Nigeria is looking to raise $2 billion by issuing dollar-denominated bonds to domestic investors to finance its budget deficit and support the national naira currency, according to Bloomberg.
Nigeria, Africa’s most populous country, faces a significant revenue shortfall due to below-capacity oil production and a very narrow tax base.
The naira is also under pressure. It has been devalued against the dollar since last year when President Bola Tinubu relaxed exchange rate rules and allowed it to float, and is still under pressure due to a shortage of dollars in the local foreign exchange market.
The domestic bonds have a total value of $2 billion, with the first series being issued today for $500 million. The bonds will have a five-year maturity.
The bond, which is available to Nigerians residing at home and abroad, as well as local pension companies, targets funds from “household accounts, diaspora remittances and foreign investments,” United Capital said. Dollar cash deposits will not qualify unless they were made in household accounts at least 30 days before issuance.
Nigeria is issuing dollar-denominated bonds locally as market conditions have not been favorable for offering Eurobonds. The government has approved a 28.8 trillion naira ($18.1 billion) spending plan for 2024, with a deficit of 9.8 trillion naira, which it aims to finance with domestic and international borrowing.
African countries were shut out of international capital markets after global interest rates rose sharply in 2022 following tight monetary policy in the United States and the EU in response to rising inflation. But several African countries have returned to international markets this year, including Ivory Coast, Benin, Senegal, Kenya and Cameroon.
2024-08-18 21:43:55