FG seeks Senate approval for $500 million Eurobond

The Federal Government has urged the Nigerian Senate to approve$500 million Eurobond to fund the 2016 Budget deficit.

In a letter to the Senate read by president of the Senate,Bukola Saraki, Vice President Yemi Osinbajo explained that the request wasbased on the 2016 appropriation, which provided for new borrowings.

Part of the letter read:  “The Senate may wish to refer toitem 229 and 244 of the 2016 Federal Government of Nigeria Appropriation Actwhich provided for a deficit of N2, 204.74 billion and new borrowings of N1,818.68 billion, respectively.

“The Act also provided for domestic borrowing of N1, 182.80billion and external borrowing N635.88 billion in line with item 245 and 246,respectively.

“The Senate may also wish to note that while the approveddomestic borrowing has been fully incurred, the N635.88 billion on externalborrowing has not been fully accessed.

“The external borrowing incurred today consist of 600 milliondollars from the African Development Bank and one billion dollars Euro Bond forthe International Capital Market (ICM) only.

“It was based on the 2016 appropriation and applying the averageexchange rate, there is headroom to access further international funds.

“Following the high oversubscription of one billion Euro loan,we wish to take advantage of the favourable market conditions to issue a eurobond debt management of 500 million dollars to fund implementation of the 2016budget.

“The Senate may wish to note that in line with the requirementof security issuances in the ICM, a specific resolution of the NationalAssembly as a firm confirmation of the approval of the legislature is required.

“This is for the Federal Republic of Nigeria to borrow the 500million dollar through the issuance of the Euro Bond debt instrument in theICM.

“The Senate may wish to note that the proceeds of the Euro Bondare to be used as funding sources to finance the budget deficit, includingcapital expenditure projects as specified in the 2016 Appropriation Act,’’saidOsinbajo.

Exlaining further, he said: “with respect to the terms andconditions of the Euro Bond, the letter indicated that the terms and conditionsof the Euro Bond may only be determined at the point of issuance.

“It is important to note that previous issuance of the 500million dollars and 1 billion dollars consisting of two tranches of 500 milliondollars and 1 billion dollars in January, 2011; July, 2013 and February, 2017.

“We issued coupons of 6.75 per cent, 5.13 per cent, 6.38 percent and 7.88 per cent based on prevailing market conditions.

“The Debt Management Office (DMO) and the Federal Governmentappointed Transaction Parties to the issue are committed to working assiduouslyto secure the best terms and conditions.’’