The Federal Government has announced plans to raise $1.7 billion through the issuance of Eurobonds to address revenue shortfalls in the 2024 budget.
This was revealed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during a briefing at the State House in Abuja on Thursday.
Edun also disclosed that an additional $500 million will be raised through Islamic Sukuk bonds, emphasizing the government’s intention to explore various international money market instruments.
“The issuance of these bonds is part of the Nigerian 2024 Appropriation Act as amended,” Edun explained.
A Budget in Deficit
The 2024 national budget, pegged at ₦28.7 trillion (approximately $17 billion), has a projected deficit of ₦9.1 trillion ($5.2 billion).
This shortfall will be financed through a combination of domestic and international borrowing.
Edun stated that the borrowing plan will be submitted to the National Assembly before the end of the year to secure the necessary approvals.
“Our goal is to ensure the smooth implementation of the budget by securing funds as quickly as possible,” he added.
Earlier this year, Nigeria raised approximately $900 million from its first domestic dollar-denominated bond issuance.
The new Eurobond, according to Edun, will help reintroduce Nigeria to the international debt capital markets.
Rising External Debt Concerns
While the planned issuance aims to raise critical capital, it also raises concerns about Nigeria’s growing external debt profile.
The country’s external debt currently stands at $42.9 billion, which represents about 39% of its total debt stock.
In addition, Nigeria’s domestic debt has surged to ₦66.9 trillion as of the second quarter of 2024, constituting roughly 60% of the country’s total debt.
Economists warn that reliance on foreign currency-denominated debt could lead to higher interest costs for servicing these loans.
The continued devaluation of the naira is another factor that will escalate the cost of servicing external debt.
Balancing Borrowing and Economic Growth
The Federal Government’s decision to borrow from international markets reflects its need to address fiscal gaps while pursuing economic recovery.
“The issuance of Eurobonds and Sukuk bonds aligns with our strategy to diversify funding sources,” Edun noted.
He also emphasized the government’s commitment to maintaining a balanced approach to borrowing.
“While borrowing is necessary, we are mindful of its impact on our overall debt sustainability,” he said.
However, critics argue that increasing external debt could burden future administrations and complicate Nigeria’s long-term economic stability.
Implications for Debt Servicing
Analysts have highlighted the potential risks of relying heavily on external loans.
Foreign currency-denominated debt, such as Eurobonds, often attracts higher interest rates than domestic borrowing options.
The depreciation of the naira further exacerbates these challenges, increasing the amount Nigeria needs to pay in naira terms to meet its dollar obligations.
This trend, if not managed carefully, could strain the government’s ability to allocate resources for infrastructure, healthcare, and other essential sectors.
Public Reactions and Economic Outlook
The announcement has drawn mixed reactions from stakeholders and the public.
Some view it as a pragmatic step to bridge budgetary gaps, while others worry about the implications of ballooning debt.
Financial analysts have called for transparency and prudent use of the borrowed funds to ensure they deliver value to Nigerians.
“The success of this borrowing plan depends on how well the funds are utilized. Mismanagement will only deepen our fiscal woes,” a Lagos-based economist noted.
Edun assured Nigerians that the government is committed to using the funds to stimulate economic growth and improve public services.
“We are focused on addressing key issues such as infrastructure development, energy reforms, and social programs,” he said.
