Nigeria Raises $1.25bn through Eurobonds as Public Debt Hits N41.026trn

*2022 Budget: FG borrows N950bn from domestic market
Ndubuisi Francis in Abuja

Nigeria has issued $1.250 (N520 billion) billion seven-year Eurobond in the International Capital Market (ICM), being the first African country to access the ICM in 2022.

This is just as the Debt Management Office (DMO) has revealed that Nigeria’s total public debt stock, comprising the federal government, Federal Capital Territory (FCT), states and local governments stood at N39.556 trillion as at December 31, 2021.

In addition, the DMO disclosed that the federal government has so far borrowed about N950 billion from domestic sources to finance the N6.39 trillion deficit in the 2022 Budget
When the fresh Eurobond issued by the country is added to its debt position as of December 31, 2021 and the N950 billion it had borrowed from the domestic market in 2022, the country total public debt currently stands N41.026 trillion.

According to the DMO, proceeds of the Eurobond would be used to finance critical capital projects in the 2022 Budget to bridge infrastructure deficit in and strengthen Nigeria’s economic recovery.
The DMO in a statement announced that the Eurobond offer was launched at an initial price  of 8.75 per cent per annum,  adding that on the back of strong investor demand, Nigeria was able to revise the price guidance to 8.5 per cent per annum

According to the DMO, the Order Book continued to grow, reaching a peak of $4 billion.
The Order Book included many quality investors in the United States, Europe and Asia.
“With this strong investor interest, the price was tightened to 8.375 per cent per annum, the Order Book still remained high at 3.676 billion and retained the quality investors.

“Nigerian investors also participated in the Offer with a total subscription of $60 million
“The proceeds of the Eurobond will be used to finance critical capital projects in the Budget to bridge the deficit in infrastructure and strengthen Nigeria’s economic recovery.

“Equally important, it would contribute directly and in full to the level of Nigeria’s external reserves,” the DMO said
Nigeria’s ability to access the ICM at this time underscores her established presence in the ICM and engagement with investors on a continuous basis.

Meanwhile, the DMO which revealed the country’s total debt position, disclosed that the federal government has so far borrowed about N950 billion from domestic sources to finance the N6.39 trillion deficit in the 2022 Budget.
The sum of N2.57 trillion was to be borrowed from domestic sources and another N2.57 trillion from foreign sources, while government hopes to draw down N1.16 trillion from multilateral/bi-lateral loans and harvest N90.7 billion from privatisation proceeds to fund the deficit.

The DMO Director General, Ms. Patience Oniha who unveiled the latest debt figures during an interactive session with journalists in Abuja, yesterday, noted that the comparable figure for December 2020 was N32.915 trillion or $86.392 billion.

The N39.556 trillion debt recorded as of December 31, 2021, was N1.566 trillion higher than the N38 trillion recorded as of September 30, 2021, even as Debt-to-GDP stood at 22.47 per cent as of December 31, 2021.
Oniha explained that the public debt stock for December 31, 2021, included new borrowings by the Federal Government of Nigeria (FGN) and sub-nationals, adding that for the FGN, the 2021 Appropriation and Supplementary Acts included total borrowing from domestic and external sources of N5.489 trillion to part-finance the deficit.

She added: “Borrowings for this purpose and disbursements by multilateral and bilateral creditors account fora significant portion of the increase in the debt stock. Increases were also recorded in the debt stock of the states and the FCT.

“The new borrowings were raised from diverse sources, primarily through the issuance of the Eurobonds, Sovereign Sukuk and FGN Bonds. These capital raising were utilised to finance capital projects and support economic recovery.

“With total public debt stock to Gross Domestic Product (GDP) as at December 31, 2021, of 22.47 per cent, the Debt-to-GDP ratio still remains within Nigeria’s self-imposed limit of 40 per cent.
“This ratio is prudent when compared with the 55 per cent limit advised by the World Bank and the International Monetary Fund ((IMF)for countries in Nigeria’s peer group, as well as the ECOWAS Convergence Ratio of 70 per cent.”

According to her, the federal government was mindful of the relatively high debt-to-revenue ratio and had initiated various measures to increase revenues through the Strategic Revenue Growth Initiative and the introduction of the Finance Acts since 2019.
Explaining why debt was growing, the DMO chief executive explained that debt accumulation was a global phenomenon, particularly necessitated by the impact of the COVID-19 pandemic.

She noted that as long as the country has been running deficit budgets for decades now, borrowing was inevitable, pointing out that as the country borrows each year, the existing debt stock expands.

Oniha stressed that high debt service rate was a function of the quantum of borrowing accumulated to build infrastructure.

On why the country was not excited by the rising prices of oil in the international market, Oniha said on one hand, Nigeria was not meeting its Organisation of Petroleum Exporting Countries (OPEC) while it also imports refined products which are denominated in dollars.

The DMO DG also reacted to reports that China was no longer willing to lend to Nigeria, adding that her office has continued collaboration with China on behalf the country.

She stressed that China’s loans to Nigeria account for just about three per cent or less than $4 billion of the nation’s total external loans, stressing that Nigeria has diversified its funding sources to avert any adverse impact from a particular lender.

Oniha disclosed that efforts to structure the federal government’s overdraft from the Central Bank of Nigeria (CBN) under the Ways and Means window were continuing.