FG Targets N762.5bn Earnings from $2.5bn Eurobond to Finance Treasury Bills

  • To save N64bn annually from dollar-backed TBs

Omololu Ogunmade in Abuja

The federal government wednesday in Abuja said its proposed $2.5 billion Eurobond already approved by the National Assembly would yield N762.5 billion proceeds for the refinancing of treasury bills.

According to the government, the deal would result in annual savings of N64 billion.

The Minister of Finance, Mrs. Kemi Adeosun, who made this disclosure while briefing journalists at the end of yesterday’s weekly Federal Executive Council (FEC) meeting in the State House, said the $2.5 billion Eurobond issuance was not a new borrowing but had already been approved by the National Assembly as part of the government’s external borrowing plan.

She recalled how the $500 million bond issued in November 2017, yielded N162.50 billion, which she said was used to redeem treasury bills, which matured in December 2017 and led to a significant drop in the bid rates of both treasury bills and federal government bonds.

Giving the impact of the $500 million bond, Adeosun disclosed that in December 2017 and January 2018, treasury bills bid rates dropped from about 16 per cent to 13 per cent while government bond rates dropped from about 16-16.50 per cent to 13.50 per cent.

“This translates to savings for government on new borrowing while also making the cost of borrowing for the real sector cheaper since the sovereign rate serves as a benchmark for other borrowers,” she stated.

Stating the potential savings from the $2.5 billion refinancing, the minister said the estimated proceeds of the N762.5 billion expected from the bond would be used to redeem treasury bills in a way that “at the estimated current NTB rates of 15 per cent (following mop-up operations by the CBN), the savings from the refinancing of N762.5 billion of domestic debt using external capital raising is about N64 billion per annum.”

Furthermore, Adeosun disclosed that FEC approved a memorandum she presented for the re-appointment of six transaction parties to manage Nigeria’s Eurobond.

She listed the institutions as City Group, Stanbic IBTC, Standard Chartered, Nicodalo, Whitened Case and African Practice.

She explained: “I presented a memo to reappoint transaction parties that play active parts on our Eurobond. This is for the Eurobond issuance of $2.5 billion for refinancing. This is not new borrowing. This is for Nigerian government treasury bills that mature and we then refinance into dollars.

“This $2.5 billion will ultimately be used to buy back treasury bills domestic debt. This will give us approximately N762.5 billion and we expect to save N64 per annum. This is all part of our borrowing plan that will leave us two to three years to pay back our debt.”

In his own briefing, Minister of State for Aviation, Senator Hadi Sirika, said the council approved a memorandum for the substitution of a member of the consortium that would provide transaction advisory services for the establishment of a national career.

According to him, Messrs Lufthansa consulting would be substituted with AMG (Airline Management Group) and Avia Solutions GE, explaining that AMG would join the other members of the consortium to provide advisory services at the same cost of N341, 200 million.

Sirika added that Lufthansa was substituted for two reasons.

He explained: “We substituted Lufthansa Consulting. Fundamentally, there are two reasons. One, that particular member of consortium, Lufthansa Consulting, in the wisdom of the council, we felt that consulting is an appendage of the airline group and that might bring a conflict of interests.

“Because Lufthansa themselves may want to join, partner or help in the process during the procurement phase of this transaction, and of course, they are members of Star Alliance, members of One World and members of Sky team.

“Others may feel short-changed. The person advising us to set up this airline, which is going to be private sector-driven, is a member of an alliance, which they are not part of.”

Also briefing, the Minister of Communications, Mr. Adebayo Shittu, said the council approved the execution of radio communication monitoring projects in different parts of the country including Ipaja, Lagos; Gusau in Zamfara State; Azare in Bauchi; and Ogoja in Cross River State.

According to him, the projects, which he said are 63 per cent completed, when operational in March, this year, seek to prohibit illegal radio transmissions by airlines, rail stations, telecommunications companies, among others.

Shittu, who said there are no fewer than 600 million radio broadcasts taking place in the country, added that when the implementation begins, it will be impossible for anyone to broadcast in any part of Nigeria using illegal radio frequency.

He also said another memorandum was approved for the initiation of another project meant to track illegal radio operations.