By Modupe Gbadeyanka
Plans to borrow about $2.36 billion from external sources have been abandoned by the Nigerian government.
Instead, federal government has concluded plans to look inward and raise the equivalent amount in local currency, N850 billion.
This would be done mostly through the issuance of treasury bills and bonds.
Business Post reliably gathered that already, the Debt Management Office (DMO) has been directed to come up with ways to go about this.
Proceeds from the local borrowing through the capital market would be used to finance projects in the 2020 Appropriation Bill, which was signed into law in December 2019 by President Muhammadu Buhari.
In the 2020 budget worth about N10 trillion, federal government said it would borrow N795 billion from the local debt market and $2.36 billion (about N850 billion) from the international market.
The N795 billion domestic loan was structured between T-bills and bonds, while efforts were being made to take the $2.36 billion equivalent to the Eurobond market.
However, the coronavirus pandemic rendered that plan useless, resulting into the sourcing for the funds from investors in Nigeria.
On Tuesday, the Senate resumed from the 5-week break it was forced into due to the global health situation. At the plenary, the red chamber of the parliament approved the request of President Buhari to convert the $2.36 billion external borrowing to N850 billion local loan.
In a statement on Tuesday, the DMO noted that, “With this change, the total new domestic borrowing under the 2020 Appropriation becomes N1,594.99 billion which is the same as the total new borrowing in the 2020 Appropriation Act.”
The agency said it expects the House of Representatives to approve the loan request like the Senate, noting that when this is done, it “will issue FGN Securities in the domestic market to raise the N850 billion, thereby providing high-quality investment opportunities for the investing public.”
Analysts at Business Post said the local borrowing should be a blessing to resident investors as the interest rates for the debt instruments should be marginally raised.
“We are of the opinion that the conversion of the $2.36 billion external loan to N850 billion local borrowing will result in the rates going up, though slightly, to attract investors.
“This anticipated hike in interest rates will be buoyed by the present global health crisis, which has made investors to hold their cash.
“In order to get this money from them, government will want to lure them with attractive rates, slightly better than the less than 2 percent in the treasury bills market at the moment,” analysts at Business Post submitted.
