Lawmakers in the Nigerian Senate consented to President Buhari request for the issuance of a $2.79billion Eurobond in the global debt market.
This development is in furtherance of a written document sent from the Presidency to the Upper Parliament last week to seek approval part of which is targeted at financing the country’s ₦9.12 trillion 2018 budget.
The senate in plenary on Wednesday reached a consensus to enable the presidency proceed with the issuance but sounded a note of caution to curtail foreign borrowing.
The federal government should do everything possible to reduce or limit its request for more external borrowing and (seek) other means of generating revenue internally
The session also registered that the approved bond will bring foreign borrowing to 32% of Nigeria total debt from 30% at June 2018.
Minister of Finance, Mrs. Zainab Ahmed briefing journalists on the event of the new bond said the government will engage financial institutions; Citigroup, Standard Chartered Bank and FSDH Merchant Bank on a financial advisory board; White And Case LLP, Banwo and Ighodalo will serve as legal advise while Africa Practice Limited as technical adviser on communication.
The decision to turn to the global market for fund was first made in 2011 when the government issued $500M eurobond, since then, Nigeria has been on a toll of eurobond issuance. Earlier in 2017, the government also issued $1billion worth of Eurobond.
Lawmakers also approved debt issuance of $82.54 million to refinance the balance of a $500 million matured Eurobond.
What is Eurobond
Eurobond is simply a loan sourced by an entity (Nigerian Government) from a debt market other than the originating country in other words international market. The prefix “Euro” does not necessarily imply that issuance will be made in the European market rather any foreign currency traceable to a particular region.
It is important to note that debt term fluctuates in effect to naira -(euro) exchange. In other words, an increase or decrease in exchange rate at a particular time will affect loan repayment. Continuous accumulation of debt will amongst other things increase debt servicing yearly and the ratio of debt to GDP will also increase.
Upon approval said
implementation of new external borrowing”that had already been approved in the 2018 budget to help finance the budget deficit and to fund infrastructure projects