Nigeria to float government bond tomorrow as part of drive to bridge budget funding gap

NIGERIA'S federal government has announced plans to launch an auction for a combined sum of N150bn ($360m) in bonds through the local debt market as part of its programme to raise capital in a bid to meets its funding needs.

Die to take place tomorrow, the programme will see the government seek to woo investors who will purchase bonds to help bridge the government's funding deficit. To be sourced in pairs, the offering seeks to raise N75bn at a coupon rate of 12.50%, set to mature by January 2026 through its first note while the second carries the same value but at a 13%, which expires January 2042.

According to the offer terms, it will be allocated at N1,000 per unit subject to a minimum subscription of N50,001,000 and in multiples of N1,000 thereafter. Nigeria’s public debt climbed to N38trn in September 2021, 18% higher than a year earlier, according to the government's Debt Management Office (DMO).

In December, the DMO said the government’s obsession for borrowing to fund critical infrastructures remains too hard to cure. Last year, Nigeria spent 85.5% of its revenue servicing debt and the figure is bound to hit 92.6% this year according to the International Monetary Fund (IMF).

With such high gearing, the IMF fears that Nigeria could be plunged into a debt sustainability crisis soon. A $4bn Eurobond raised in September last year went into budget support and provided a bulwark for its foreign exchange reserves, which took a hit from an oil crash and the Covid-19 outbreak.

Patience Oniha, the DMO, director-general, said government will not tap into that market this year but will be looking at other sources of revenue.. In December, the federal government announced that it plans to borrow N6.3trn to plug its funding gap for 2022.