The Federal Government of Nigeria has initiated plans to issue a new Eurobond in June, marking its return to the international bond market after a two-year hiatus. To facilitate this venture, the government has enlisted the expertise of renowned global investment banks, including Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc. Additionally, Standard Chartered Bank and Chapel Hill Denham, a Lagos-based financial advisory firm, have been appointed to provide consultation on the issuance.
The Eurobond issuance, the first since 2022, aims to bolster Nigeria’s fiscal budget and revive its engagement with global financial markets. The exact size of the Eurobond offer, expected before June, is yet to be determined, according to sources familiar with the matter. However, the government may seek to accumulate up to $1 billion in international loans throughout 2024.
This external funding is deemed crucial for Nigeria as it endeavors to finance a significant budget deficit outlined in President Bola Tinubu’s 2024 spending blueprint, amounting to N28.8 trillion ($18 billion). The deficit, estimated at N9.8 trillion or 3.8% of GDP, is planned to be bridged through both local and international borrowings, as well as assistance from global financial institutions.
Since assuming office in May 2023, President Tinubu has actively pursued policies aimed at revitalizing foreign investment inflows into Nigeria. These efforts include implementing currency devaluations to foster a more flexible exchange rate regime, narrowing the gap between the Central Bank’s policy rate and government securities yields, and discontinuing fuel subsidies.
In tandem with the Eurobond issuance plans, the Federal Government aims to borrow N450 billion from its third FGN bond auction of 2024. This figure represents a significant decrease from the N2.5 trillion target set for the same bond auction in the previous month. The auction, scheduled for March 18, 2024, will include three different bonds, with each having an allocation of N150 billion, totaling the government’s borrowing target for the month.
In recent years, the Federal Government has relied on FGN bond auctions to finance budget deficits, with significant amounts raised in 2023 and January 2024. Despite falling short of the target in February 2024, the government remains committed to borrowing from both domestic and international markets to address the budget deficit in the 2024 fiscal year.
