximize financing from relatively cheaper concessional and semi-concessional external sources where available, and the balance, if any, from the International Capital Market (ICM) through the Issuance of Eurobonds.”

The agency also explained that $2.78 billion proceed from the Euro bond will be used to fund the government’s 2020 budget deficit, while the remaining will be used to refinance an existing $500 million Eurobond due on January 28, 2020.

“In addition to the USD2.780 billion for the Budget, Nigeria has a USD500 million Eurobond which will mature on January 28, 2021 (6.75% USD500 million 2021).

“Given that the Eurobond will mature early in the year 2021, the plan is to refinance it through the issuance of a Eurobond in 2020.

“Thus, the new external capital raising for the year 2020 to part finance the 2020 Budget Deficit and refinance the Eurobond maturing in January 2021 is USD3.3 billion,” the DMO said.

The agency said that the Transaction Advisers for the issuance of the bond will be carried out through a competitive bidding.

“Whilst the approval process for the proposed USD3.3 billion external capital raising is expected to be completed soon, Transaction Advisers for a potential Eurobond Issuance will be through Open Competitive Bidding process.”

Recall that Standard Chartered Bank, Citigroup and local firm FSDH Merchant Bank acted as financial advisers, where it raised $2.86 billion in the 2018 Eurobond sale.