DMO clears air on proposed $3.3bn external borrowing

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The Debt Management Office (DMO) over the weekend provided clarification on the proposed $3.3 billion external capital raising planned for the year 2020 by the federal government.

DMO in a statement explained that the planned capital raising will be integrated to fund the budget deficit of N2.175trillion in the 2020 appropriation act.

According to the statement, “The Appropriation Act, 2020 includes a provision of N850 billion (equivalent to about $2.786 billion at the Budget Exchange Rate of USD/N305) as New External Borrowing to part-finance the deficit of N2.175 trillion in the Budget.

“In furtherance of the Government’s commitment to developing infrastructure, the proceeds of the USD2.786 billion will be used to finance Capital Projects in priority sectors of the economy that are included in the 2020 Appropriation Act. The projects include those in power, transport, works and housing, aviation, health, education, agriculture and rural development.

“Mindful of the need to moderate Debt Service Cost, the plan for the raising of the USD2.780 billion capital is to first maximize financing from relatively cheaper concessional and semi-concessional external sources where available, and the balance, if any, from the International Capital Market (ICM) through the Issuance of Eurobonds.

“In addition to the USD2.780 billion for the Budget, Nigeria has a USD500 million Eurobond which will mature on January 28, 2021 (6.75 per cent $500 million 2021). Given that the Eurobond will mature early in the year 2021, the plan is to refinance it through the issuance of a Eurobond in 2020. “Thus, the new external capital rising for the year 2020 to part-finance the 2020 Budget Deficit and refinance the Eurobond maturing in January 2021 is $3.3 billion,” the statement further explained.

The DMO added that while the approval process for the proposed $3.3 billion external capital raising is expected to be completed soon, transaction advisers for a potential Eurobond issuance will be through open competitive bidding process.

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