Nigeria to Borrow $5.5bn to fund 2017 CAPEX & Debt Obligations

The Nigeria President, Muhammadu Buhari has written the Senate requesting for authorisation to borrow $5.5bn for the purpose of refinancing maturing domestic debt obligations of the Federal Government of Nigeria & the funding of the 2017 capital expenditure budget.

In a letter read by the Senate President to members of the upper chamber of the National Assembly “The Senate is requested to kindly approve the following external borrowings: Issuance of international Capital Markets through Eurobonds or a combination of Eurobonds and Diaspora Bonds for the Financing of the Federal Government of Nigeria’s 2017 Appropriation Act & Capital Expenditure Projects in the Act. Issuance of Euro bond in the ICM and/or Loan syndication by the Banks in the sum of $3bn for maturing of domestic debt obligations of the Federal Government of Nigeria”

Nigeria currently has a 15.1 trillion naira external debt stock which places its credit rating by Moody’s at B1 stable even though Fitch has downgraded Nigeria to B-. At the Annual Meeting of the International Monetary fund in Washington last week, it warned that Nigeria should be careful with its acquisition and management of foreign debt, especially considering that should this proposal be approved by the regulator, the Country’s total debt stock will rise to 19.6 trillion naira

Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.
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