Domestic Bonds

FG to halt Eurobond issuance, other external borrowing, blames debt service obligation – The Whistler Newspaper

The Nigerian government is wary of external borrowing to fund its budget deficit as the cost of servicing loans becomes increasingly unfavorable.

The global trend of rising interest rates to curb inflationary pressure may force the Debt Management Office to focus its borrowing on the domestic market, the Director General of the Federation’s Budget Office, Ben Akabueze, has revealed. in a monitored interview on Channels TV.

But the government is even more cautious about the eurobonds it issued for $5.25 billion between 2021 and 2022.

“The deficits will be financed by loans and mainly national bows. Currently, we have access to some foreign borrowing from multilateral and bilateral sources.

“The source of foreign borrowing that is clearly contested is access to the international capital market. And at this point, I don’t believe the DMO intends to do that at this time,” he said.

The European Central Bank on Thursday revised the region’s key interest rates by 50 basis points, its first in 11 years.

In June, US inflation forced the US Fed to raise the key funds rate to a range of 1.5% to 1.75% and is expected to raise it by another 50 basis points or 75 basis points in July.

Nigeria recently increased its rate from 13% to 14%, the second time such an increase has been made in 2022.

The Nigerian government is already in debt to the tune of $100.1 billion (41.6 billion naira) and has spent up to $2.3 billion to service the loans from January to June 2022.

Official data reveals that Nigeria paid $694 million (288.64 billion naira) for external debt service and $1.61 million (668.68 billion naira).

Currently, Nigeria’s debt on the issuance of the Eurobond and promissory notes is $16.52 billion.

“The reality is that these domestically issued bonds do not mean that only domestic investors are buying the bonds. This is something to note. So we still have external flows in the market to buy bonds.

“Beyond that, it seems that the internal market has the absorptive capacity. If you look at the banks’ balance sheets, it’s not like there’s pressure on their balance sheets for funding,” he commented on the government crowding out local businesses.