Nigeria’s Eurobond oversubscribed by 198.08%

THROUGH the Debt Management Office (DMO), the Federal Government announced that the government raised $1.25 billion seven-year Eurobond and the subscription remained high at $3.68billion, indicating an oversubscription of +198.08 per cent.

According to the DMO, the offer attracted investors from the United States, Europe, and Asia. Nigerian investors also participated in the offer with a total subscription of $60million.

Nigeria will become the first African country to access the international capital market in 2022. The issue had a coupon of 8.75 per cent per annum, but investor interest reduced the rate to 8.375 per cent.

This announcement comes after data for the total debt stock for 2021 was released by the DMO.

Total debt rose year-on-year (Y-on-Y) by +20.17 per cent to N39.56 trillion ($95.78 billion) from N32.92 trillion ($86.39 billion) stock.

Debt service-to-revenue was 76.2 per cent as of November 2021, although the DMO seems to play it safe by using the debt-to-GDP ratio, which currently stands at 22 per cent as of 2021.

The Director-General of DMO, Mrs Patience Oniha, stated that Nigeria was prudent in managing its debt-to-GDP ratio at 22 per cent as the country’s Medium Term Expenditure Framework (MTEF) sets this ratio at 40 per cent.

The World Bank and ECOWAS set a 55 per cent and 70 per cent benchmark for countries like Nigeria.

However, analysts do not see the debt-GDP ratio as a good metric to measure the sustainability of the debt size of the economy. The cost of the debt related to revenue generated should be the crux.

The debt service-to-revenue ratio worsens with more expensive borrowings, such as the Eurobond markets and larger debt stock according to experts.

Because a considerable amount of the revenue earned is needed to service debts, this has a significant negative impact on the government’s spending ability.

Similarly, DMO latest quarterly data release showed that the total domestic debt for the 36 states of Nigeria and the FCT amounted to N4.2 trillion as at September ‘21, representing a modest rise of 1.9 per cent quarter-on-quarter.