Federal lawmakers have approved the executive’s request to sell a $1 billion Eurobond to help Nigeria finance its budget deficit, Senate spokesman, Aliyu Sabi Abdullahi, said on Wednesday.
Nigeria is suffering its first recession in 25 years and needs to find money to make up for shortfall in its budget. Its revenues have plunged along with global oil prices and militant attacks in its crude-producing heartland, the Niger Delta.
Finance Minister, Kemi Adeosun, Central Bank Governor, Godwin Emefiele, and other senior government officials have been meeting investors this week in London and the United States on a roadshow to issue the bond with a 15-year maturity.
Adeosun said in October that Africa’s biggest economy had commitments for half the amount it wanted to raise from the Eurobond, to be issued in dollars.
“The only request for approval from the executive was … for the issuance of $1 billion Eurobond … for the funding of the 2016 budget deficit, and we immediately granted the approval,” Abdullahi said.
It is believed that the deal to approve the Eurobond sale was reached when the Senate President, Bukola Saraki, and the Speaker of the House of Representatives, Yakubu Dogara, held a closed door meeting with the Acting President, Prof. Yemi Osinbajo.
Low oil prices have triggered chronic dollar shortages in the economy and battered the naira, which lost a third of its official value last year and is now trading at a 39 percent discount on the black market.
A source with knowledge of the investor meetings, organised by Citigroup and Standard Chartered Bank, told Reuters that oil production and currency were the two main issues investors were considering in pricing the bond this week.
Investors also asked about the continuity of government policies in the absence of President Muhammadu Buhari, who is in Britain on medical leave.
“The real concern is oil production and FX. Will there be a further devaluation this year?” the source said, adding that investors queuing for the dollar bond were looking at a potential yield above 7 percent.
Senate spokesman Abdullahi said the government wanted to use part of the Eurobond proceeds to finance two rail projects. The source added that recurrent expenditure would also be funded from the bond.
The government has laid out plans to spend a record 6.86 trillion naira ($22.5 billion) to help pull Nigeria out of recession in a draft 2017 budget sent to parliament for approval. It planned to spend 6.06 trillion naira last year, but struggled to fund it.
The government has set out a $30 billion overseas borrowing plan to finance planned infrastructure projects until 2018, but analysts are sceptical whether it would be able to raise the funds.
