Govt accesses $3b Eurobond


The government’s efforts to borrow through Eurobond was oversubscribed by about $11 billion, but only $3 billion was accessed.

Central Bank of Nigeria (CBN) Governor Godwin Emefiele did not say why the country could only access about one-third of the bond.

Answering reporters’ questions at the end of the Monetary Policy Committee (MPC) meeting in Abuja yesterday, Emefiele said: “The information that I got was that the bond was oversubscribed to the tune of about $11 billion. However, we could only access $3 billion in two tranches of 15 and 30 years. One is at 6.5%; the other about 7.38%.”

The implication of the Eurobond over subscription and government’s ability to access $3 billion of the bonds, Ememfiele said, is “that investor confidence in the Nigerian economy continues to be strong based on most of the macroeconomic indices and also supported by the decisions of both the Monetary and Fiscal policies. There is confidence by the investor community about what the government is doing and it delights us that the level of confidence has improved and hence you’ve seen that the activities of the Monetary and Fiscal authorities have resulted in the country exiting recession.”

The CBN governor advised policy makers not to “rest on our oars; we need to remain focused. For a country that grows its population by an average of 3%, nothing short of going back to the historical levels of the average of 6% would be considered good. We know it’s a long journey from 1.4% to 6% but with tenacity, with lots of work being done with the aggression and focus being shown by the policy makers (monetary, fiscal and trade policy makers) I’m very optimistic that we will get there and in short time.”

Asked of his view on the spate of borrowings by the government, Emefiele argued that “there is nothing wrong in borrowing but what is very important is how we deploy the funds being borrowed?”

He was delighted that “the specific reasons for these borrowings are targeted at infrastructural development I am sure that you all know that most of the borrowings right now is targeted at roads, train, construction, airports and various other infrastructural development projects that will spur economic activities in the country and ultimately continue to accelerate the growth trajectory of the country.”

In the course of the MPC meeting, the Committee called for a quick passage of the 2018 Appropriation Bill by the National Assembly, “so as to keep fiscal policy on track and deliver the urgently needed reliefs in terms of employment and growth of the economy.’

The MPC retained the interest rate/Monetary Policy Rate (MPR) at 14.0%; the Cash Reserve Ratio (CRR) at 22.5%;  the Liquidity Ratio at 30.0%; and  the Asymmetric corridor at +200 and -500 basis points around the MPR.

To arrive at these, the CBN governor noted that “forecasts of key macroeconomic variables indicate a positive outlook for the economy up to the first quarter of 2018”.

This, he said, is predicated on continued implementation of the 2017 budget into early 2018, anticipated improvement in government  revenue from the implementation of the Voluntary Asset and Income Declaration Scheme (VAIDS) as well as favourable crude oil prices.”

“The development finance initiatives by the CBN in the real sector, particularly in agriculture, are expected to continue to yield positive results in terms of output expansion and job creation” he said.

Focusing on the downside risks to the outlook, the Committee noted the low fiscal buffers and weak aggregate domestic demand. On the external front, widening global imbalances, and rising geo-political tensions were some of the crucial risks identified.

On financial stability, the Committee noted the concentration of non-performing loans in a few sectors but observed that the overall condition and outlook for the banking system was stable as deposit money banks’ balance sheets remained strong.

This assessment Emefiele said “is strengthened by developments in the national accounts and the expectations that the affected sectors are returning to growth. Nonetheless, the Committee urged further strengthening of supervisory oversight and deployment of early warning systems in order to promptly identify vulnerabilities and proactively manage emerging risks in the banking system.”

The Committee also observed that the government was increasing debt, both domestically and externally, thus crowding out the private sector.

The Committee noted with satisfaction the second consecutive quarterly growth in real GDP following five quarters of contraction. In addition, Members welcomed the relative stability in the exchange rate, particularly the narrowing premia and the very slow deceleration in consumer price inflation, largely attributable to base effects.

Overall, members of the MPC noted that “the economy has begun to show strong signs of recovery as public investment has picked up with increased housing construction at the Federal and state levels, as well as shipping activities at the ports.”

The Committee was, however, of the view that policy makers must not relent in their aggressive policy initiatives aimed at continuing the positive growth trajectory. The Committee was also concerned about potential adverse external developments and the cautious approach to lending and financial intermediation by domestic deposit money banks.


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