Oniha: More Eurobonds to be released in late 2017

Patience Oniha, director general of the Debt Management Office (DMO), says the federal government has plans to release more Eurobonds by the fourth quarter of 2017.

Oniha made this known while speaking on the N100 billion Sukuk in an interview with Channels Television on Monday.

“On what the DMO is looking at to bring down debt service, one part of it is what has been running already which is trying to increase the share of external debt because what we get from that side is an extended tenor and a lower cost of borrowing so that strategy is ongoing and we expect to be in the market again in the fourth quarter of this year with more Eurobond or a Eurobond and a diaspora bond, whichever works in the best interest of Nigeria.

“Where we are is that we are still issuing long dated bonds and if the outlook is that interest rates are going to come down, we should probably be looking at our calendar so that is something we are doing already so that we can take advantage of when the rates are down, we can re-issue the long-term bonds.

“A strategy that we’ll roll out over the next one year, subject to approval, is to begin to look at buying back some of those long dated bonds that are at very high rates as interest rates come down which is the tool of liability management that a debt management office could use from time to time and we have seen that work in the international market and we intend to apply it here as well. The assumption is that interest rates would have come down so that would make it beneficial.”

In February 2017, the federal government had offered a $1bn Eurobond with a 15-year tenor and it had been oversubscribed by almost eight times.

Speaking on the N100 billion Sukuk, Oniha said proceeds will be used for the construction of roads across the six geopolitical zones in the country.

“What is different this time is that the Sukuk is being raised to finance capital projects so in terms of status, we have all the approvals,” she said.

“We all know that infrastructure is extremely critical for development so what is unique about this is that it goes straight to the financing of roads and the roads have already been identified, they are economic roads which are used for moving people and goods. The Sukuk has a tenor of seven years and the rental income on it is 16.47%.

“The roads have been selected, they are 25 road projects in the six geopolitical zones so the sections of those roads have been identified and arrangements have already been made on how those funds will be tied to those projects.

“Those roads are not going to be tolled now so it’s not a case or revenue coming from roads to service the Sukuk. It has been taken as a direct obligation to the government. The servicing will come directly from appropriation the same way we service our current domestic borrowing.”