Several plans for external financing

Since the FGN’s 2017 budget proposals remain in the National Assembly, we provide an update on deficit financing. The proposals project a deficit of N2.36trn, which is to be covered N1.25trn domestically, N1.07trn from external channels and N0.04trn from other sources. It is unclear whether the FGN has raised the external financing component of the approved N2.20trn deficit for 2016. The only disbursement to our knowledge was US$600m by the African Development Bank (AfDB) in November.

The FGN made a good start to its financing programme for this year with the successful US$1bn, 15-year Eurobond issuance earlier this month. For whatever reason, it was unable to take advantage of the near-eight times oversubscription.

Yemi Osinbajo, the acting president in the absence of Muhammadu Buhari, has sought the go-ahead from the National Assembly to raise a further US$500m from further Eurobond sales by the end of March. Sales proceeds will be allocated for financing of the 2016 deficit.

That deficit was to be funded largely on the external side with loans from the World Bank and the AfDB.

Armed with its new economic recovery programme, the FGN is renewing its conversation with the World Bank. It is reluctant to put a figure on the loan sought amid speculation of conditionality related to the exchange-rate regime.   We suspect that the Bank’s stance will be less exacting than that of the IMF, from which the FGN will not borrow, and more than that of the AfDB.

The authorities also aim to collect US$300m from the sale of diaspora bonds this year. When we consider the size of the diaspora, this would be a modest beginning.

Within the N1.25trn projection for domestic financing in the budget proposals, the FGN looks to raise N20bn from the issue of Nigeria’s first green bond

The DMO and the SEC are together working on a maiden sovereign sukuk (Islamic bond). We understand that issuance would initially be in local currency, and would follow on from the lead taken by Ogun State in 2013

Additionally, the authorities have announced some useful early results under the “whistle-blower” programme to recover stolen monies. These funds are, however, to be treated as other non-oil revenues rather than deficit financing items (Good Morning Nigeria, 14 February 2017).

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