News / Africa

Nigeria Switching to Foreign Debt to Lower Costs

A view is seen of the Nigeria stock exchange building in the central business district in Lagos, April 10, 2013.
A view is seen of the Nigeria stock exchange building in the central business district in Lagos, April 10, 2013.
Reuters
Nigeria will increase the amount it borrows overseas to around 40 percent of all debt over the next three to five years, from 12 percent currently, to lower its funding costs, the head of the debt office said on Monday.

DMO Director General, Abraham Nwankwo, said he expected Nigeria's debt to GDP ratio to fall to 17 percent over the same period from 21 percent, as Africa's second-biggest economy switches into cheaper foreign debt.

The move came eight years after Nigeria was forgiven some $18 billion of external debt by the Paris club.

"Nigeria has developed a medium-term debt strategy... which will improve the portfolio mix and reduce our average cost of funds," Nwankwo told Reuters in a telephone interview.

Nigeria is one of several African countries seeking to ride the wave of cheap money generated by ultra-loose monetary policy in the West and Japan.
    
With the world's top central banks driving yields on safe assets close to zero, investors are increasingly seeking fixed income from frontier markets like Vietnam and Romania.

Rwanda, heavily dependent on foreign aid and whose robust economic growth still reflects a recovery from its 1994 civil war, was able to issue a 10-year Eurobond last month at 6.875 percent, attracting subscriptions eight times the bond's size.

Nwankwo said foreign debt was now 800 basis points cheaper than domestic debt, adding that a proposed $1 billion Eurobond issue was part of the strategy to move towards foreign loans.

"Optimal mix"
    
Total domestic debt stood at 6.49 trillion naira ($41 billion) at end-March, 2013 while foreign debt was $6 billion.

"We have to look at the optimal portfolio mix, cost structure... and source of funding," Nwankwo said.

Analysts welcomed Nigeria's move to cheaper foreign loans, noting that global low interest rates in contrast to tight monetary policy at home will help reduce debt service costs and free up money to invest in badly-needed infrastructure.

"While some in Nigeria [those with long memories of the Paris Club negotiations] might express concern over the desire to increase external debt once again, from the perspective of reducing debt service costs, some rebalancing makes plenty of sense," Razia Khan, head of Africa research, said.

"However, Nigeria's dependency on a single commodity - oil - for much of its earnings, is still a concern."

Nigeria's central bank has kept interest rates on hold at 12 percent since last November, citing the need to maintain single-digit inflation and stabilize the naira  currency, which has kept domestic borrowing costs relatively high. Lower currency risk has made foreign debt more attractive to Nigeria.

Standard Bank emerging market debt strategist Samir Gadio said "ample global liquidity" would enable Nigeria to place a Eurobond at reduced cost.

But he added that pressure to borrow more domestically would most likely increase as Nigeria approaches elections in 2015. During previous elections, patronage has very quickly drained state coffers.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

America's Most Exotic Presidential Pets

From alligators to bears, the White House has been home to some unusual presidential pets over the years More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs