Nigeria Plans $1.7 Billion Eurobond Issue to Address 2024 Budget Deficit
The Nigerian government has announced plans to raise approximately $1.7 billion through the issuance of Eurobonds. The funds will be used to help cover a projected budget deficit of N9.1 trillion (around $5.2 billion). The announcement was made on Thursday by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, at the State House in Abuja.
The Nigerian government also plans to issue Islamic Sukuk bonds to raise an additional $500 million, further tapping into international capital markets to generate the much-needed funds. This move is part of the government’s broader strategy to secure funding for the N28.7 trillion ($17 billion) budget for 2024, which has a large gap due to low revenue collection, compounded by a decline in crude oil output.
“The borrowing will be in line with the 2024 Appropriation Act as amended,” Edun said, noting that officials are working to submit the borrowing plan to the National Assembly for approval “as soon as possible.”
The government’s budget deficit is expected to be financed largely through borrowing, marking a continued reliance on debt to meet fiscal needs. While Edun did not specify the exact issuance dates for the Eurobonds, the move signals Nigeria’s reentry into the international debt markets, after a period of focusing primarily on domestic debt.
Earlier this year, Nigeria raised about $900 million in a domestic sale of dollar-denominated bonds, and the proposed Eurobond issuance will represent a significant step in the country’s efforts to attract foreign capital.
Also Read: Nigeria’s Budget Deficit Falls by 29% to N2.83 Trillion in Q1 2024
However, the decision to issue foreign currency-denominated bonds carries risks. Nigeria’s external debt currently stands at approximately $42.9 billion, representing nearly 39% of the country’s total debt stock. This new borrowing will likely push Nigeria’s external debt higher, raising concerns over its ability to service that debt, especially with the naira’s ongoing devaluation.
The country has traditionally focused on managing its domestic debt, which as of Q2 2024 had ballooned to approximately N66.9 trillion (about 60% of the total debt). The shift towards external borrowing exposes Nigeria to greater risks, particularly the impact of higher interest costs on debt servicing, especially as the value of the naira continues to fluctuate.
The move to raise funds via Eurobonds and Sukuk comes amid growing concerns from international financial institutions. The International Monetary Fund (IMF) has cautioned that issuing dollar-denominated bonds could place additional pressure on the naira and escalate the costs associated with servicing Nigeria’s external debt.
The IMF also expressed concern over the government’s plan to introduce domestic foreign exchange securities to improve dollar liquidity in the official market. The Fund warned that such measures could lead to fragmentation in the foreign exchange market, further complicating Nigeria’s fiscal landscape.
Despite the IMF’s concerns, the need for external funding has become more urgent due to Nigeria’s ongoing budgetary challenges. With a heavy reliance on oil revenues, which have been inconsistent in recent years, the government’s efforts to plug the fiscal gap are increasingly reliant on borrowing from both domestic and international markets.
Nigeria’s decision to issue Eurobonds reflects the government’s strategic shift towards raising capital abroad, a necessary step given the substantial revenue shortfalls. However, the country must balance its desire for capital with the risks posed by an already high debt burden and a volatile currency.
