Nigeria is considering a new debt service provisioning of N361 billion ($1.2 billion) for the $1 billion (N305.1 billion) Eurobond which was acclaimed to have been over-subscribed.

When consummated, the development will not only add to the country’s debt stock, its current debt service provision at over N1.4 trillion will rise, and it will deepen the troubled debt-to-revenue ratio which has been impeding the country’s ability to freely finance growth projects.

Government had said its 15-year Eurobond offer was priced at 7.875 per cent, with a lump sum repayment of the principal ($1 billion) at the due date – February 2032.

The investors had opted for a higher yield to cover their assessed risks or devaluation in early negotiations, asking for a 7.5 per cent for a 10-year period or eight per cent and above for a 15-year period, due to foreign exchange crisis and other macroeconomic issues.

However, the aggregate cost for the deal at the offering rate may not be less than N361 billion at the prevailing official exchange rate, considering that investors would be paid in dollar, representing a yearly average cost of about N24.1 billion ($79 million).

A popular economist who would not want his name in print said the net proceeds of the Eurobond would naturally be less than the amount quoted due to service charges incurred in the process, “but we would be debited with $1 billion.”

“If you factor in these costs, you begin to ask whether we should have been here. It is irritating that in the midst of these challenges, misappropriation, huge governance cost and outright embezzlement of public fund still persist.

“The budget items of some ministries are clear fraud and these have put the country on an unsustainable path. What is there to celebrate about the Eurobond? Is it that we are now committing our young generations, even the unborn, to poverty and immediate struggle?” the economist queried.

But the Minister of Finance, Mrs. Kemi Adeosun, in a statement, said: “Nigeria is implementing an ambitious economic reform agenda designed to deliver long-term sustainable growth and reduce reliance on oil and gas revenues while reducing waste and improving the efficiency of government expenditure.

“We are establishing the building blocks for long-term growth and making the hard decisions that must be made to reset our economy appropriately.”

The Director-General of Debt Management Office, Dr. Abraham Nwankwo, also said: “Nigeria is delighted to have successfully priced its third Eurobond issue…The Eurobond is the latest step in a broader debt strategy designed to significantly re-balance our debt profile towards longer term financing and reduce the burden of interest on our annual budget.”

A director at Union Capital Markets Limited, Egie Akpata, said he was sure that the country would raise the amount and predicted an oversubscription earlier, but expressed worry on the pricing, which he said would have been a lot lower if the fundamentals did not get this bad.

“Eurobond is the easiest platform for international fund raising for the country now, because there is no string attached, unlike the International Monetary Fund and the World Bank.

“With the assurance that our daily oil earnings may be more or less this amount, it is not a ‘back breaking’ deal. But considering the exchange rate, local debts would be better off, as the total cost incurred would be less,” he said.

http://investorsking.com/nigeria-to-service-1b-eurobond-with-n361b/

DIRECTIONLESS






That's the word for me

This what I was trying to tell you, PassingShot, the premium offered is way too high and we will be serving the debt with more money than we got.

Oga, it is borrowing and the difference between bond sales and conventional borrowing is actually our disadvantage. For instance, the government is issuing this bond at a premium high (interest rate) to attract investors. While in conventional borrowing interest are way lower (foreign institution) and costs of servicing debt are cheaper but when there is no foreign institution that wants to borrow us due to the current headwings in the country and the downgrading by credit ratings in recent time. The government result to borrowing (bond sale) at a very 'High Cost'. Don't forget this is money we really do not have.

Let me ask you, why are investors rushing the bond giving the level of risk exposure and uncertainty?

It simple, we are offering more than they can ignore.

chaiii..economics gives me an headache...

already reading the numbers gives me a headache...

They have not answered Fayose's question of whether they are planning to repay from the federation account ... If so the money should be shared among the cconstituent arms of government... FG States and Local governments... Since all will bear the brunt of repayment

and when the oil price drop again..??..

our leaders are all crazy...

we should only live on what we earn..no more debts....

Nigerian govt always relying on paperwork instead of realistic economic strategies.

If GEJ was acclaimed to be clueless, I wonder what Bubu will be?

Kontinue, we're watching you

Someone is just hearing loan, loan and the country is still in stagnation. May God help this country.

Check my signature for your quality and stylish footwears.

Hmmm!

That's about 70% ratio!

I think this is too high. But what other options do we have in getting the money we so badly need?

We have been borrowing since time immemorial yet we have nothing to show for it. Buhari has been in power for almost 2 years no single positive outlook

Buhari Nigeria na God only way go save us from this our problem

Have you blamed GEJ today







Apc .............. Provide our buhari

Good

Children of hate don come again.
I didn't read anywhere in the article where the detractors offered any shred of alternative source of revenue.
If the same eurobond had failded (thank God it was a HUGE success) these same wailing zombies would still have come to blame Adeosun and caller her unprintable names.

The reality is you lots were happy with the vandalisation of pipeline even though we know the gov need funds to execute its plan. Now that they have successuflly (using their term) sold the future of your unborn children, you are here again complaining. The only possible alternative is for government to dip its dirty hands into the pension fund. I am sure these same "ekpas" would still cry fowl.

For me, having infrastructure is unnegotiable, now that revenue are low, we need the cheapest "loan" we can get and this eurobond is a great deal. Is their a price to pay? Of course yes. But that price cannot and should not be lack of needed infrastructure of the nation.

Having said that, Adeosun and her team should realise that they have not done anything we have not seen before. Getting money from foreign investors is not new to Nigeria. So while some of us are relatively happy with this news, we are not excited "yet" until we see actual utilization of the funds for the purpose which its meant. If that happens then she and her team would have written their name among the true hero/heroines of this country.

Geonigga:
so this recession is really biting hard on you.

lol.. Wetin we go do naa?

Has this wicked govt not done enough already? What an insensitive and dumb govt we have

I'm sure a lot read and don't even understand the message

This debt management issue is quite technical but interesting

SmartChoices:
They have not answered Fayose's question of whether they are planning to repay from the federation account ...

Stop talking nonsense. It's Monday Morning and get busy with real life issue.

How's debt supposed to be serviced?

From OBJ, Yar Adua, Jonathan and Now Buhari, how have they serviced the debt? Go and study to show yourself approved and stop blindly following what Fayose (a confused man) is saying

SmartChoices:

If so the money should be shared among the cconstituent arms of government... FG States and Local governments... Since all will bear the brunt of repayment

Your handle says 'smartchoice' but your comment is devoid of smartness. Ibori, Peter Odili, Fayose, Jonah Jang etc were/are governors, who looted allocated funds. You want loans to be given to criminal CEO? Which is better? to use the bond in funding power, Lagos Ibadan road, Infrastructure that would benefit many states at once or share the money to looters and no one benefits?

Pathetic people in this country

WHERE IS ADEOSUN? I NEVER HEARD HER FOR A WHILE OR SHE TOO ON HOLIDAY IN LONDON MASSAGING BUBU NI?

What we want the government to do is to
1. Reduce cost of governance. Try to find an acceptable ratio considering economic considerations and comparison with top economies.
2. Transparency. Create an organization like transparency international here in Nigeria, one that works with the senate and legislators to provide Nigerians with transparent reports on Goverment expenditures.
3. With this trust in place, Government can now start talking of 30billion or what ever
4. Reverse bad economic policies that has brought us here. Importation policies, Niger Delta, social welfare - it's simply not sustainable and transparent enough, approach to corruption should be about the system and not individuals...etc
Can go on and on

Off course we all know our leaders, they are just there for their pockets, they are not ready to salvage d situation in this country, if d money is borrowed, it will not be used as planned, it means more money to be stolen, so we should live on our warning

We secure our future by the ability to borrow more?

You borrow 305 bn and pay back 361 bn after 15 years. What is wrong there? Is it not a loan? This is very misleading because the interest paid back is 56bn and not 361 bn.

davodguy:


Stop talking nonsense. It's Monday Morning and get busy with real life issue.

How's debt supposed to be serviced?

From OBJ, Yar Adua, Jonathan and Now Buhari, how have they serviced the debt? Go and study to show yourself approved and stop blindly following what Fayose (a confused man) is saying



Your handle says 'smartchoice' but your comment is devoid of smartness. Ibori, Peter Odili, Fayose, Jonah Jang etc were/are governors, who looted allocated funds. You want loans to be given to criminal CEO? Which is better? to use the bond in funding power, Lagos Ibadan road, Infrastructure that would benefit many states at once or share the money to looters and no one benefits?

Pathetic people in this country

If it's to be serviced with our national resources then it must be shared among all tiers of government.... I love democracy... Who accused ibori of looting? Oga Constitution is sacrosanct.... It must be shared!

PassingShot:
Hmmm!

That's about 70% ratio!

I think this is too high. But what other options do we have in getting the money we so badly need?

zombie I thought ur sickler bubu recovered much loots then y do we badly need money