Financing Nigeria’s budget

Nigeria tops remittances to sub-Saharan Africa with $22 billion according to the World Bank and it is clear that Nigeria’s Diaspora remittances for 2017 can fund our budget and pay part of Nigeria’s foreign debt for 20 years. Nigeria needs a Diaspora bond of at least half of the 2017 remittances to execute capital projects. The revelation is that Diaspora remittances can help shape Nigeria’s debt in the 21st century. We can create more Diaspora bonds where remittances could be used to fund capital projects. Diaspora fund can cover what Nigeria struggles to borrow in 20 years. The interest for servicing foreign debt will be channeled to Diaspora bond. The International Monetary Fund (IMF) should stop criticising our external debt since 2017 Diaspora remittances can pay Nigeria’s external debt for 20 years.

I want to appeal to President Buhari to create more Diaspora bonds which will help to grow Nigeria’s economy. There is therefore the scope for the Federal Government and state governments through community associations or even faith groups in the Diaspora, to make a developmental impact with innovative policies. Annual remittances are running at about $22 billion about three-quarters of total spending in the 2018 budget. There is a stable inflow, unlike portfolio investment or even development assistance.

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On June 19, 2016, Nigeria successfully issued its first Diaspora bonds in the international capital market to raise the sum of $300 million at the rate of 5.625 per cent for a tenor of five years. This feat made Nigeria the first African country to issue a bond targeted at retail investors in the United States, a market highly regulated by the United States Securities and Exchange Commission (U.S. SEC). The only previous U.S. SEC registration for an African country was targeted at institutional investors. Let’s create more Diaspora bonds to grow our economy.

The Federal Government can use Diaspora bonds to fund our budget and pay part of Nigeria’s external debts. Sovereign debt instruments traded in the home or destination country is a Diaspora bond. They are traditional bonds sold by the home country to its own Diaspora as an alternative to borrowing from capital markets. The first Diaspora bonds were issued by China and Japan in the 1930s; Israel and India entered the market in the 1950s, while in the 2000s Ethiopia, Nigeria and Ghana were the first in Africa to do so. Diaspora bonds do not need to be limited to Diaspora investors. Proceeds can be used to finance major public sector projects including energy, housing and other economic infrastructure.

The desire of the Diaspora to assist those who have remained in their homelands can be turned into a driver for much needed savings and investments in the countries of origin. Countries that have understood this potential have established legal frameworks to facilitate Diaspora investments, including through the issuance of debt instruments and the establishment of intermediary agencies. The following instruments help to make the simple monetary transaction described above into a savings or investment decision.

Inwalomhe Donald, Benin City