Economy
It’ll be Difficult to Sell Proposed FG’s N22.7trn 40-year Bonds at 9%—BudgIT
By Dipo Olowookere
A Nigerian civic company, BudgIT, has said, based on findings, it would be difficult for the federal government to get buyers for the proposed securitisation of the N22.7 trillion overdrafts of the Central Bank of Nigeria (CBN) at 9 per cent per annum coupon rate.
President Muhammadu Buhari on Tuesday appealed to the National Assembly to reconsider his request to convert the ways and means into securities.
The bonds, to be sold to interested investors in local denomination, would have a maturity of 40 years at a coupon rate of 9 per cent.
Last week, the Senate rejected the proposal, pointing out that it must know what the government spent the money on.
The government violated the CBN act as regards the overdrafts as it was supposed to get 5 per cent of the revenue it generated in the previous fiscal year as ways and means, which must be paid back before another is given.
However, these requirements were not met by the federal government but the central bank, under the leadership of Mr Godwin Emefiele, went ahead to give more loans to the government to fund the budget deficits.
While signing the 2023 budget into law on Tuesday, Mr Buhari begged the parliament to approve the conversion of the loans to bonds to avoid the payment of an extra N1.8 trillion as interest.
“I have no intention to fetter the right of the National Assembly to interrogate the composition of this balance, which can still be done even after granting the requested approval.
“Failure to grant the securitization approval will, however, cost the Nigerian government about N1.8 trillion in additional interest in 2023, given the differential between the applicable interest rates, which is currently MPR plus 3 per cent, and the negotiated interest rate of 9 per cent and a 40-year repayment period on the securitised debt of the Ways and Means,” he had pointed out.
But BudgIT said the claims by Mr Buhari that the 40-year bonds would be sold at 9 per cent may not be totally true.
Business Post reports that the FGN savings bond currently being offered for sale by the Debt Management Office (DMO) has coupon rates higher than what the government is claiming.
The debt office is offering the 2-year FGN savings bond maturing on January 11, 2025, at 9.60 per cent and the 3-year paper maturing on January 11, 2026, at 10.60 per cent.
At the last FGN bonds held in December 2022, the debt office sold a 10-year bond at 14.75 per cent and a 20-year bond at 15.80 per cent. Based on this, it would most likely be difficult to lure investors to purchase 40-year bonds at 9 per cent when a shorter-tenor paper can be bought at almost double the coupon rate.
In a series of tweets via its official Twitter page on Thursday, BudgIT said it would be a herculean task for the government to get buyers for the bonds at the “specified rate.”
“@MBuhari has asked @nassnigeria to approve the securitization of FG’s N22.7tn debt to @cenbank, is it legal for @nassnigeria to approve the request of the FG to securitize the Ways & Means, which goes against the CBN Act?
Since 2015, the FG has asked @cenbank to provide advances to fund its fiscal deficit without any requirement for cost-cutting measures/fiscal control. The law stipulates that such advances should be limited to 5% of the previous year’s revenues. This law has not been followed.
“Also, Section 38 of the CBN Act mandates the FG to repay all advances made by the CBN to it at the end of the financial year in which the advances were received. Failure to repay the advances in full implies that the FG will not be eligible for further advances by the CBN.
“While FG has continuously breached the CBN Act, it now seeks the @nassnigeria’s approval to offload N22.7tn debt for 40 years at a 9% interest rate. Findings have shown that it will be difficult to sell such debt at the specified rate.
“Currently, the FG has been on a borrowing binge as domestic debt increased from N8.3tn in June 2015 to N21.6tn as of June 2022, & foreign debt rose from $10b in 2015 to $39.66b in 2022.
“Similarly, interest paid in Ways and Means (CBN Debt to FG) grew from N9.51b in 2017 to N1.22tn in 2021. In the meantime, the CBN’s new debt adds at least N2.5tn annually to Nigeria’s debt servicing costs.
“According to a recent MTF, Nigeria’s debt servicing cost is projected to reach N10tn in 2025. If National Assembly approves this action, FG’s public debt will rise from its current state by 59% – from $89.5b to $142 billion.
“In 2021, FG used 91% of its N4.64tn revenue to service public debt. Unless something drastic happens with revenue growth, the FG will spend more on servicing debt. This has implications for inflation, economic confidence, higher interest rates & weakened exchange rates.
“Is it legal for the National Assembly to approve the request of the Federal Government to securitise the Ways and Means, which is in clear breach of the CBN Act? More importantly, what were the borrowings used for?” the company asked.
By Adedapo Adesanya
Crude production under the collective Organisation of the Petroleum Exporting Countries (OPEC ) fell in May to its lowest level in at least 37 years as the blockade of Iran by the United States and disruptions in the Persian Gulf, continued to limit output.
According to a Bloomberg survey released on Friday, output from the organisation’s 11 current members, including Nigeria, dropped by 1.22 million barrels per day to 16.33 million barrels per day last month.
Iran accounted for more than half of the decline. The data excludes the United Arab Emirates (UAE), which departed the cartel last month after six decades of membership.
War between a US-Israeli alliance and Iran has reduced oil supplies from the Middle East, largely closing the Strait of Hormuz waterway. Saudi Arabia, Iraq, the UAE and Kuwait have been forced to cut crude production. Iranian shipments face additional pressure following a US blockade of its ports imposed in mid-April.
Iranian output fell by 710,000 barrels per day to a five-year low of 2.34 million barrels per day in May, the survey showed. Central Command reported that US forces have redirected 127 commercial vessels to enforce the blockade of all maritime traffic entering and exiting Iranian ports.
Kuwait recorded the second-largest decline last month, with production falling by 310,000 barrels per day to 490,000 barrels per day, less than one-fifth of pre-war levels. Saudi Arabia, the group’s leader, saw output decrease by 240,000 barrels per day to 6.57 million barrels per day.
The production reductions have not prevented OPEC and its allies from raising quotas over recent months, continuing a year-long process of restoring output halted several years ago.
This comes ahead of a meeting scheduled to be held on Sunday, June 7, where a sub-group of seven members is expected to increase targets by 188,000 barrels again in July. The session is one of four online meetings OPEC and its partners plan to hold that day.
Delegates indicated the alliance has plans for two additional monthly quota increases in August and September. UAE output rose by 300,000 barrels per day to 2.44 million barrels per day in May, according to the survey.
By Aduragbemi Omiyale
The 2025 third quarter Budget Implementation Report from the Budget Office of the Federation has shown that the federal government exceeded the funds allocation for repayment of debts for the first nine months of the fiscal year by about 18 per cent.
In a report by Punch, the sum of N10.74 trillion was budgeted for debt servicing between January and September 2025, but the government used N12.63 trillion for the purpose, N1.90 trillion or 17.65 per cent more than the allocation for the year.
The funds were spent on domestic debts, foreign debts and sinking fund by the central government in nine months.
Business Post reports that for the whole year, the amount approved by the National Assembly and signed by President Bola Tinubu for debt repayments was N14.31 trillion.
Looking at the nine-month figures, domestic debt service gulped N6.23 trillion, exceeding its N5.39 trillion provision, while foreign debt service was N6.30 trillion versus the budget provision of N5.06 trillion.
According to the report, the figures indicated that 67.2 per cent of the federal government’s retained revenue of N18.63 trillion was spent on debt service in the first nine months of 2025. When the sinking fund is included, debt-related payments consumed about 67.8 per cent of revenue.
It was also observed that aggregate federal government revenue underperformed the budget by N12.03 trillion or 39.24 per cent, as actual revenue of N18.63 trillion fell short of the N30.67 trillion projected for the first three quarters.
In the third quarter alone, the government generated N7.70 trillion versus the quarterly target of N10.22 trillion as a result of persistent oil revenue shortfalls, despite stronger non-oil collections.
The debt burden also crowded out capital spending, as total capital expenditure was N3.10 trillion in the first nine months compared with the N17.58 trillion budgeted for the period, indicating that actual debt-related payments were more than four times capital expenditure.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a loss of 1.13 per cent on Thursday, June 4, shrinking the market capitalisation by N30.03 billion to N2.630 trillion from N2.660 trillion on Wednesday.
Similarly, this brought down the NASD Unlisted Security Index (NSI) by 50.19 points to 4,396.08 points from the 4,446.27 points recorded a day earlier.
The loss was influenced by the overpowering of the bulls by the bears, after the bourse closed with two price gainers and three price losers, led by FrieslandCampina Wamco Nigeria Plc, which slumped by N20.03 to sell at N190.38 per unit compared with midweek’s N210.41 per unit. Food Concepts Plc declined by 25 Kobo to trade at N2.50 per share versus the previous day’s N3.00 per share, and Acorn Petroleum Plc crumbled by 2 Kobo to end at N1.32 per unit, in contrast to the preceding session’s N1.34 per unit.
For the gainers, Central Securities Clearing System (CSCS) Plc added N2.93 to close at N78.34 per share compared with the previous price of N75.41 per share, and Afriland Properties Plc gained 80 Kobo to settle at N16.80 per unit versus N16.00 per unit.
There was a slip in the volume of transactions yesterday by 46.8 per cent to 280,714 units from 527,221 units, as the value of trades dropped 66.5 per cent to N21.8 million from the preceding session’s N64.2 million, and the number of deals fell by 8.7 per cent to 42 deals from 46 deals.
Great Nigeria Insurance (GNI) Plc ended the session as the most traded stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 billion.
GNI Plc also finished the day as the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
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