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Nigeria taps global investment banks for Eurobond issuance amid fiscal pressures

Federal Government Looks to International Markets to Bridge Budget Gap and Revitalize Economy

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The Federal Government of Nigeria has embarked on a strategic move to engage leading global investment banks, including Citibank NA, JPMorgan Chase & Co, and Goldman Sachs Group Inc., to spearhead its forthcoming Eurobond issuance, signalling a return to the international bond market after a two-year hiatus. The move underscores the country’s determination to shore up its fiscal budget amidst mounting economic challenges.

In a bid to navigate its financial landscape, Nigeria has also enlisted the expertise of Standard Chartered Bank and the Lagos-based financial advisory firm Chapel Hill Denham to consult on the venture, further highlighting the government’s commitment to leveraging international partnerships for economic rejuvenation.

While the size of the Eurobond offer, expected before June, is yet to be determined, sources close to the transaction, who spoke on condition of anonymity due to the sensitive nature of the matter, indicated that Nigeria may target accumulating up to $1 billion in international loans throughout 2024. This external funding is deemed essential for bridging the significant budget deficit outlined in President Bola Tinubu’s ambitious spending blueprint for 2024, which aims to address fiscal shortfalls and stimulate economic growth.

Since assuming office in May 2023, President Tinubu has pursued an aggressive agenda to revitalize foreign investment inflows into Nigeria, implementing a series of reforms aimed at fostering a more conducive investment environment. These initiatives include currency devaluations to promote exchange rate flexibility, as well as measures to narrow the gap between policy rates and government security yields.

In a parallel development, the Federal Government has announced plans to borrow N450 billion from its third FGN bond auction of 2024, as detailed in the latest circular from the Debt Management Office (DMO). The auction, scheduled for March 18, 2024, aims to raise funds through the issuance of three different bonds, totaling the government’s borrowing target for the month.

With the budget deficit in the 2024 fiscal year projected at N9.18 trillion, the Federal Government remains committed to leveraging both domestic and international borrowing avenues to meet its financial obligations and drive sustainable economic growth.

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