Acting President, Prof Yemi Osinbajo has written to the National Assembly, seek ing its approval to issue a Eurobond debt instrument of $500 million to fund the implementation of the 2016 budget, which runs it may 2017.
The $500 million bond, according to the acting president, would be issued between February and March 2017, subject to market conditions, in order to meet government’s approved capital expenditure funding plan.
In the letter read by Speaker Yakubu Dogara at Wednesday’s plenary, Osinbajo noted that items 229 and 244 of the 2016 appropriation act, provided for a deficit of N2, 204.742 billion and new borrowings of N1, 818, 675 billion, adding that the Act also provides for domestic borrowing of N1,182,798 billion and external borrowing of N635.877 billion in items 245 and 246.
He said while “the approved domestic borrowing has been fully incurred, the N635.877 billion external borrowing has not been fully accessed.
The external borrowings incurred to date consist of $600million from the African Development Bank and USD 1 billion Eurobond from the international capital market only.
“Thus, based on the 2016 appropriation and applying the average exchange rate, there is headroom to access further international funds”
The acting president said: “Following the high oversubscription to the recent USD 1 billion Eurobond issuance, we wish to take advantage of favourable market conditions to issue a Eurobond debt instrument of USD 500 million to fund the implementation of the 2016 budget, which is still ongoing.
“The Rt. Honourable Speaker may wish to note that in line with the requirement of securities issuances in the ICM, a specific resolution of the National Assembly, as a firm confirmation of the approval of the legislature for the Federal Government of Nigeria to borrow the USD 500 million through the issuance of a Eurobond debt instrument in the ICM is required.”
The letter continued: “The Rt. Honourable Speaker may wish to note that the proceeds of the Eurobond are to be used as funding sources to finance the budget deficit, including capital expenditure projects as specified in the 2016 appropriation act.
“With respect to the terms and conditions of the Eurobond, the legislature may wish to note that being a market-based instrument, the terms and conditions of the Eurobond may only be determined at the point of issuance.
“It is important to note that the previous issuances are USD 500 million, USD 1 million (consisting of two tranches of USD 500 million) and USD 1 billion in January 2011, July 2013 and February 2017, respectively, were issued at coupons of 6.75%, 5.125%, 6.375% and 7.875% based on the prevailing market conditions.
“The Debt Management Office and the Federal Government are appointed transaction parties to the issue and are committed to working assiduously to securing the best terms and conditions for the Federal Republic of Nigeria.
“Accordingly, the Rt. Honourable Speaker is requested to kindly approve by resolution of the National Assembly the issuance of USD 500 million Eurobond in the international capital market for the funding of the budget.”