Nigeria’s Debt Profile Expands as DMO Raises $4 Billion Eurobonds

Patience Oniha, Director-General, Debt Management Office

Nigeria’s Debt Profile Expands as DMO Raises $4 Billion Eurobonds

After an intensive two days of virtual meetings with global investors, the Debt Management Office has confirmed that Nigeria has raised $4 billion through Eurobonds. The DMO also added the Eurobond was oversubscribed more than three times the value offered as the order book peaked at $12.2 billion.

“This enables Federal Government to raised additional $1 billion, above $3 billion initially planned”, the Nigerian debt agency noted. Explaining the capital raise dynamics, DMO said the exceptional performance has been described as one of the biggest financial trades to come out of Africa in 2021.

It further stated that bids for the Eurobonds were received from the investors in Europe, America as well as Asia.

“There was also good participation by local investors”, the DMO added, saying that the size of the order book and the quality of investors demonstrate confidence in Nigeria.

The long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 – 2023, the agency explained.

“Since the Eurobonds were issued as part of the New External Borrowing in the 2021 Appropriation Act, the raising of US$4 billion through Eurobonds provides a significant amount of funds to finance projects in the Act, thus contributing to the implementation of the 2021 Appropriation Act”, DMO said.

In the first half of 2021, Nigeria’s indebtedness crossed N35 trillion amidst fiscal slippage despite increased prices of oil in the global market. In a report, the Budget Office said net distributable revenue of the Federation stood at ₦2,012.63 billion in the first quarter of 2021, signified a shortfall of ₦95.69 billion or 4.54 per cent from the ₦2,108.32 billion projected for the period.

“This was driven largely by the substantial reduction in the inflow into the Federation Account from the oil sector”, it added.

It was noted that the non-oil revenue accruing to the Federation account increased by ₦266.90 billion (24.86 per cent) and largely augmented the oil sector shortfall of ₦358.36 billion (34.57 per cent) during the review period.

The percentage contribution of the different distributable revenue classifications in the first quarter of 2021 is presented, Budget Office noted. It also added that oil revenue, VAT, CIT, Customs & Special Levies contributed 55.90 per cent, 17.72 per cent, 15.97 per cent and 10.55 per cent respectively.

Based on the amended budget framework, the sum of ₦6,637.58 billion was projected to fund the Federal Budget in 2021, indicating a quarterly share of ₦1,659.39 billion.

A total of ₦1,091.42 billion was received in the first quarter of 2021. This amount was ₦567.98 billion (34.23 per cent) lower than the quarterly projection of ₦1,659.39 billion. It was however ₦99.17 billion (9.99 percent) above the ₦992.25 billion recorded in the first quarter of 2020.

The sum of ₦299.33 billion that was received from oil sources in the first quarter of 2021 was lower than the quarterly estimate of ₦502.75 billion by ₦203.43 billion (40.46 per cent).

On the other hand, FGN’s share of Solid Minerals revenue which stood at ₦0.86 billion was above its quarterly projection of ₦0.66 billion by ₦0.20 billion (29.71 percent).

Budget office said the FGN Share of company income tax of ₦179.76 billion, Value Added Tax of ₦100.83 billion and independent revenue of ₦391.07 billion were above their corresponding quarterly budget estimates of ₦170.43 billion, ₦59.61 billion and ₦265.47 billion by ₦9.33 billion, ₦41.22 billion and ₦125.59 billion respectively.

“All other non-oil revenue items fell below their quarterly budget projections”, the Budget office added. In the first quarter, total debt service payment stood at ₦1,088.70 billion representing an increase of ₦257.61 billion or 31.0 per cent above the ₦831.10 billion projected for the quarter.

It was noted that domestic debt service payment was higher than the quarterly budget estimate of ₦545.87 billion by ₦35.40 billion (6.48 per cent) during the period. The budget office noted that the actual domestic debt service paid was ₦581.27 billion during the quarter as against the sum of ₦235.22 billion planned for external debt service in the first quarter of 2021.

However, actual external debt service payment amounted to ₦231.83 billion, a difference of ₦3.39 billion below the quarterly projection.

Nigeria’s Debt Profile Expands as DMO Raises $4 Billion Eurobonds