Ayo Teriba Urges Government to Prioritise Equity Bonds in 2025

*Argues Nigeria’s new borrowings not going into capital spending but interest payment

Dike Onwuamaeze

The Chief Executive Officer of Economic Associates Limited, Dr. Ayo Teriba, has advised the federal government to prioritise the issuing of equity investment bonds by securitising its assets for domestic and external borrowings in order to enable Nigeria to enjoy the benefits of correct and efficient borrowing.

Teriba gave this advice this week in an interview segment of Arise TV’s Morning Show where he stated that Nigeria is largely borrowing to service its debts obligations rather than infrastructure spending.
The economist averred that the fact that the deficit portion of the proposed 2025 federal budget is less than the amount earmarked for debt servicing is a clear indicator that the country’s borrowing pattern is inefficient and should be discouraged.

He said: “Part of the crisis that we have is that a third of the proposed 2025 budget is going to go on interest payment alone.
“It is a sign that we have borrowed extremely inefficiently when there are more efficient means of raising liabilities.
“We should not continue to fund deficits year in year out with debt. Nigeria has debt as a possibility but it also has equity as a possibility.

“We go every time to Europe but we do not issue equity. We only issue debts while the likes of Saudi Arabia, United Arab Emirates (UAE) and Malaysia that issue equity like bonds raise money more heavily than we do.”
Teriba added: “I do not think that Nigeria’s new borrowings are going into any capital spending.

“Interest payment as proposed in the next year’s budget is higher than the deficit. The deficit is about N13 trillion while the debt repayment is going to be about N16 trillion.
“It means that Nigeria is merely borrowing to pay interest. Let us just understand that we are borrowing just to pay interest.”

He also described the last Eurobond issue by Nigeria’s government at 10 per cent on a dollar liability as cheer recklessness. “You are issuing junk bonds and nobody can put Nigeria in that kind of situation,” he said.
Teriba suggested that one key performance indicator for the Federal Ministry of Finance should be the quality of the debt instrument the country is deploying both at home and abroad to raise money.

According to him, Nigeria should not be celebrating that its debt issue was oversubscribed but should rather borrow a leaf from Saudi Arabia that has “Triple A” rating and whenever it issued its Sukkuk the institutional investors would be glad to subscribe to it at a rate close to what the United States’ government is going to borrow.
“Let Nigeria show that kind of seriousness. You have heard Dangote Industries issuing investment grade bond. The Nigerian government has never issued an investment grade bond. Let us get that clear.
“We should not go on a road show issuing junk bonds again. We should start looking at assets that we can securitise,” Teriba said.

He also stated that what that is needed for Nigeria to achieve stable exchange rate is the country’s net foreign reserve and not the gross reserve of $42 billion that it has been showcasing and celebrating.
According to him, “what matters for the stability of the exchange rate is the net foreign reserve.
“The lesson is that the reserves are key and unless you achieve the reserve adequacy you are not going to be able to stabilise the Naira. And until you stabilise the Naira, inflation is not going to come down.

“So, raising the reserve adequacy is the kind of conversation we should be engaging with President Bola Tinubu and his team; that taking drastic actions to attract FDIs instead of debts, which is just kicking the can down the road, could lift both the gross and net reserves and produce rapid improvements in exchange rate and inflation rate.

“Then 5.0 per cent inflation rate is possible next year. It is a question of what the government does. If the President can make the kind of efforts being made with tax and finance Acts to do an investment Act that can get $50 billion in FDIs over the next one year, the exchange rate will improve and inflation will go down to single digit.”