Nigeria to service $1b Eurobond with N361b

L-R: Nigeria;s finance minister Kemi Adeosun and the country’s acting president Yemi Osinbajo at the 2nd Presidential Quarterly Business Forum in Abuja on Monday, January 23, 2017

Govt recovers N54.1 billion through whistleblowing policy
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 told The Guardian that 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.

The Executive Director of Centre for Human Rights and Conflict Resolution, Idris Miliki, said with the President’s absence, investors’ risk assessments would always be on the high side.

Besides, he said that both investors and those in acting capacity would approach with caution any economic decision now, because the truth about the head of government is shrouded in uncertainty and that is a risk for investment.

Meanwhile, the Federal Government’s whistleblower policy has so far led to the recovery of $151 million and N8billion in looted funds.

The government yesterday said it would not disclose the identities of the whistleblowers or make public when they would receive the 2.5 to 5 per cent reward promised.

If the whistleblowing policy is well managed, it will boost the fight against corruption so that the nation’s resources can be used to develop the country rather than allowing corrupt leaders to siphon them for use only by their families.

In an interview with The Guardian, Minister of Information and Culture, Alhaji Lai Mohammed assured that government would not renege on its promise, arguing that disclosing the identities of the whistleblowers or when they would be rewarded would jeopardise the entire programme.

“We cannot disclose to you when where or how the whistleblowers will be paid, the moment we do that, we have blown their cover and this will jeopardise the entire programme so we have to protect their identities. But nobody will receive anything below 2.5 per cent, there is no question about that,” he said.

The Federal Ministry of Finance in December 2016 devised a whistleblower policy aimed at encouraging anyone with information about a violation, misconduct or improper activity that impacts negatively on Nigerians and government.

The policy stipulated that “In order to encourage Nigerians to key into the whistleblowers’ scheme, if there is a voluntary return of stolen or concealed public funds or assets on the account of the information provided, the whistleblower may be entitled to anywhere between 2.5 per cent (minimum) and 5.0 per cent (maximum) of the total amount recovered.”

Reacting to the development, the lead Director, Centre for Social Justice (CSJ), Eze Onyekpere expressed reservations over the authenticity of government’s claim and demanded that it tells Nigerians where the recovered money would be deployed.

“They should tell us from who they recovered the money and where they want to deploy it. It’s quite difficult for anybody to believe, so he should tell us from who they recovered the money and what they want to do with it because it is a lot of money, you are talking of over N45 billion by the official exchange rate. He can claim anything, nobody is sure of what he is saying.”

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  • Tru

    This news item shows that The Guardian is fast degenerating to a junk newspaper. The head of the wailers club! When the government is not doing anything they are the first to promote articles of government non performance, which is good. When government now does something like the eurobond, they are the first to condemn it. What do you guys want? To dig ourselves out of the hole the previous admin put us, we need forex to build infrastructure and diversify our economy and finance the budget deficit. With the dwindling oil production and little progress with engaging the Niger Delta militants, we have basically two other choices. 1) Steal money. 2) Borrow money.

    Fortunately, government cannot steal money like Andrew Yakubu did, so we are only left with one choice, to borrow. Now you guys are promoting news to condemn government borrowing of $1b. If you want to be sincere, you need to encourage the government to even secure much more forex line of credit.

  • Olumide Soneye

    May be i should refinance my house at the present rate of 4.5% and take a lot of cash out to buy Nigeria bond at 7.875%.

    • Tru

      That may be a good idea. Though the yield may reduce to about 7.5% at the secondary market when available. I think Nigeria’s bond is a relatively safe bet for those of us who are from the country and can reasonably judge that the risks are not as high as portrayed outside the country.

  • Christopher Adodo

    Borrowing is not the right way for the
    Firstly, I doubt if the Finance Minister have what it takes to take the country out of the woods. Because a country cannot be indebted up to its neck and continue to borrow more money, without paying first it’s indebtedness.
    And must first reduce the Federal Government over heads and check monetary leakages in the system. Simply put sew your cloth according to your size.
    Secondly, Nigeria is not America, that has strong manufacturing and export base, that cut across all sectors.
    At best Nigeria is a one export resource sector. Also, Nigeria is not prudent, malfeasance, corrupt and lack good accountability.
    Thirdly, it’s reminds me of Mr. Shagari, government borrowing from the so called Paris Club and other sources. And at the end left the country indebted to the sum of thirty seven billions dollars.
    And when the late Mr. Awo’s questioned the reasons behind those loans, he was castigated. And was eventually paid off by Mr. Obasanjo, through swapping and debt forgiveness.