The Federal Government of Nigeria is considering issuing international debt early next year for the first time since 2013, as it prepares to send a record spending plan to parliament to stimulate an economy hammered by crashing oil prices, finance minister, Kemi Adeosun said.
President Muhammadu Buhari will probably present the 2016 budget to lawmakers on December 22, Adeosun said in a phone interview.
“It would be based on a medium-term fiscal plan announced this month, which projects spending to increase about 25 per cent from 2015 to N6trillion ($30.1 billion). The deficit will more than double to N2.2 trillion, or 2.2 per cent of gross domestic product.
“We need to stimulate the economy because we cannot afford this downturn to be excessively prolonged,” Adeosun said.
“We think we have the headroom to borrow. We’re going to mix it between local and foreign debt. We’re talking to multilateral agencies already and we’re at an advanced stage. Then we’ll look at the foreign capital markets.”
The minister did not mention how much would be raised in a possible sale. Nigeria’s fairly low ratio of debt to GDP means it has the ability to increase borrowing to plug the gap, she said.
Bloomberg reports that Africa’s biggest oil producer derives about two-thirds of government revenue from the commodity and has seen its finances shrivel as prices have fallen to below $40 a barrel from over $115 in June 2014.
Nigeria has $1.5 billion of dollar bonds outstanding and has tapped the market twice, in 2011 and July 2013. Yields on its $500 million of securities due in July 2023 fell 2 basis points to 8.58 per cent at 8:31 am in London. They have risen by more than 300 basis points since May as oil prices have fallen further and investors pull money from emerging markets in anticipation of interest rate hikes in the U.S.
Source : Leadership