Nigeria: Govt Set to Issue Eurobond for 2021 Budget Funding

The federal government has said it will issue Eurobonds to raise revenue from the foreign market to fund the 2021 budget deficit.

Reuters quoted director-general of the Debt Management Office (DMO), Ms Patience Oniha yesterday as saying that the government is now planning to choose Eurobond advisers through an open bid process.

Minister of finance, budget and national planning, Zainab Ahmed while presenting the breakdown of 2021 budget said government may decide whether to go for foreign loan when the market is right or friendly for such a decision. She said the government was going to base its decision on the prevailing variables at the international market.

The federal government had said it would raise N2.34 trillion from foreign sources.

The federal government dropped its planned Eurobond issuance early last year after its sixth sale in 2018 where it raised $2.86 billion due to the outbreak of COVID-19 pandemic.

It repaid the principal sum of $500 million and final interest payment due on the Eurobond issued in 2011.

To service domestic debt, the government spent N1. 755 trillion in 2020 as against a budget of N1. 87 trillion. N553 billion was spent on foreign debt.

The 2021 budget has an overall budget deficit of N5.60 trillion, representing 3.93% of GDP.

Meanwhile, the finance minister stated that the budget deficit is to be financed mainly by borrowings: Domestic sources, N2.34 trillion; foreign sources, N2.34 trillion; multilateral/bilateral loan drawdowns, N709.69 billion, and privatization proceeds, N205.15 billion.

The aggregate revenue available to fund the 2021 budget is projected at N7.99 trillion (36.9% higher than the 2020 projection of N5.84 trillion).

In February, the federal government cut foreign borrowings in a new debt strategy after it repaid a $500 million eurobond in January. Oniha had said the DMO was monitoring international markets for new issues by frontier countries.

Nigeria emerged from its second recession since 2016 in the fourth quarter but growth is fragile. The government expects a 2021 budget deficit of N5.60 trillion to be financed largely from foreign and local borrowings.

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