By Jeph Ajobaju Chief Copy Editor
Despite outcry against Nigeria’s debt which has ballooned under Muhammadu Buhari, he has just enlisted JP Morgan, Goldman Sachs, and other international advisers to help Nigeria borrow an additional $6.2 billion.
Debut Management Office (DMO) Head of Media, Chinenye Onu, said the transaction advisers are to facilitate the issuance of Eurobonds to raise N2.34 trillion (about $6.2 billion) to part-fund the deficit in the 2021 budget.
Nigeria’s debt rose by N20.8 trillion to N32.92 trillion between June 2015 and December 2020, and to N33.11 trillion in the first quarter of 2021 (Q1 2021), according to DMO data.
Servicing the debt cost N1.8 trillion between January and May this year, creating concern for local and foreign financial experts who warn of the risks.
New IMF loan
Last week, the International Monetary Fund (IMF) approved $3.35 billion new loan for Nigeria, adding to its $87.239 billion debt in Q1 2021 owed by federal and states and the Federal Capital Territory (FCT).
The approval is part of a “historic general allocation” of Special Drawing Rights (SDRs) of about SDR456 billion, an equivalent of $650 billion.
The lender said Nigeria will get $3.35 billion out of the funds to raise its external reserves and boost global liquidity at a time when the world is grappling with coronavirus.
Nigeria’s foreign reserves declined from $35.37 billion in Q4 2020 to $33.32 billion Q2 2021, a 5.8 per cent dip in six months.
This translated to a drop of about $2.1 billion, according to data from the Central Bank of Nigeria (CBN).
World Bank, AfDB express concern
Nigeria’s debt to the World Bank and the African Development Bank (AfDB) alone rose from $7.14 billion to $14.35 billion between June 30, 2015 and March 31, 2021, data from the DMO shows.
This means that under Buhari, Nigeria’s debt to these two institutions rose by $7.11 billion, an increase of 98.48 per cent.
Debt amassed by federal and state governments notched N33.11 trillion in Q1 2021 and N1.02 trillion was spent to service domestic and foreign debts, a 35.7 per cent rise on N753.7 billion spent in Q1 2020.
Both the World Bank and the AfDB have expressed concern that Nigeria and other African countries run the risk of defaulting on loan repayments.
A major problem is that most loans taken by African countries are not invested in infrastructure to yield returns to pay off debt. Where loans are invested, contracts are heavily inflated with the extra amount siphoned into personal pockets as bribe.
Regardless, Abuja is pressing on to obtain more loans.
Selection of loan advisers
“Activities by Nigeria towards the issuance of Eurobonds in the International Capital Market inched forward today with the appointment of Transaction Advisers by the federal government.
“Typical of Eurobond issuance, transaction advisers of various categories are required to work with an issuer, in this case Nigeria, to ensure the success of the Transaction,” said a statement issued by Onu, quoted by The PUNCH.
It listed the advisers as
· International Bookrunner (JP Morgan, Citigroup Global Markets)
· Joint Lead Managers (Standard Chartered Bank and Goldman Sachs)
· Nigerian Bookrunner (Chapel Hill Denham Advisory Services)
· Financial Adviser (FSDH Merchant Bank)
· International Legal Adviser (White & Case LLP)
· Nigerian Legal Adviser (Banwo & Ighodalo)
The transaction advisers were selected from an Open Competitive Bidding Process in line with the Public Procurement Act, the DMO disclosed.
“A total of 38 institutions responded to the Expression of Interest, and after rigorous evaluation to ascertain the technical capacities of the responders to execute the transaction, the eight institutions above were selected.”