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FG moves to restructure debts, to consider Eurobonds with cheaper rates in 2023

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Zainab Ahmed says Naira likely to weaken further

The Federal Government has hinted at plans to restructure Nigeria’s debt with the extension of the repayment period of its loan facilities as the debt service burden rises.

This is as the country’s debt burden continues to mount to a disturbing level with the Federal Government proposing an N10.78 trillion deficit in the 2023 budget presented to the National Assembly by President Muhammadu Buhari, although it’s an improvement on the earlier proposed N12.43 trillion deficit for the 2023 budget.

This was made known by the Minister of Finance, Budget and National Planning, Zainab Ahmed, during an interview with Bloomberg TV, saying that the government has engaged the services of consultants for advice.

Ahmed said the government plans to refinance domestic debt obligations that are due this year and next, while the country’s N20 trillion ($45.4 billion) in outstanding borrowings from the Central Bank of Nigeria (CBN) will be converted into government bonds.

What the Finance Minister is saying

Ahmed said, “For the larger portfolio of debt, we have just appointed a consultant” to assess how the government can “get additional relief by way of restructuring and negotiating to stretch out the repayments to longer periods,” although she didn’t provide further details.

The National Assembly had earlier approved plans by the Federal Government to borrow as much as N8.4 trillion in order to help make up the N10.78 budget deficit for 2023, an estimated 4.8% of the Gross Domestic Product (GDP).

The minister said, “The budget is designed for us to raise financing 50% from domestic and 50% from international financing and this will be a combination of concessionary sources and bilateral sources as well as the international capital market.’’

Nigeria considering cheaper Eurobond, to introduce new excise duties

Ahmed has also said that the Federal Government would consider the issuance of Eurobond in 2023 only if the rates improve, which is moving close to levels they were the last time they went into the international markets, with a little markup.

The Federal Government had in March, sold a 7-year bond at a yield of 8.375%, far higher than a similar maturity it raised 8 months earlier at 6.125%. It later suspended plans to borrow another $950 million in May after yields on outstanding bonds spiked to mid-double digits.

Ahmed said, As it is right now, it’s too expensive for us to borrow from the international capital market.’’

She said that as a means of raising more money, the government will cut tax waivers and incentives given to companies and also plans to introduce new excise duties or levies to ramp up revenues. The yield on the country’s longest tenured 2049 bond closed at 14.021% on Wednesday.

Ahmed expects that increased efforts to tackle crude theft, which has cut output to record lows, will produce results in the next three months.

She said, “In the next one, two, three months, we should be able to hit the targets that we have in the budget, which is 1.6 million barrels a day.’’

What you should know

  • Nigeria has in recent years been struggling with a rising debt service burden with experts and international developmental financial institutions expressing serious concerns over the development.
  • The World Bank had earlier estimated that the country’s debt service burden will likely rise to 102% of revenues this year, with an earlier federal government report suggesting that the country’s cost of debt servicing surpassed retained revenue in the first four months of 2022.
  • President Muhammadu Buhari had during last week’s presentation of the 2023 budget to the National Assembly for consideration and passage, proposed a total expenditure of N20.5 trillion, with less than half of that to be backed by revenues and the balance to be funded by borrowings, sales of national assets and project-specific loans.

The post FG moves to restructure debts, to consider Eurobonds with cheaper rates in 2023 appeared first on Nairametrics.

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