DMO: FG Has Not Foreclosed Foreign Loans, Eurobond Issuance

The Debt Management Office (DMO) yesterday stated that the federal government has not foreclosed the possibility of issuing Eurobonds as part of its external borrowing plan for 2019.

The 2019 budget with a deficit of N1.92 trillion is to be financed mainly by borrowing N1.6 trillion, comprising N802.82 billion domestic and N802.82 billion foreign loans respectively.

The DMO said in a statement, issued in Abuja that it was refuting media reports to the effect that the federal government has no plans to issue Eurobonds as part of its external borrowing window in 2019.

According to the DMO, “The misrepresentation appears to have arisen during the Islamic Finance News Nigeria forum which held in Lagos on June 18, 2019, where the Director-General responded to a question on whether the federal government will issue a US Dollar-denominated Sukuk in 2019 which she stated was unlikely given the processes involved in the Sukuk issuance.”

The debt management agency noted that for the records, the 2019 Appropriation Act provides for New External Borrowing of N824.82 billion, equivalent of 2.7 billion at N305 per dollar

The DMO stated that the federal government plans to go for cheaper foreign loans to help it part -fund the 2019 Budget while exploring the issuance of Eurobonds, if necessary, to cover any shortfall.

“Consistent with the Debt Management Strategy of reducing debt service cost, the plan for raising the new external borrowing is to first access cheaper funding from multilateral and bilateral lenders as may be available. “Thereafter, any balance will be raised from commercial sources which may include securities issuance such as Eurobonds in the international capital market,” the DMO said.

It reaffirmed its determination to continue focusing on its objective of reducing debt service costs by emphasising borrowing from concessional sources while considering Eurobonds and other commercial sources as secondary options.

The country, which emerged from recession last year, has borrowed abroad and at home over the past three years to help finance its budgets and to fund infrastructure projects, but debt servicing cost is also rising.

The government has said it wanted to tap concessionary long-term loans to finance its 2019 budget in addition to borrowing at home.

It sold $3 billion in eurobonds in 2017, part of which it used to fund its budget that year.

The government then followed with a $2.5 billion eurobond sale last year to refinance local currency bonds at lower cost.

On Tuesday, the head of DMO, Mrs. Patience Oniha was quoted as saying at a conference in Lagos that there were no plans to issue Eurobonds this year