Nigeria’s planned $2.5 billlion Eurobond to help lower government cost

A proposed $2.5 billion Eurobond to refinance some of Nigeria’s treasury bill portfolio will not increase its overall debt stock but will help lower cost, the Debt Management Office (DMO) said on Friday.

Proceeds from the bond sale would be converted to naira and used to redeem a more expensive local debt, thereby improving the government’s debt service ratio, the DMO said in a statement.

Finance Minister Kemi Adeosun said on Wednesday that the country plans to redeem 762.5 billion naira worth of treasury bills and that it would save government 64 billion naira each year after the refinancing is completed.

In January, the head of the debt office told Reuters the government would consider raising $2.5bn through Eurobonds in the first quarter to refinance a portion of its domestic treasury bill portfolio at lower cost.

Nigeria wants to refinance $3bn worth of a local treasury bill portfolio of 2.7 trillion naira.

Eurobonds make up more than a fifth of Nigeria’s $15.35bn foreign debt portfolio as of September and more than half of interest paid in the third quarter. Total domestic debt stood at 15.68 trillion naira by September.

The West African country wants to switch its borrowing mix so that foreign loans account for up to 40% of its total debt portfolio by 2019, from about 25%, to lower its funding costs and lengthen the repayment period, the DMO said.

Nigeria has reappointed the banks that handled its last Eurobond sale – Citigroup, Stanbic IBTC Bank and Standard Chartered Bank – for the new bond sale. Read more on this here.