In order to finance the 2016 budget, the Federal Government is to raise $1bn through the issuance of Eurobonds by November, investigation has shown.
The amount to be raised from the international bonds market is part of the $4.5bn that the Federal Government plans to borrow from the market in three years.
Authoritative sources told PUNCH that the government was watching events in the international capital market to know the best opportune time to approach it to raise the fund.
Further investigation revealed that the international capital market had become very attractive to the Federal Government because of the dearth of foreign exchange in the country as a result of poor earnings from the nation’s major forex earner, crude oil.
It was also learnt that most of the monies expected from external borrowings to finance the 2016 budget would come from the issuance of the $1bn Eurobonds.
Other sources recently approved by Federal Executive Council for external borrowing to support the 2016 budget are the World Bank, African Development Bank, China Exim Bank and the Japanese International Cooperation Agency.
According to the budget passed by the National Assembly in May, the Federal Government is to borrow N900bn from external sources and N984bn from local sources.
At an exchange rate of N400 to a dollar, the $1bn that the government plans to raise through Eurobonds is N400bn or 44.44 per cent of the N900bn it plans to borrow from abroad to finance some capital projects in the 2016 budget.
In preparation for the issuance of the Eurobonds, the Debt Management Office has advertised for key partners to offer the government consultancy services in order to avoid poor showing at the international bonds market.
The consultants being sought by the Federal Government through the DMO are two international banks to serve as joint lead managers, one local bank to serve as financial adviser, one legal adviser and one technical adviser on communication.
In the advert, the DMO stated, “The Federal Republic of Nigeria is in the process of establishing a $4.5bn Federal Government Medium Term Note Programme, 2016 – 2018, out of which it intends to issue $1bn Eurobond in the year 2016.
“The purpose of establishing the FGMTN programme is to enable the FRN to have the flexibility of quickly taking advantage of favourable market conditions in the international capital market to raise funds, if and only when the need arises.”
Our correspondent learnt that officials of the DMO and the Ministry of Finance would in alliance with the transaction partners soon begin to sensitise the market to enable the country to take the earliest advantage of the market even though a target of November had been set.
It was also learnt that the Federal Government had adopted a cautious approach to the market in order to get the best result.
In 2015, the Federal Government could not muster the courage to approach the international bond market to raise the funds that it had scheduled to borrow from the market because of circumstances prevailing within and outside the country.
Instead, it resorted to the local bond market to raise the funds it had earmarked to borrow from abroad.
The government could also not approach the market early enough this year because the 2016 budget that prescribed a borrowing of N900bn from external sources could not be passed until May.
However, the Minister of Budget and National Planning, Senator Udo Udoma, had at a recent town hall meeting, said the government had a 12-month window to implement the 2016 budget. This means that the government can continue to implement the budget till May 2017.
The PUNCH
