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Proposed $3.3bn external borrowing is to finance 2020 budget, Eurobond ― DMO

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DMO, External borrowing

By Elizabeth Adegbesan

The Debt Management Office (DMO) has clarified that the proposed $3.3 billion external borrowings is meant to finance part of the 2020 budget deficit of N2.18 trillion and refinance the federal government’s Eurobond maturing in January 2021.

The DMO disclosed this yesterday in a press statement released on its website.

In December 2019, President Muhammad Buhari signed the 2020 Appropriation Act into law which content included a total expenditure of N10.594 trillion, Capital Expenditure of N 2.465 trillion, Recurrent Expenditure of N4.842 trillion, Statutory Transfer of N560.4 billion, Debt Servicing of N2.72 trillion and Fiscal Deficit of N2.18 trillion.

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According to DMO, the Act provided N850 billion as external borrowing to finance part of the budget deficit of N2.18 trillion. The proceeds its said will be used to finance projects included in the Act including power.

The office also noted that the federal government plans to refinance a $500 million Eurobond maturing in January 2021 hence will need $3.3 billion to carry out the plans.

The report stated:” The Debt Management Office by this Press Release seeks to provide clarification on a proposed $3.3 billion External Capital raising planned for the year 2020.

“The Appropriation Act, 2020 includes a provision of N850 billion (equivalent to about $2.786 billion at the Budget Exchange Rate of $/N305) as New External Borrowing to part-finance the deficit of N2.175 trillion in the Budget.

“In furtherance of the Government’s commitment to develop infrastructure, the proceeds of the $2.786 billion will be used to finance Capital Projects in priority sectors of the economy that are included in the 2020 Appropriation Act. The projects include those in power, transport, works and housing, aviation, health, education, agriculture, and rural development.

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“Mindful of the need to moderate Debt Service Cost, the plan for the raising of the $2.780 billion capital is to first maximize financing from relatively cheaper concessional and semi-concessional external sources where available, and the balance, if any, from the International Capital Market (ICM) through the Issuance of Eurobonds.

“In addition to the $2.780 billion for the Budget, Nigeria has a $500 million Eurobond which will mature on January 28, 2021 (6.75 percent $500 million 2021). Given that the Eurobond will mature early in the year 2021, the plan is to refinance it through the issuance of a Eurobond in 2020. Thus, the new external capital raising for the year 2020 to part-finance the 2020 Budget Deficit and refinance the Eurobond maturing in January 2021 is $3.3 billion.

“Whilst the approval process for the proposed USD3.3 billion external capital raising is expected to be completed soon, Transaction Advisers for a potential Eurobond Issuance will be through Open Competitive Bidding process.”

Vanguard News

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