Nigeria plans $950mn Eurobond issuance

Nigeria is set to embark on another economic milestone by issuing a $950 million Eurobond in the international capital market for 2023. This announcement comes on the heels of the country raising approximately $1.3 billion in Eurobonds last month to finance critical capital projects outlined in the 2022 budget. The Finance Minister, while expressing confidence in the market's receptiveness to Nigeria, emphasized that the decision to tap into the market would hinge on favorable market conditions. Oluseyi Akinbi, Managing Director of Zedcap Partners, highlighted the necessity of seeking foreign capital through Eurobond issuance due to limited alternative funding options available for the country. Considering the stringent conditions imposed by institutions like the World Bank and IMF, the Eurobond market emerges as the most viable avenue for Nigeria to access capital. The current global economic landscape, marked by potential tightening of policy and increasing funding costs, has encouraged Nigeria to consider entering the market sooner rather than later. Akinbi noted that a favorable interest rate range between 8 to 9% would be conducive for Nigeria's upcoming Eurobond issuance. With the nation's abundance of oil reserves and a relatively low commercial debt ratio compared to its peers, investor confidence remains robust in Nigeria's ability to meet its obligations. Despite a 51.9% uptick in Nigeria's external debt over the past three years, experts reaffirm that the debt to GDP ratio remains within sustainable levels. However, concerns persist over Nigeria's debt service to revenue ratio, underscoring the need for enhanced revenue generation strategies alongside external borrowing. Akinbi acknowledged the challenges facing the government in navigating revenue deficits, exacerbated by the ongoing pandemic recovery and approaching elections. While the administration works on diversifying revenue streams and tightening tax regulations, the necessity of borrowing to sustain crucial economic initiatives remains inevitable. The government's efforts to boost revenue through measures such as bank levies, tax reviews, and reforms in the oil sector are underway but are expected to yield results over time. In the interim, leveraging external financing avenues appears as a strategic move to bolster the economy amidst prevailing challenges. Moving forward, Nigeria's engagement in the international capital market through Eurobond issuance stands as a pivotal strategy to secure funding for developmental projects and sustain economic growth in the face of evolving global dynamics.