THE latest $2.2 billion Eurobond borrowing will not only heighten Nigeria’s public debt profile but will make the government repay approximately $4.31 billion at maturity.

Nigeria’s public debt stock officially stands at N134.3 trillion ($91.3 billion) as of the end of the second quarter.

In a statement on Monday, December 2, the Debt Management Office (DMO) revealed that the Federal Government raised a $2.2 billion debt from the Eurobonds auction to finance its 2024 fiscal deficit and support its budgetary needs.

The auction involved the issuance of two bonds with varying tenors as the Nigerian government returned to the international capital markets to raise the debt.

According to DMO, the allotments were $700 million for a six-year and five-month bond priced at 9.625 per cent and $1.5 billion for a 10-year bond priced at 10.375 per cent.

The latest borrowing underscores revenue shortfalls and mounting public spending amid the country’s debt profit.

An analysis by The ICIR on the repayment term shows that the Federal Government will be paying a $155.625 million coupon rate (interest) for the 10-year bond and $67,375 million for the six-year and five-month bond yearly.

At the maturity of the 10-year bond, the Federal Government would have paid interests of about $1.56 billion for the 10-year bond and $544.615 million for the six-year and five-month bond.

With a face value of $2.2 billion and interest of about $2.11 billion, the Federal Government is indebted to repay $4.31 billion for the December 2024 Eurobond issuance.

Financial analysts believe that amid the government’s borrowing spree, there are concerns about the efficient use of the borrowed funds by the government.

Commenting on the $2.2 billion Eurobond issuance, a development economist, Kalu Aja, said the yield curve on Nigeria’s bond was inverted, which is never good for its economy.

“Nigeria should be cutting spending not borrowing at expensive rates to fund a budget that was predicated on an unrealistic revenue from crude oil sales,” he added.

The ICIR had reported that a larger chunk of the 2024 budget was funded by borrowing despite the Federal Government’s claim of $20 billion in subsidy savings.

Even though the dual purpose of the latest Eurobond is to fund the budget and rev up the foreign exchange reserves, however, the efficient management of the funds calls for concern, the head of Financial Institutions Rating at Agusto&Co, Ayokunle Olubunmi, told The ICIR.

“Can the Federal Government use the proceeds on something that will give us a significant benefit that, when we compare the benefits vis-a-vis the interest to be paid on the fund, will show that the government is being profitable with the fund?

“Another question to ask is what exactly will the proceeds be used for,” Olubunmi queried.

This is why some analysts prefer Sukuk bond issuance as the borrowing is dedicated to a particular project, he stressed.

“By so doing, all the funds will be used for a specific project.

“It is a way of being more efficient in terms of the use of resources and being accountable,” Olubunmi explained.

But the situation most of the time has been that the government borrowed funds for frivolous purposes.

On The domestic front, the government is crowding out the private sector by borrowing heavily from the domestic markets, which is not good for its economy.

While this could be one of the reasons the government attracts Eurobonds and the World Bank borrowings, however, it can monetise its assets to raise funds, Olubunmi pointed out.

“If you look all over the country, you will see that there are assets that are sub-performing, that are not optimal, that are not being used efficiently,” Olubunmi said.

The government could concession or sell off any of its available assets to raise funds to support the budget as it is another area through which the government can raise funds.

According to the DMO’s revelation, the $2.2 billion Eurobond offer attracted a wide range of investors from multiple jurisdictions including the United Kingdom, North America, Europe, Asia, Middle East and participation from Nigerian investors.

“The Federal Republic of Nigeria successfully priced US$2.2 billion in Eurobonds maturing in 2031 (6.5-year) and 2034 (10-year) in the international capital markets on 2 December 2024, with US$700 million and US$1.5 billion placed in the 2031 and 2034 maturities, respectively.

“The 6.5-year and the 10- year. The notes were priced at a coupon and re-offer yield of 9.625 per cent and 10.375 per cent, respectively,” it said.

The transaction attracted a peak order book of more than $9.0 billion, it added.