MPC Members Worry Over Nigeria’s $15.9bn Eurobonds Debts

With the rising level of Nigeria’s debt, members of the Monetary Policy Committee of the Central Bank of Nigeria (CBN)  have expressed worries over the country’s ability to service and repay both is external and local debt levels.

Particularly of concern is the country’s appetite for Eurobonds, at high interest costs, with the associated exchange rate risk, they said.

Nigeria currently has a total of  $15.918 billion outstanding Eurobonds debts at at March 2022 and continues to accumulate more.

The country had in the first quarter of the year spent N898.6 billion in servicing both local and foreign debts. With a N6.26 trillion budget deficit and over N4 trillion still budgeted for fuel subsidy this year, the federal government plans to further increase its borrowings this year through Eurobonds.

Nigeria’s total debt stock is currently at N41.6 trillion as at the end of the first quarter of this year, an amount the International Monetary Fund projects to cross N46 trillion by the end of this year.

A breakdown of the $15.918 billion Eurobonds debts as obtained from the Debt Management Office (DMO) indicates as follows:

$500 million, July 2023 Eurobond raised at 7.625 per cent: $1.118 billion November 2025 Eurobond, at 6.500 per cent; $1.5 billion November 2027 Eurobond, at 6.125 per cent; $1.25 billion September 2028 Eurobond, at 8.375 per cent and $1.25 billion March 2029 Eurobond.

Other include the 7.143 per cent   $1.25 billion due by February 2030; Eurobonds $1.0 billion January 2031 at 8.747 per cent interest  yield; Eurobond, 7.875 per cent; $1.5 billion FEB 2032 Eurobond, 7.375 per cent;  $1.5 billion September 2033 Eurobond, 7.696 per cent; $1.25 billion February 2038 Eurobond, 7.625 per cent; $1.5 billion November 2047 Eurobond, at 9.248  per cent; $750 million January 2049 Eurobond and 8.25 per cent $1.25 billion due by September 2051 Eurobond.

Members of the MPC said they are concerned about the government’s appetite for borrowing particularly at the Eurobond market. A member of the MPC, Robert Asogwa while expressing his worry over the rising debt said “particularly worrisome about the debt structure, is the increasing accumulation of Eurobonds in the external debt component, while minimising concessionary loans.

“The unexplained government preference of Eurobonds at high interest costs, with the associated exchange rate risk may likely hurt Nigeria sooner than anticipated.

“The escalating fiscal sector deficits with the attendant rising debt ratios are part of the weak links in the domestic economic environment. The poor revenue growth in a period of expanding government expenditures has continued to soar the budget deficit levels in the first quarter of 2022, similar to the trend witnessed in 2021.

“Unfortunately, several other African countries are involved in this excessive rush for Eurobonds. Already, Nigeria is being mentioned by the IMF as one of the countries that may likely move into debt distress, given the staggering $100.07 billion dollars of public debt stock as at March 31, 2022.

Another member of the MPC, Professor Festus Adenikinju, a member of the MPC, it is important to curb the appetite of the government for debt.

“I am worried that Nigeria is not able to benefit maximally from the current upsides in the global oil market. We were not only unable to ramp up our production levels to meet the OPEC quota, no accretion to foreign reserves is also taking place, and government deficit and public debts are going north at a time we should be writing down our debt profiles and even building up a buffer for the inevitable raining days ahead.”

He also raised concerned about government budgetary performance, saying “the rising share of governments in total credit to the economy by the banking system suggests crowding out effects of private sector borrowings. Governments should divert to non-debt means of funding its activities.”