Finance minister Adeosun leads team to London next week to negotiate with bond investors

NIGERIAN government officials intend to hold a high profile meeting with bond investors in London next week as part of an aggressive plan to tap into international debt markets for to help finance its record budget deficit.

 

With the collapse in global oil prices, Nigeria's revenue is insufficient to fund the 2016 budget, so the government is aggressively looking for alternative sources of revenue. As a result for the first time in three years, the government is wooing the bond market and hopes to attract a substantial amount of investors at its London meeting.

 

On June 7, finance minister Kemi Adeosun, will lead a delegation of officials to meet with investors in a meeting arranged by Standard Chartered Bank. Abraham Nwankwo, the head of Nigeria’s Debt Management Office, Dami Adesanya, an adviser at the finance ministry, and a representative of the Central Bank of Nigeria (CBN) will be part of the delegation to the meeting.

 

According to government sources, the talks will probably focus on Nigeria’s currency controls and its policy of pegging the naira against the dollar. Standard Life Investments, which manages around $1.3bn of fixed-income assets in emerging markets, says the curbs have exasperated investors, who say the naira is overvalued and the inhibitions have caused investment into the economy to shrivel.

 

However, President Muhammadu Buhari and CBN governor Godwin Emefiele, have hinted over the past two weeks that they will shift their stance and allow more flexibility. Nigeria plans to borrow as much as $10bn from debt markets, with about half of that coming from foreign sources, to help fund a budget deficit worsened by the slump in oil prices that has slashed revenues and weakened the naira.

 

Mark Baker, a money manager at Standard Life, which has recently bought Nigerian Eurobonds in anticipation of a devaluation, said: “A lot of Nigeria’s problems today can be traced back to the pegged exchange rate. The current policy mix is clearly unsustainable, given what’s happened with oil prices and the impact on the fiscal position, so a weaker currency is obviously needed to help boost fiscal revenues.”

 

Earlier this year, the government said it plans to raise about $5bn of external debt in 2016 to help fund a N6.1trin ($31bn) budget designed to stimulate its contracting economy. In April, Ms Adeosun said that Nigeria was considering a debut yuan-denominated bond as it may be cheaper than dollar debts.

 

Nigeria last issued a Eurobond in mid-2013. Yields on its $500m of securities maturing in July 2023 rose 16 basis points to 7.57% in London.