Nigeria Approves $2.2B Borrowing to Fund Budget Deficit

AFRICAN BUSINESS AND ECONOMYNovember 25, 2024 at 12:58 PM UTC

TLDR

Nigerian lawmakers approve President Bola Tinubu's $2.21 billion foreign investor borrowing proposal to address a $5.46 billion budget deficit for 2023
Funding includes $1.7 billion in eurobonds and $500 million in sukuk; marks Nigeria's potential first eurobond issuance since 2022
Expectations for new eurobond issuance yields above 10% due to fiscal pressures and uncertainties linked to lower oil prices in 2025

Nigerian lawmakers approved President Bola Tinubu’s proposal to borrow $2.21 billion from foreign investors to address a 9.18 trillion naira ($5.46 billion) budget deficit for 2023. The funding includes $1.7 billion in eurobonds and $500 million in sukuk, as Finance Minister Wale Edun outlined.

This marks Nigeria’s first potential eurobond issuance since 2022, following a deferred sale earlier this year due to high costs. Instead, the government raised $900 million through domestic dollar bonds at a 9.67% yield.

Analysts, however, expect any new eurobond issuance to attract yields above 10%, reflecting fiscal pressures and uncertainties tied to lower oil prices in 2025. Current Nigerian dollar bonds are trading at varying yields, with 2029 notes at 9.45% and longer-term 2051 paper at 10.71%.

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Key Takeaways

Nigeria’s reliance on external borrowing highlights its fiscal challenges as oil revenue struggles to cover budgetary needs. While the move helps plug immediate funding gaps, rising borrowing costs and volatile oil prices pose long-term risks. Investors will closely monitor fiscal discipline and structural reforms to gauge Nigeria’s debt sustainability. The higher yields expected on eurobonds may reflect these ongoing uncertainties, impacting overall investor confidence.

Nigeria

Economy

Budget

Loans

Debt

Finance

Eurobonds