House Approves Request to Increase Diaspora Bond to $300m

Damilola Oyedele in Abuja
The House of Representatives has approved the request of the federal government seeking an increase in the amount raised through the Diaspora bond from the international market from $100 million to $300 million.

The request by President Muhammadu Buhari laid before the House on March 3, 2016,   is captured under the federal government’s external borrowing plan 2016-2018.

The request was approved following consideration of the report of the ad-hoc committee to the House presided over by the Deputy Speaker, Hon. Yussuff Sulaimon Lasun, on Tuesday.

The report of the ad hoc committee, presented by Hon. Garba Shehu (Kano APC), said the increased bond would assist to diversify government sources of funding, and would take advantage of the large Diaspora population of Nigerians abroad.

The report noted that the  bond reduces the interest cost of government’s borrowing as it is an inexpensive way to raise funds for developmental projects, while proceeds of the issuance would be used to finance capital projects in priority sectors of the economy such as roads, railways, power projects among others.

The committee recalled that Nigeria’s debut entry into the international capital market was in January 2011, with issuance of a $500 million euro bond, before the issuance of another  $1 billion euro bond in July 2013.

“The first $500 million euro bond was for a tenor of ten years and issued at the rate of 6.75 per cent, with the subscription rate at 260 percent…the second issuance of $1 billion euro bond in 2013 was in dual tranches of $500 million euro bond each,” the report said.

“The first tranche of the $500 million euro bond in 2013 was for a tenor of five years and issued at the rate if 5.125 per cent, with the subscription rate at 346 per cent…the second tranche of the $500 million euro bond was for a tenor of ten years, issued at the rate of 6.375 per cent and at a subscription rate of 445 per cent,” the report added.

“That in the seventh Assembly, the Committee on Aids, Loans and Debt Management considered and recommended for approval the request for an increase in the issuance amount from $100 million to $300 million, but the House was unable to consider the report of the committee before the expiration of its tenure,” the report read.