President Muhammadu Buhari’s visit to China is aimed at strengthening ties with the Asian giants and also to “borrow the cheapest money possible” to plug 2016 budget deficit.
According to Kemi Adeosun, minister of finance, the country is considering selling a Chinese panda bond to help finance a budget deficit of about $11bn.
“The opportunity now, with the renminbi being a reserve currency, we are looking obviously at the lowest cost of funds to fund our budget deficit,” she said told Financial Times and Reuters.
“Initially we were looking simply at the eurobond but then we began to explore opportunities in the renminbi market so there is a possibility of issuing a panda bond.”
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Panda bonds are said to be renminbi-denominated debt sold by foreigners into China’s bond markets.
Financial Times quoted Adeosun as adding that the priority is to borrow “the cheapest possible money” – a total of 1.8tn naira ($9bn) from international and Nigerian markets.
She said it seemed that a renminbi-denominated bond would be cheaper than issuing a eurobond, adding that the “there’s the possibility of doing a Samurai [yen-denominated bond] which is also an option we’ll look at. We’re simply shopping around for the best deals.”
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Buhari has proposed record spending of N6.08 trillion for the 2016 budget, with an expected deficit between N2.2 trillion and N3 trillion.
Hence, the country is looking everywhere possible to get the needed funds to “jump-start” the economy.
She insists that the country would be spending on infrastructure such as power and roads, which is “really what is needed to get the economy out of where it is now”.
Adeosun said the push to develop infrastructure outlined in the budget is essential to help Nigeria diversify away from oil in the longer term.
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Adeosun had earlier said in February at a KPMG meeting in Lagos, that the country is looking for loans at a maximum of 1.5 percent interest rate.
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